The Supreme Court of British Columbia appointed a receiver over a medical-mask manufacturer and three related companies despite ongoing negotiations for a business sale. In National Bank of Canada v. Novo Textile Company Ltd., 2026 BCSC 2134, the Court found that longstanding defaults and risks to the lender’s security justified immediate receivership. However, it delayed the receiver’s power of sale until November 3, 2026, allowing the proposed transaction additional time to proceed.
Why National Bank Sought Receivership
National Bank provided financing to Novo Textile Company Ltd. and related companies, secured by general security agreements, guarantees and mortgages. The total indebtedness exceeded $9.55 million by August 2026, excluding legal fees and costs. Evidence included prolonged payment defaults, more than $80,000 in unpaid property taxes and failures to provide required financial reporting.
The insurance policies documented to the bank had expired, and substantial government tax debts remained outstanding. National Bank also raised concerns about operating revenue being directed elsewhere and withdrawals by Novo Textile’s principal. It sought a receiver to protect the secured assets, preserve revenues and pursue recovery.
Why the Proposed Sale Was Insufficient
Novo argued that receivership could undermine the business’s going-concern value and jeopardize important customer relationships. It maintained that a proposed sale could generate enough money to repay National Bank and government creditors. However, earlier transactions had failed, anticipated closing dates had changed and the latest negotiations remained subject to execution of a formal agreement.
Justice Veenstra found that the defaults were substantial and longstanding. The Court accepted National Bank’s concerns about its security and found that the demonstrated value of the underlying assets was insufficient to cover the outstanding liability. An unsigned transaction after months of negotiations did not justify withholding receivership protection.
Why the Court Delayed the Receiver’s Sale Powers
The Court considered the equity of redemption, including the debtor’s opportunity to repay secured obligations before assets were sold. It confirmed that receivership orders are flexible and that courts may adjust the receiver’s powers to reflect competing interests. The question was what relief was just and convenient in the circumstances.
The Court appointed Deloitte Restructuring Inc. as receiver but postponed its power of sale until November 3, 2026. This allowed the proposed private transaction an additional opportunity to proceed while the receiver protected the assets. The Court considered immediate receivership necessary to ensure that funds generated by the debtors’ operations were applied in the appropriate priority.
What Lenders and Distressed Businesses Should Take From the Decision
A proposed sale does not necessarily prevent receivership when substantial defaults place secured creditors at risk. Borrowers seeking additional time should provide concrete evidence of transaction progress, including purchaser commitments, financing arrangements and realistic completion dates. General expectations of an imminent sale may carry limited weight when earlier transactions have failed.
The decision also demonstrates that appointing a receiver and authorizing asset sales are separate questions. Courts may preserve secured creditors’ interests while temporarily restricting sale powers to accommodate a realistic repayment opportunity. The judgment did not determine that Novo’s proposed transaction ultimately completed.
ATAC LAW represents lenders, borrowers and commercial parties in commercial litigation and real estate disputes. These matters include disputes involving secured obligations, contractual enforcement and commercial property interests. The firm’s litigation team assesses available remedies alongside the contractual terms and financial evidence.
