Freshstone: the reverse vesting order, granted on a third affidavit

Freshstone Brands Inc.'s Steinway facility in Ontario operates under licence number 4HFXBWXT, issued by the Canadian Food Inspection Agency under the Safe Food for Canadians Act. Without its licences, certificates and registrations, "and more particularly" that kind of licence, Leigh Wilson, the company's chief development officer, swore on October 7, 2026, "all of Freshstone's operations would be brought to a halt." Her affidavit quoted s. 20(5) of the Act ("The registration or licence is not transferable") and went on to report what a CFIA support agent had verbally confirmed to her, what the agency had written to every licence holder in July, and how long the buyer of Freshstone's former Kitchen Partners division had waited for a licence of its own, per the Affidavit of Leigh Wilson, Oct. 7, 2026, paras. 1, 4–5, 8–12.

Freshstone, a Canadian maker of prepared meals, has been under the CCAA since June 9 with Deloitte Restructuring Inc. as monitor. On October 2 it asked Justice W.D. Black of the Ontario Superior Court of Justice (Commercial List) to approve a reverse vesting transaction with Frank Burdzy, its chief executive and a secured creditor. The judge declined to grant the order, and the reasons of October 5, reported here that day, said the source of Freshstone's "understanding" that its licences could not be transferred "is not identified," and that the identity of the advisers behind Mr. Burdzy's advice on its tax losses "is not disclosed," per the Endorsement of Justice W.D. Black, Oct. 5, 2026, paras. 4, 7, 9, 13–17, 19, the Affidavit of Leigh Wilson, Sept. 11, 2026, para. 25 and the Fourth Report of the Monitor, Sept. 25, 2026, paras. 1, 4(b) n. 1. On October 14 the judge granted the order. "The additional evidence now persuades me to grant the order sought," the endorsement reads, and in its last paragraph the judge records having "signed the updated form of ARVO provided," per the Endorsement of Justice W.D. Black, Oct. 14, 2026, paras. 3–4, 7, 10.

Seventy business days

The CFIA support agent, Ms. Wilson swore, verbally confirmed that a Safe Food for Canadians licence cannot be assigned or transferred to a third party, "including in the context of a sale transaction"; that the agency would require any third-party purchaser to apply for a new one; and that the process "could last up to seventy (70) business days." The affidavit ties that estimate to an email that the CFIA's director of operations for its National Service Centres Division sent to all licence holders, Freshstone among them, on July 21, 2026. Applications "will no longer be processed within 48 hours," the email said, and the service standard for a licence application is 70 business days, per the Affidavit of Leigh Wilson, Oct. 7, 2026, paras. 9–10 and Ex. "A".

Freshstone's own experience came from the other side of a sale. When it sold the Kitchen Partners division, the affidavit says, Freshstone had a duty to cooperate with the purchaser's licence application, and so "had direct knowledge" of the steps: an application through the CFIA's online portal on March 9, 2026; further documents on March 13; a case assigned to an inspector on April 8; the inspector's review completed on April 15; and approval on April 30, "a total of fifty-two (52) days (or eight (8) weeks)," per the Affidavit of Leigh Wilson, Oct. 7, 2026, paras. 11–12.

For the Steinway facility's registration with the U.S. Food and Drug Administration, the affidavit quotes the U.S. Code of Federal Regulations: when a registered facility has a new owner, the former owner must cancel the registration within 60 calendar days and the new owner must submit a new one. Two FDA helpdesk employees verbally confirmed the same to Ms. Wilson, and one added that the review would be manual, with no specific or estimated timeline that could be given. Under the SQF Food Safety Code, as the affidavit quotes it, a new owner must notify the certification body within 30 calendar days and apply to retain the certification. Ms. Wilson had tried to reach the SQF Institute and been "unable to speak to anyone thus far," per the Affidavit of Leigh Wilson, Oct. 7, 2026, paras. 4, 13–16.

The affidavit draws its conclusion for the CFIA licences and the FDA registrations: "it is clear from the above," Ms. Wilson swore, that they "cannot be assigned or otherwise transferred to a third party, including in the context of a sale transaction." A sale by ordinary approval and vesting order, she believes, "would certainly result in additional delays and costs, as well as uncertainty given that there is no guarantee that the issuing entity will agree to re-issue" what Freshstone needs to operate, per the Affidavit of Leigh Wilson, Oct. 7, 2026, paras. 17–18.

The affidavit also quoted the by-law behind another of Freshstone's reasons. Membership in the Fruit and Vegetable Dispute Resolution Corporation, which the affidavit says Freshstone is required to maintain to operate under s. 122 of the Safe Food for Canadians Regulations, "may only be transferred to the Corporation," under s. 2.03 of the corporation's By-law No. 1 as the affidavit quotes it. An asset sale, the affidavit says, "would likely be followed by Freshstone's bankruptcy," which in turn would terminate that membership automatically, per the Affidavit of Leigh Wilson, Oct. 7, 2026, paras. 19–21.

The adviser, identified

On the tax losses, the affidavit restated the figures and corrected one. Freshstone's 2024 tax return, the affidavit says, shows approximately $36.6 million in non-capital loss carryforwards. The September affidavit had put the estimate for 2025 and 2026 at more than $50 million; that, Ms. Wilson now swore, was the figure for 2025 alone, and current estimates for the two years come to more than $70 million, per the Affidavit of Leigh Wilson, Oct. 7, 2026, para. 22 and n. 16. The monitor's Third Report gives the same "in excess of $70 million" as Freshstone's estimate for the combined years, per the Third Report of the Monitor, Sept. 15, 2026, para. 80.

Mr. Burdzy's advice that the losses "could potentially be lost" in an asset deal had come, the September affidavit said, "based on its discussions with its advisors." The October affidavit identifies the adviser as the director and leader of the Canadian tax practice at Moodys Tax Law. Ms. Wilson also swore that Freshstone's own counsel, Stikeman Elliott LLP, through the partner who heads the tax group in its Montreal office, had advised her that the tax attributes the investor requires "would be lost should the Transactions be structured as an asset deal." As she sets out that advice, s. 111(1) of the Income Tax Act lets non-capital losses be deducted only by the taxpayer that incurred them; no provision of the Act lets a taxpayer assign them; an amalgamated corporation is deemed by s. 87(2.1) to be the same corporation as its predecessors for counting those losses; and so, before reverse vesting structures, a purchaser who wanted an insolvent debtor's tax attributes generally had to buy the other assets, sponsor a proposal or plan so that the debtor would not become bankrupt, reorganize its share capital and amalgamate with it, steps that "would require significant delays and associated costs," per the Affidavit of Leigh Wilson, Oct. 7, 2026, paras. 23–25.