CCAA vs. Chapter 11: Why Canada Is Becoming a Restructuring Destination
TL;DR
Chapter 11 is rules-based; Canada’s CCAA gives judges power to make any order appropriate in the circumstances. According to restructuring lawyer Robert “Bob” Thornton, that flexibility, including third-party releases that Purdue ruled out of Chapter 11, is why Canada can be an attractive venue for the right cross-border case.
Ask most restructuring professionals where a large, complex case should be filed, and the answer tends to follow gravity: Delaware, the Southern District of New York, Texas.
Robert “Bob” Thornton, founding partner of Thornton Grout Finnigan LLP in Toronto, has spent his career on the other side of that pull, arguing with American counterparts over where cross-border cases belong. So, when a well-regarded U.S. lawyer told a panel audience they should start thinking about Canada, he was stunned.
“You could have knocked me over,” Thornton tells Reviving Giants host Drew McManigle.
A Tiny Statute with Outsized Reach
The difference starts with size.
Chapter 11 of the U.S. Bankruptcy Code is, in Thornton’s words, “huge.” Canada’s primary restructuring statute, the Companies’ Creditors Arrangement Act (CCAA), is not. When he started practicing, he recalled, it had about 19 sections. It is now closer to 65, which still looks small next to the thousands of sections in Chapter 11.
But size is not the real distinction. Structure is.
Rules-Based vs. Power-Based
“In Chapter 11, it’s rules-based,” Thornton explains. “You have to find something in that statute that gives you the power to do something. But the CCAA is power-based.”
Under the CCAA, he says, judges are empowered to make “any order they think appropriate in the circumstances.” He asks listeners to let that sink in. If counsel can convince a judge that a novel order is appropriate, relief can be granted and will stand up even when there is no statutory predicate or precedent for it.
McManigle adds that most U.S. bankruptcy lawyers, if they thought a U.S. bankruptcy judge had that much power, “would probably turn white and get a little sick at their stomach.”
The Purdue Gap
The U.S. Supreme Court's 2024 ruling in the Purdue Pharma opioid bankruptcy case changed what a Chapter 11 plan can do.
For years, plans could include releases for parties that were not themselves in bankruptcy, such as a company's directors, officers, and shareholders. In Purdue, the Sackler family was named in the litigation but never filed for bankruptcy themselves. The Supreme Court held that non-consensual releases for non-debtors like these are not available. As Thornton sums it up, the ruling sends everybody back to the bargaining table.
Canada, he says, is a different story. Those kinds of releases are available under the CCAA, and in his account, they can be recognized in the U.S. through a Chapter 15 proceeding, the U.S. mechanism for recognizing foreign cases, "even when Purdue says you can't get them recognized under an 11."
He is quick to say they are not handed out freely. A legal test has been developed. There must be a connection to the case, and the person seeking the release must have contributed to the restructuring in a meaningful way. Canadian law, he says, evolves case by case on a principled basis, rather than requiring that every power be found in the statute.
Flexibility in Practice
Thornton points to other tools that flow from the same breadth of judicial power, including what practitioners now call reverse vesting orders (RVOs), which vest liabilities out of a company rather than vesting assets out of it, in part to preserve licenses and similar attributes. He notes he used the approach in some of his earliest cases, long before it had a name.
He also credits the bench. Canada has a panel of strong commercial judges who have embraced this area of law, he says, and the body of law keeps growing “every day” as they handle unique fact patterns.
Not a Replacement for the U.S. System
Thornton is candid that the pull toward U.S. venues is real. American lawyers “know their rules” and “love their rules,” he says, and many look north and see “the Wild West.” His claim is narrower: for the right case and the right facts, Canada can be a very attractive option, a jurisdiction where, as he puts it, you are “limited only by the creativity of counsel.”
For companies with a genuine Canadian connection, that is a reason to put Canada in the venue analysis from the start.
Takeaways For Leaders
- Chapter 11 is rules-based; the CCAA is power-based. They are different tools, not interchangeable ones.
- Companies with a Canadian connection should consider Canada in the venue analysis, not only the traditional U.S. venues.
- Availability of third-party releases differs between the two systems after Purdue, and the Canadian test requires a real connection and a meaningful contribution.
- Flexibility rewards experienced, creative counsel; it is not a shortcut.
- Choose the forum based on the facts of the case, not habit.
Listen to the Full Episode
Reviving Giants is presented by MACCO Group and hosted by Drew McManigle. To hear the full conversation with Robert “Bob” Thornton on the CCAA, third-party releases, and what makes a restructuring case historic, listen on the Reviving Giants podcast page or wherever you get podcasts.
