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WHAT IS A CREDITOR IN ACCOUNTING TERMS? - YouTube
Channel: Ira Smith
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what is a creditor in business law not
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to do introduction the purpose of this
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Brandan's blog is to tell you a true
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story that all business people can learn
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from especially those wishing to provide
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consulting services to stakeholders in
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an insolvency proceeding let's start
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simply by answering what is a creditor a
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creditor is a person or company that has
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advanced credit and is owed the payment
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by a different person or company the
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debtor is the party that owes the money
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and the creditor is a person or company
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that wishes to be paid Vonn crossings
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incorporated in January 2017 my firm
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became the court-appointed receiver of
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the real property of Vaughan crossings
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incorporated VC I VC I owned real
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property comprised of five point five
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acres of commercial development land
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located at the northwest corner of
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Dufferin and Center streets in the City
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of Vaughan the first mortgagee made the
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application to court for our appointment
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the second mortgagee was a fund made up
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of many small investors upon our
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appointment we learned that the second
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mortgagee stakeholders had retained a
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business consultant to advise and assist
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these investors to try to obtain value
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out of the receivership from their
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investment we dealt with the business
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consultant throughout the receivership
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it became clear to everyone that there
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was insufficient value for the second
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mortgagee group to recoup any funds
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through the sale of the property so the
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business consultant put together a group
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which included those who had registered
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a lien against the property for
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non-payment in the second mortgagee
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group the business consultant was not
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paid in cash by the second mortgagee
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group for his work his fee and costs
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were also part of the buying group they
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ended up paying above market value in
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all cash I was not involved in their
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financing discussion so I don't know how
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they were able to get the required
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financing the sale was completed and we
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were discharged as the court-appointed
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receiver now it gets even more
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interesting the business consultant the
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second mortgagee group of VC I was put
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together by a promoter it turns out that
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promoter had other properties that they
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financed by way of the second mortgage
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the same way my firm was not involved in
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those other properties however it
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appears the same biz
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consultant was involved in at least one
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other property it also appears that the
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business consultant experienced the same
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problem in that other property that he
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did in BCI
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no cash to be paid from in fact as it
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turns out he didn't even have a retainer
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to act on behalf of the second mortgage
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investors in those other properties that
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didn't stop him from trying to work that
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property and chase his VCI dollars the
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court case that issue was decided in the
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court case the superintendent of
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financial services V textbook student
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Suites 525 Princess Street trustee
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corporation 2018 ons C 7392 Kenley the
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consultants primary claim is against the
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investors committee he asserts to be
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entitled to cost for solutions that he
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executed for the board
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he claimed against the investors
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committee that because of the work he
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did in advising them his charges need to
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be safeguarded by a court-ordered charge
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against the properties he claims that
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his a bankruptcy expert that his
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solutions were for the advantage of the
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stakeholders therefore he ought to be
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paid as charges in advance of any kind
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of distributions to secured creditors he
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also said that his job also helped the
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lenders in their recuperation of the
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funds owing to them he did not provide
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the court with any case law to support
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his position rather he was relying on
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the inherent jurisdiction of the court
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to order such security the analysis of
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course there was not a written agreement
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between the consultant and the investors
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committee signed by both parties the
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judge stated that the legislation is
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well settled that in identifying whether
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the parties had a binding agreement the
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court will take into consideration
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whether they reached agreement on every
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one of the material terms one term that
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can be material as whether an
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arrangement requires to be in writing or
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whether an oral contract will be enough
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as it turns out there were several
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drafts of the consultants engagement
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letter discussed with the chair of the
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investors committee however the
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investors committee found the engagement
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letter to be too vague they told the
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consultant this and asked him to provide
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a more detailed engagement letter of the
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activities he would undertake the time
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estimate for each phase of his work and
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what his hourly rate would be for those
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services the consultant did not provide
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a more formal engagement letter and as a
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result one was never signed rather the
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court
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found that the consultant continued
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working at the same time he was
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exchanging emails with the investors
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committee the committee learned that at
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this same time the consultant was trying
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to strike a deal with the second
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mortgagee stakeholder in my VC I file
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now the investors committee felt that
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the consultant may have a conflict and
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did not seek an engagement letter to
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sign at the same time the consultant
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advised the investors committee that his
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retainer was subject to their legal
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counsel obtaining a court-ordered charge
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for his fee and costs ahead of any
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distribution to be paid to the second
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mortgage investors this email turned out
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to be the downfall of the consultant in
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this court case the court found that by
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this email the consultant knew that he
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did not have that priority yet was
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continuing his work no court application
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was ever made to obtain that
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court-ordered charge the consultant
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tried advancing all sorts of other
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arguments as to why he should now be
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granted the priority claim but none were
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persuasive or even correct the judge
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ruled against the consultant so not only
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did the consultant not get paid for his
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work he also had costs awarded against
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him for losing this court battle
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so what is it that you should not do
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what you should not do is not start
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working if you do not have a proper
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written retainer to provide the
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consulting services even if you have the
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properly written retainer know how you
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are going to be paid and that the party
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you are contracting with has the ability
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to pay this is especially true in an
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insolvency situation in a receivership
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or bankruptcy administration there are
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many claimants against the assets many
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times the creditor claims are competing
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so anyone wishing to provide goods or
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services to a stakeholder in an
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insolvency administration better make
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sure there is a clear contract and know
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who is going to be actually paying this
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consultant found out the hard way that a
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court is not going to protect you for
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your mistakes later on no matter how
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reasonably you believe it is what is a
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creditor is your business and financial
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distress because you cannot collect your
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Billings do you not have adequate funds
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to pay your creditors as their bills to
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you come to if so call the IRS Smith
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team today we have decades and
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generations of experience assisting
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people looking for financial
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restructuring a debt settlement plan and
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to avoid bankruptcy as licensed
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insolvency trustee formerly called a
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bankruptcy trustee we are the only
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professionals accredited acknowledged
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and supervised by the federal government
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to provide insolvency advice and to
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implement approaches to help you remain
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out of personal bankruptcy while
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eliminating your debts a consumer
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proposal is a government-approved get
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settlement plan to do that we will help
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you decide on what is best for you
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between a consumer proposal vs.
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bankruptcy call the IRA Smith team today
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so you can eliminate the stress anxiety
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and pain from your life that your
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financial problems have caused with the
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one-of-a-kind roadmap we developed just
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for you we will immediately return you
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right into a healthy and balanced
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problem-free life you can have a no cost
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analysis so we can help you fix your
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troubles call the IRA Smith team today
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this will allow you to go back to a new
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healthy and balanced life starting over
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starting now I hope you enjoyed the
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video the IRA Smith team is available to
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help you at any time
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we offer sound advice and a solid plan
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for starting over starting now so that
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you'll be well on your way to a
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debt-free life in no time
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for more information on a no-cost basis
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please visit our website or call us our
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website and telephone details are coming
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right up now
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