Rethinking the Case for Reverse Vesting Orders in Canadian Insolvency Law

Forthcoming in UBC Law Review

This article examines the rise and normalization of reverse vesting orders (RVOs) in Canadian insolvency law. Initially framed as exceptional remedies suited to highly regulated industries, RVOs now appear with increasing frequency in proceedings under both the Companies’ Creditors Arrangement Act (CCAA) and the Bankruptcy and Insolvency Act (BIA). Drawing on the first empirical study of RVOs, the article presents original data on their frequency, context, and outcomes since their inception in 2015 to 2025. It shows that courts have increasingly treated RVOs as routine restructuring tools, despite offering limited reasoning on their coherence with the statutory frameworks they purport to operate within.

The article argues that RVOs undermine the core tenets of Canadian insolvency law – creditor democracy, class-based voting, and collective negotiation – by enabling purchasers to acquire a debtor’s shares free of liabilities outside the statutory plan or proposal process. It further challenges the prevalent characterization of RVOs as asset sales, despite their fundamental structure as share transfers, a mischaracterization that distorts foundational corporate law principles. Comparative analysis with bank resolution regimes further reveals that RVOs lack the legislative grounding, public policy rationale, and creditor safeguards that justify similar tools in financial stability contexts. Ultimately, the article calls for a rethinking of the doctrinal and normative foundations of RVOs. It warns that continued reliance on speculative benefits and cursory precedents risks displacing carefully designed procedural protections, entrenching a restructuring model that privileges expediency over fairness and erodes the legitimacy of the insolvency regime.