2016-0628741I7 appeared to indicate that where, under a Plan of Arrangement, interest of a debtor will be forgiven, s. 143.4 will apply in the year the Plan is approved by the creditors to reduce the interest amount rather than in the subsequent year when the Plan is implemented. If CCAA procedures commence in Year 1, the creditors approve the Plan in Year 2, and the Plan is implemented in Year 3, when will a “right to reduce” arise for s.143.4 purposes?
CRA indicated that, in general, when a right to reduce arises under s. 143.4(1) will require a determination of when the legal right, albeit contingent, arises, and whether it is reasonable to conclude that the right will be exercisable. In the case of an interest that is forgiven under a CCAA proceeding, this will include a review of the Plan of Arrangement and the terms of the contingencies contained in the Plan, which would include an assessment of whether that right of the debtor, to settle for less than the full amount of the obligation, will be exercisable in the circumstances.