Target Canada exit controversy

US discount department store retailer Target is making its Canadian exit a month early.

Target Canada will close the last of its 133 stores by April 12, leaving 17,600 staff jobless and owing literally billions of dollars to suppliers and landlords.

Its largest debt, however, is US$1.9 billion to its US parent.

Its departure is raising questions on the process of Canada’s corporate bankruptcy laws. Target has controversially sought court protection under Canada’s Companies’ Creditors Arrangement Act, an insolvency law designed to be used by companies seeking to restructure their finances to remain in business.

But Target Canada had no intention of remaining in business, closing all its stores and exiting the market, unable to compete with rival US retailer Walmart and gain critical mass in sales to creative a commercially viable business.

“There is no question that the notion of using the CCAA as a liquidation strategy is contested in Canada,” Janis Sarra, a law professor at the University of British Columbia and an insolvency expert, told The Globe and Mail newspaper in an article published online.

“There’s a live debate about whether or not it’s the appropriate tool.”

Canada’s government is reportedly reviewing insolvency laws to prevent companies using such protection to liquidate rather than restructure.

“What was merely a debate among bankruptcy specialists takes on new meaning as the repercussions of Target’s massive failure ripple through the economy,” opined The Globe and Mail.

Read the full story online here.

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