Formula Solutions: a waterfall that stops at ARK, after the molds went for scrap

On October 22, 2026, on an unopposed motion heard by Zoom, Justice W.D. Black of the Ontario Superior Court of Justice (Commercial List) signed the two orders that wind up the receivership of Formula Solutions Inc., a Burlington company whose primary business was making aerospace composite parts for one large customer, Rohr, Inc., a division of Collins Aerospace. The Distribution and Discharge Order directs the receiver, Bricks Damiani Inc. (BDI), to pay out the funds it holds in three steps: first, the amounts secured by the Receiver's Charge, including its own and its counsel's fees and disbursements and the estimate to finish; second, the Receiver's Borrowings Charge; third, ARK Capital Ltd., the senior secured lender, "up to the full amount of the indebtedness owing to ARK," subject to any holdbacks the receiver believes it needs to complete the proceeding or that may be owed to creditors with a prior-ranking interest, per the Distribution and Discharge Order, Oct. 22, 2026, para. 3 and the First Report of the Receiver, Oct. 14, 2026, para. 13. "The realizations in the receivership will not be sufficient to retire the ARK indebtedness, which is secured by valid and enforceable instruments," the judge wrote, per the Endorsement of Justice W.D. Black, Oct. 22, 2026, paras. 1, 2(b).

According to the receiver's first report, dated October 14, ARK was owed in excess of $7,199,078 at September 30, 2026, with costs and interest still accruing, and the estate held approximately $1,705,098 at October 9. The consequence, in the report's words, is that "there will be no recovery available to the unsecured creditors of FSI," per the First Report of the Receiver, Oct. 14, 2026, paras. 15, 73–74. The company has been bankrupt since May 12, 2026, with BDI as its trustee as well. The order makes every distribution under it "final and irreversible," binding on the trustee and on any receiver or monitor that may be appointed, not void or voidable by creditors, and not to be deemed a fraudulent preference, transfer at undervalue "or other reviewable transaction" under the BIA or any other federal or provincial legislation, per the Distribution and Discharge Order, Oct. 22, 2026, para. 6.

A plant for one program

Justice J. Dietrich, appointing the receiver in May 2025, described the business the company ran until it shut down: composite parts for Collins Aerospace "in respect of a commercial aviation program," and small runs of non-aviation products such as high-end stereo speaker cabinets, boom sets and specialty gimbal lighting sets, per the Endorsement of Justice J. Dietrich, May 13, 2025, para. 6. The company was incorporated in Ontario in 2018 and worked by vacuum assisted resin transfer moulding. It leased about 50,000 square feet of plant and warehouse space at 1550 Appleby Line from July 1, 2018, then began a large capital expenditure program on machinery and equipment and hired employees and managers across its functions, per the First Report of the Receiver, Oct. 14, 2026, paras. 12–14, 16(a).

Delays in final tooling and accreditation, and the pandemic's disruption of air travel, meant manufacturing of parts for Collins did not begin until August 2023, the receiver's report says, per the First Report of the Receiver, Oct. 14, 2026, para. 16(c). ARK's affidavit, as the proposed receiver's report of May 2, 2025 summarized it, gives the numbers. The audited statements, it says, showed revenue of $1.3 million in fiscal 2022 and $3.5 million in fiscal 2023, net losses of $4.6 million and $11.3 million, and an accumulated deficit of $24.3 million at the end of fiscal 2023. Sales for the year ended September 30, 2024 were $11.1 million, according to the affidavit, against a business-plan forecast of $15.3 million. The company attributed its negative margins primarily to production labour and material input costs for the Collins parts running above forecast; midway through fiscal 2024 it negotiated better pricing with Collins on a temporary basis, but not a permanent improvement. Talks about selling the company, or its tooling, to Collins did not succeed, and neither did the board's own canvass for a buyer, per the Pre-Filing Report of the Proposed Receiver, May 2, 2025, paras. 16(d), 17(a), 17(d), 17(f)–(g) (Motion Record, Oct. 14, 2026, App. E). At its peak in 2024 the company employed 121 people: 103 non-unionized employees and 18 engineers and managers, per the First Report of the Receiver, Oct. 14, 2026, para. 17.

On December 20, 2024, Collins sent a "Notice of Termination for Convenience of Purchase Agreement," which, in the proposed receiver's summary, set out Collins's alleged ownership of, or intention to take possession of, certain tooling, per the Pre-Filing Report of the Proposed Receiver, May 2, 2025, para. 17(i), (l) (Motion Record, Oct. 14, 2026, App. E). The company ceased operations that day and took steps to release its remaining finished goods to Collins. On or about December 26 it terminated all remaining employees and arranged for their final payroll and vacation pay; on January 2, 2025 the landlord terminated the plant lease for uncured defaults and arrears; by mid-January every director and officer had resigned, per the First Report of the Receiver, Oct. 14, 2026, para. 16(g)–(j). The final director resigned on January 9, 2025, after signing the consent to a receiver and waiving the 10-day enforcement notice period, per the Endorsement of Justice J. Dietrich, May 13, 2025, para. 10. The statement of affairs sworn for the bankruptcy gives the reason in one line: "Loss of largest customer and did not have sufficient working capital to operate," per the Notice of Bankruptcy, May 15, 2026, p. 2.

The lender, the auction and the molds

ARK came to the debt by assignment. Service365 Inc. had lent to the company under a term loan secured by a general security agreement, and assigned the loan and security to ARK on January 18, 2025; in early February it paid out the debt owed to RBC, which had held a first-ranking charge and discharged its security. ARK had also invested more than $1.9 million in the company's common shares, per the First Report of the Receiver, Oct. 14, 2026, paras. 15, 22. The company had acknowledged its default on January 8, 2025, and at April 23, 2025 owed ARK $5,498,370.06, excluding legal and other professional fees, with interest accruing on the principal at a per diem rate of $2,044.00, per the Endorsement of Justice J. Dietrich, May 13, 2025, paras. 11, 13.

On May 13, 2025, Justice Dietrich appointed BDI under s. 243(1) of the BIA and s. 101 of the Courts of Justice Act, per the Receivership Order, May 13, 2025, para. 2, and, the same day, approved an auction services agreement with Corporate Assets Inc. for the plant's machinery and equipment, per the Approval and Vesting Order, May 13, 2025, para. 1. A going-concern solution had been canvassed in 2024 and not obtained, and was no longer possible once the employees had been terminated and the directors had resigned, the judge wrote. Seven auction proposals had come in, and the equipment, the endorsement says, could not be moved from the plant without significant risk of damage. Corporate Assets was selected because its proposal provided for "a competitive net minimum guarantee with an entitlement to an agreed share of any proceeds of sale realized by the Auctioneer in excess of the NMG" and satisfied the landlord's conditions for the plant, per the Endorsement of Justice J. Dietrich, May 13, 2025, paras. 16, 32–33.