Paystone: the bidder who has to help the other bidders

A company that comes to court with the deal already done is asking for approval, not for a process. Paystone asked for approval in June and was refused. What it got on July 10 is the process.

What a prepack is, and where this one failed

Justice Myers set out the mechanism before he ruled on it. A pre-packaged sale — a "prepack", or in receivership a "quick flip" — is where an insolvent debtor arrives with a restructuring outcome already in hand, having consulted affected stakeholders and agreed a way forward, and needs only formal approval. It can be granted quickly because the affected parties have already done the work, per Endorsement of Justice Myers, June 24, 2026, paras. 2–3.

The law is not lighter for being fast. "The law applicable to quick flips is not different than the regular applicable law. The timing is hurried. But the substance of the event — an asset sale in insolvency proceedings — is the same as usual," per Endorsement of Justice Myers, June 24, 2026, para. 4.

Here the proposed buyer was the debtor's own management, and that is where the reasoning turns. Non-arm's-length sales carry special provisions under the CCAA and attract special scrutiny against the risk of abuse. Then the sentence that decides it:

"In a balance sheet insolvency, by definition, the equity of the insolvent debtor has no value. With liabilities exceeding the realizable value of the debtor's assets, there is no room left to share value with shareholders."

So a non-arm's-length quick flip has those in charge of the debtor proposing a transaction under which they receive some value when their equity has none — and proposing it in a form that leaves little process or time in which to test whether creditors' positions were given due heed, per Endorsement of Justice Myers, June 24, 2026, paras. 5–8.

The debtor had not met the burden on it for approval of the sale, and the stay was extended to 11:59 p.m. EDT on June 30 instead, per Endorsement of Justice Myers, June 24, 2026, paras. 9–10.

July 10, and a courtroom that had already settled

Three weeks later the same parties were back with orders they had negotiated among themselves. The Monitor's counsel went out of his way to compliment the principal actors on the cooperation, and Justice Myers noted drily that "counsel could not resist reserving their clients' respective rights. So the potential downside is covered too," per Endorsement of Justice Myers, July 10, 2026, para. 1.

The sale process now before him was proposed by the Monitor, not by the debtor, and it was not opposed. BDC Capital and Sandton take consultation roles to keep the process transparent and value-maximising, per Endorsement of Justice Myers, July 10, 2026, paras. 2, 5.

He applied the criteria from Nortel Networks Corp. (Re), 2009 CanLII 39492 (ON SC) at paras. 48–49, and found them present — adding a reason specific to this file: a sale process matters "especially due to the stutter step caused by the prior unsuccessful effort by the debtor to approve a quick flip to its management," per Endorsement of Justice Myers, July 10, 2026, para. 7.

The conflict the order manages rather than removes

Management was not barred from bidding. It was made a supplier of information to the people bidding against it.

Justice Myers identified the difficulty directly: management may be in a conflict of interest in that the Monitor may be calling on them for information sought by other bidders. The initial order already obliges the debtor to give documents to the Monitor. Should the Monitor become concerned about the pace or flow of information "for any reason whatsoever", it may convene a case conference on short notice — and he served notice on every stakeholder that he expects to resolve such concerns summarily under Rule 50.13(6) of the Rules of Civil Procedure, per Endorsement of Justice Myers, July 10, 2026, para. 8.

Then the incentive, stated so that nobody could miss it: "it is in management's interest to be fully cooperative so that the fairness and integrity of the sale process is not criticized in the event that management's bid is brought forward for approval," per Endorsement of Justice Myers, July 10, 2026, para. 9.