When Equity Investors Use the Companies’ Creditors Arrangement Act

The Alberta Court of Appeal’s recent decision in Angus A2A GP Inc. v. Alvarez & Marsal Canada Inc. tackles a novel and complex use of the Companies’ Creditors Arrangement Act (CCAA). It deals with equity investors initiating insolvency proceedings, not to rescue a failing company, but to stop a property sale they had not approved. This case marks one of the rare times in Canadian business law that shareholders have used the CCAA to assert their governance rights. The Court granted limited leave to appeal, signalling that the matter raises serious legal questions worthy of appellate scrutiny.

Cross-Border Real Estate Investments Gone Awry

At the heart of the case are three real estate development projects: one in Ontario (Angus Manor) and two in Texas (Windridge and Fossil Creek). These developments were marketed to Canadian and offshore investors through a maze of trusts, limited partnerships, and corporate entities based in Alberta, Ontario, and federally, and the United States.

Canadian investors, who were limited partners, unitholders, and undivided fractional interest (UFI) holders, were not directly involved in day-to-day management. Their role was passive, but they expected transparency and participation in key decisions such as asset sales. Offshore investors held similar interests and were represented separately in the proceedings.

A Facebook Post and an Unapproved Sale

In November 2024, Canadian investors discovered via social media that the Angus Manor Group intended to sell the Ontario property. They had not been informed or consulted, which they argued breached their rights under the investment structure. Alleging a lack of communication and derelict governance, they rushed to court under section 11.02 of the Companies’ Creditors Arrangements Act (CCAA), seeking a stay of the property sale and appointment of a monitor.

The investors framed their application as urgent: without intervention, they argued, the property would be sold without oversight or repayment of outstanding debts. The Alberta Court of King’s Bench granted an initial 10-day stay and appointed Alvarez & Marsal Canada Inc. as monitor. It concluded the development groups were at least $5 million in debt (enough to trigger CCAA jurisdiction).

A Complex Corporate Web of Jurisdictional and Procedural Issues

The development groups challenged the proceedings on several grounds. They argued:

1. The Canadian investors lacked standing under the CCAA;

2. The companies were solvent, and therefore not subject to the CCAA;

3. Texas-based entities were improperly brought into a Canadian proceeding;

4.The proceedings were an abuse of process; essentially, a shareholder dispute dressed up as insolvency.

Moreover, they objected to service and notice, especially as the initial order was granted on short notice without ex juris service on the Texas LLCs. The supervising justice acknowledged the irregularities but excused them due to urgency and later proper notice for subsequent hearings.

The Supervising Justice’s Rationale: CCAA as a Governance Tool?

On November 25, 2024, the supervising justice of the Court of King’s Bench issued an Amended and Restated Initial Order, extending the stay and allowing the monitor broader authority. He concluded that there is no prohibition on investors initiating CCAA proceedings. Further, the Canadian investors had standing as persons “interested” under section 11.02(1) of the CCAA.

The supervising justice concluded the companies were debtors or affiliated companies with over $5 million in liabilities (including U.S. judgments and unpaid bonds). The Texas entities were part of an integrated investment structure marketed in Canada and thus were found to be within the court’s jurisdiction. This expansive interpretation was partly driven by the monitor’s findings of insufficient records, failure to provide financial information, and potential prejudice to bondholders if the sale proceeded.

Appeal Efforts and Judicial Resistance

Unhappy with the outcome, the development groups (especially the Texas entities) sought leave to appeal. They also tried, unsuccessfully, to appeal the original order.

They returned to court on January 17, 2025, to again request that the CCAA proceedings be terminated. That application was also dismissed. The Court of King’s Bench instructed the monitor to present a plan to gain control over the U.S. assets. By March 2025, the monitor had secured approvals under Chapter 11 proceedings in the U.S., enabling partial recovery of funds from the Texas land sales.

The Court of Appeal Steps In: A Cautious But Significant Move

On April 28, 2025, the Alberta Court of Appeal granted leave to appeal on two key questions:

1. Did the supervising justice err in concluding that the Canadian investors came within the scope of the CCAA and that their use of the CCAA was proper?

2. Did the supervising justice err in concluding that the Texas entities were subject to the CCAA?

Leave on all other grounds was denied. The Court of Appeal emphasized that this was a “unique, if not singular” application of the CCAA and warranted appellate guidance, especially given the implications for cross-border investment structures.

Why This Case Matters: Expanding the Scope of the CCAA

The CCAA is usually used by insolvent companies to reorganize debts for the benefit of creditors. In Angus, equity investors used it to protect governance rights. This flips the traditional narrative: rather than creditors seeking to restrain debtors, shareholders used the CCAA to restrain managers and preserve assets.

If upheld on appeal, this case could broaden standing under the CCAA to include aggrieved investors, not just creditors, blurring the line between insolvency law and corporate governance. It could also extend Canadian court jurisdiction over U.S.-based entities where there’s a meaningful Canadian investment structure. The case also reinforces the role of monitors in situations involving deficient records or uncooperative management, even outside traditional creditor-debtor contexts.

Risks and Cautions: The Floodgates Argument

The use of the CCAA highlighted in Angus could raise concerns about undermining the CCAA’s integrity. The CCAA is typically used to resolve shareholder disputes or internal governance failures. Using insolvency law for such purposes might delay legitimate sales, disrupt markets, and unfairly impact other investors.

However, the Alberta Court of Appeal appears to be aware of these risks. By granting only limited leave, the Court is signalling both caution and a willingness to clarify the law. Its forthcoming decision will determine whether this use of the CCAA is a creative remedy for investor protection or a misuse of a specialized legal tool.

Key Takeaways for Alberta Business Law Clients and Advisors

The Angus case has several implications for Alberta businesses and business advisors:

1. Standing under the CCAA may be broader than you think. Passive investors may be able to bring applications if they can demonstrate a financial or legal interest, especially when governance fails.

2. Courts may accept jurisdiction over foreign entities where there’s a sufficient nexus to Canada through the investment and corporate structure.

3. The use of the CCAA to block asset sales rather than for traditional debt restructuring is legally controversial and still unsettled.

4. Equity and insolvency law are starting to intersect more frequently in complex, cross-border structures. Clients must be aware of the risks this poses for real estate and investment deals.

5. Early legal advice is critical. The development groups’ failure to appeal the initial order in time limited their options. Strategic decisions early in litigation can have lasting consequences.

Angus A2A GP Inc.: A Precedent in the Making?

Angus A2A GP Inc. v Alvarez & Marsal Canada Inc. presents a critical legal crossroads. Whether the CCAA can be used as a backdoor remedy for corporate mismanagement, or whether this stretches insolvency law too far, is now before Alberta’s highest court.

When released, the appeal decision will likely set a precedent for how flexibly Canadian courts are willing to interpret the CCAA, especially in cross-border investment contexts. For business lawyers, investors, and insolvency professionals, this case is one to watch.

DBB Law: Providing Top-Tier Business Law Services in Calgary

The Angus decision could reshape how Canadian courts view the scope and purpose of the CCAA, particularly in cross-border investment contexts where equity investors seek to assert governance rights. For tailored legal advice on insolvency proceedings, investor protections, or cross-border corporate structures, contact the experienced Alberta business lawyers at DBB Law today.

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