Freedom Cannabis – Alberta Court of King’s Bench finds that it had the discretion under the CCAA to eliminate directors’ personal liability arising under a federal taxing statute

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.

Neal Armstrong. Summary of Freedom Cannabis Inc (Re), 2025 ABKB 272 under ETA, s. 323(2).