Freedom Cannabis Inc (Re), 2025 ABKB 272

Freedom Cannabis Inc. (“Freedom”) was in CCAA proceedings. The only bid for it or its assets came from a secured creditor (JLL), which proposed that desired assets and contracts of Freedom would be retained and that there would be a vesting out (pursuant to a reverse vesting order) of unwanted liabilities to a newly created company (ResidualCo.) The existing shares of Freedom would be cancelled and new shares issued to a JLL subsidiary.

The only contentious issue before Mah J related to the proposed release of liabilities of the directors of Freedom, which would have the effect of extinguishing their liability pursuant to s. 295(2)(a) of the Excise Act for unremitted excise taxes of Freedom of $4.7 million.

Mah J found that the Court had the jurisdiction pursuant to s. 11 of The Companies’ Creditors Arrangement Act (CCAA) to grant a release of such liabilities in the face of a CRA argument that it was within the exclusive jurisdiction of the Minister of National Revenue or the Tax Court to relieve director liability under s. 295(2). In particular, Mah J found that the wording of s. 11 should not be viewed as meaning that an order thereunder could not affect rights granted by other federal legislation.

In determining that the requested director releases were appropriate, he referred, inter alia, to the JLL position that it would not proceed with the transaction without continuity of management, which depended on the release.

Maw J also found that it was appropriate for him to exercise his discretion to grant the proposed relief since "the greater sum of benefit will arise from granting the releases (and permitting the transaction to proceed), as opposed to refusing them, letting the transaction fail and allowing CRA to realize what it can” (para. 38) and further indicated that there was no basis for finding that Freedom and its directors had not in good faith sought to manage the excise liabilities.

The only bid for the shares of assets of a company (“Freedom”), a cannabis-producer in CCAA proceedings, came from a secured creditor (JLL), which proposed that desired assets and contracts of Freedom would be retained and that there would be a vesting out of unwanted liabilities to a newly created company (ResidualCo.) The existing shares of Freedom would be cancelled and new shares issued to a JLL subsidiary.

The only contentious issue before Mah J related to the proposed release of liabilities of the directors of Freedom, which would have the effect of extinguishing their liability pursuant to s. 295(2) of the Excise Act (similar to ETA s. 323(2)) for unremitted excise taxes of Freedom of $4.7 million.

Mah J found that the Court had the jurisdiction pursuant to s. 11 of the CCAA to grant a release of such liabilities in the face of a CRA argument that it was within the exclusive jurisdiction of the Minister of National Revenue or the Tax Court to relieve director liability under the Excise Act. In particular, Mah J found that the wording of s. 11 should not be viewed as meaning that an order thereunder could not affect rights granted by other federal legislation.

In determining that the requested director releases were appropriate, he referred, inter alia, to the JLL position that it would not proceed with the transaction without continuity of management, which depended on the release, and that there was no basis for finding that Freedom and its directors had not in good faith sought to manage the excise liabilities.