Torkin Manes

torkinmanes.com Unexpected Creditor... (cont'd.) Corp. v. CPI Plastics Group Ltd., in which a bank lent funds to CPI Plastics Group Ltd. ("CPI"). Itak International Corp. ("Itak") owned preference shares in the capital of CPI, which allowed Itak to retract any or all of its preference shares on 30 days' notice to CPI. The bank obtained the agreement of CPI not to purchase or redeem any issued and outstanding shares without the bank's consent during the term of the financing— but did not do so with Itak. Itak called for the redemption of its preference shares in the capital of CPI. The Court stated that the bank's negative covenant with CPI would not, in and of itself, preclude a shareholder from calling for the retraction of any of its preferences shares and would not justify a borrower's refusal to honour the retraction notice. It is interesting to note that CPI was concerned about its financial position and the impact redemption would have on its negative banking covenants. The Court stated there was no evidence the contractual right to retraction was specifically subject to any bank financing covenants. Given these facts, we negotiated and obtained a negative covenant from Dad whereby he agreed not to retract his preference shares during the term of the financing without the lender's consent. This file illustrates the importance of understanding the commercial implications of share attributes and tax restructurings in what would otherwise be a pure commercial financing. The moral of the story is that lenders and borrowers should each address at the outset the issue of whether there are issued and outstanding preferred shares which would allow a shareholder to call for the retraction of its preferred shares. The time to deal with this is at the The Alliance Corner Torkin Manes is one of the founding members of the International Alliance of Law Firms (www.ialawfirms.com). The Alliance provides us with access to the expertise of more than 60 member firms in more than 40 leading economic jurisdictions throughout the world. In early November, members gathered in Philadelphia for the organization's Americas Regional Meeting. To find out more about the memorandum or for more information about the Alliance, please contact: Darryl T. Mann | 416 777 5407 dmann@torkinmanes.com Allan S. Bronstein | 416 777 5369 abronstein@torkinmanes.com Barry S. Arbus | 416 777 5423 barbus@torkinmanes.com beginning of loan discussions and not when there is a conflict between shareholder/bank since the result, while unintended, can prove costly. Marc Weisman is Chair of our Tax Law Group. Marc's practice focuses on tax and business law planning, with significant experience in advising on all types of financing transactions. Marc can be reached at 416 777 5455 or mweisman@torkinmanes.com. Barry A. Cohen, QC is a partner in Torkin Manes' Banking, Finance and Insolvency Group. He provides counsel to banks, leasing companies, factoring companies, asset-based lenders, and other secured lenders in commercial loan transactions. Barry can be reached at 416 777 5434 or bcohen@torkinmanes.com. Torkin Manes in the Community in 2012 SPORTING LIFE 10K On May 13 Torkin Manes, friends and clients raised more than $8300 at the Sporting Life 10K Law Challenge benefiting Camp Oochigeas for children with cancer. BECEL RIDE FOR HEART Team Torkin Manes won the Silver Wheel Award in the Health, Law and Service category and raised over $25,000 on June 3. CIBC RUN FOR THE CURE On September 30, the Torkin Manes team raised more than $3500 at the 2012 CIBC Run for the Cure. WALK NOW FOR AUTISM SPEAKS A team of 50 lawyers, staff, friends and family raised over $2000 at the Toronto Walk Now for Autism Speaks on June 17. DAILY BREAD FOODBANK Team Torkin Manes won the 2012 Law Firm Food Sort Challenge on June 8. The event raised $5,750 for Daily Bread Food Bank. VE'AHAVTA From June 4-7, associates of Torkin Manes worked to prepare and deliver meals directly to group homes and the homeless. c l i e n t - f o c u s e d s o l u t i o n s® 5 5

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