Debtor in Possession Financing: The Jursidiction Of Canadian Courts to Grant Superpriority Financing in CCAA Applications

Restructuring of insolvent corporations can be an effective means of a voiding the social and economic consequences of firm failure. Key to successful restructuring is financing (called DIP financing) in the interim period during which the corporation is attempting to develop a viable business plan that is acceptable to stakeholders. Canadian courts have exercised their inherent jurisdiction to grantsuch financing. A recent case before the Supreme Court of Canada settled. However, there continue to be challenges to the courts'jurisdiction. This article suggests that the degree of uncertainty created by the courts' granting of DIP financing has been exaggerated and that the courts have engaged in a reasoned effort to further the aims of the CCAA in protecting the interests of all creditors and the public in the continued operation of corporations where the prospects of successful reorganization exist.