Section 11.4 of the CCAA requires that persons identified as critical suppliers to a debtor company continue to provide goods and services on terms and conditions with the existing supply relationship. The policy rationale underlying section 11.4 of the CCAA is simple: a business is dependent on the ongoing supply of important products and services, an interruption in such supply could adversely impact going concern operations, impair a restructuring and cause significant losses to creditors and other stakeholders. When the court makes such an order it is obligated to grant a charge in favour of the suppliers in an amount equal to the value of the goods or services supplied. The suppliers are prevented from insisting on immediate payment but obtain security for their post-filing extensions of credit to the debtor.
Prior to amendments to the CCAA in 2009, there was no express statutory authority within the CCAA to allow a court to direct a person, however critical to the operation of a business, to continue to supply goods and services to a debtor company. There was clear case authority that permitted a debtor company to make payment of pre-filing obligations when doing so would maximize the value of the business. The making of pre-filing payments often represents the simplest and most straightforward way of ensuring continued supply from vendors, who will understandably be more receptive to supplying after receipt of an anticipated payment as opposed to interpreting and complying with a court order. Although section 11.4 of the CCAA has been given a broad interpretation to compel continued supply, the case law subsequent to the passage of the 2009 amendments is also very clear that the court has retained the inherent jurisdiction to permit the payment of pre-filing obligations.