Giftcraft Ltd. and KPMG Inc.
MEMORANDUM OPINION GRANTING MOTION AUTHORIZING SALE, INCLUDING ASSETS IN THE U.S., AND ASSUMPTION OF EXECUTORY CONTRACTS
A P P E A R A N C E S:
Counsel to the Foreign Representative
501 5th Avenue, 15th Floor
New York, New York 10017
By: Daniel G. Egan, Esq.
MARTIN GLENN
CHIEF UNITED STATES BANKRUPTCY JUDGE
Pending before the Court is the uncontested Motion of Foreign Representative for Entry of an Order Pursuant to Sections 105(A), 363, 365, 1507, 1520, and 1521 of the Bankruptcy Code and Bankruptcy Rules 2002, 6004, 6006, And 9014 (I) Recognizing and Enforcing the Approval and Vesting Order, (II) Authorizing the Sale of Certain of the Debtors’ Assets Free and Clear of All Liens, Claims, Interests, and Encumbrances, (III) Authorizing the Assignment of Certain Executory Contracts, and (IV) Granting Related Relief (the “Motion,” ECF Doc. # 43) submitted by KPMG Inc. (“KPMG“), in its capacity as the court-appointed receiver (in such capacity, the “Receiver“) of the above captioned debtors (the “Debtors“), and in its capacity as the authorized foreign representative (the “Foreign Representative“) of the Debtors, which are the subjects of a receivership proceeding (the “Giftcraft Receivership“) pursuant to section 243(1) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, as amended (the “BIA“), and section 101 of the Courts of Justice Act, R.S.O. 1990, c. C.43, as amended (the “CJA“), pending before the Ontario Superior Court of Justice (Commercial List) (the “Canadian Court“). This Chapter 15 case has previously recognized the Canadian proceeding as a foreign main proceeding. The Sale has been approved by the Canadian court. The Sale Motion includes assets located in the United States. Second Circuit precedent makes clear that sales of assets located in the United States require the Chapter 15 court to determine whether the sale of U.S. assets satisfies section 363(b) of the Bankruptcy Code. See In re Fairfield Sentry Ltd., 768 F.3d 239, 244 (2d Cir. 2014). As discussed below, the Motion includes the necessary showing permitting the sale of U.S. assets.
The objection deadline was July 29, 2025, and no objections were received. The Foreign Representative seeks entry of an order (the “Proposed Order“), annexed to the Motion as Exhibit A (i) recognizing, enforcing, and giving effect in the United
For the reasons explained below, the Court GRANTS the Motion
I. BACKGROUND
A. Giftcraft Receivership
On May 9, 2025, following defaults by the Debtors under their secured credit facilities, Royal Bank of Canada (“RBC“), the Debtors’ secured lender, filed a Notice of Application with the Canadian Court under the BIA and CJA seeking to have a receiver appointed. (Motion ¶ 5.) On May 14, 2025, the Canadian Court entered an order (the “Appointment Order“) appointing KPMG as the Receiver, without security, over all the present and future assets, undertakings, and properties of each of the Debtors acquired for, or used in relation to, a business carried on by eaсh Debtor, including all proceeds thereof (the “Property“). (Id.)
The Appointment Order also provides the Receiver with broad authority over the Debtor‘s assets including the ability to:
- take possession of and exercise control over the Property and any and all proceeds, receipts and disbursements arising out of or from the Property;
- manage, operate, and carry on the business of the Debtors, including the powers to enter into any agreements, incur any obligations in the ordinary course of business, cease to carry on all or any part of the business, or cease to perform any contracts of the Debtors;
- receive and collect all monies and accounts now owed or hereafter owing to the Debtors and to exercise all remedies of the Debtors in collecting such monies, including, without limitation, to enforce any security held by the Debtors;
- execute, assign, issue and endorse documents of whatever nature in respect of any of the Property, whether in the Receiver‘s name or in the name and on behalf of the Debtors, for any purpose pursuant to the Appointment Order;
- market any or all of the Property, including advertising and soliciting offers in respect of the Property or any part or parts thereof and negotiating such terms and conditions of sale as the Receiver in its discretion may deem appropriate;
- sell, convey, transfer, lease or assign the Property or any part or parts thereof out of the ordinary course of business, (i) without the approval of the Canadian Court in respect of any transaction not exceeding $250,000 provided that the aggregate consideration for all such transactions does not exceed $1,000,000 and (ii) with the approval of the Canadian Court in respect of any transaction in which the purchase price or the aggregate
purchase price exceeds the applicable amount set out in the preceding clause; and - apply for any vesting order or other orders necessary to convey the Property or any part or parts thereof to a purchaser or purchasers thereof, free and clear of any liens or encumbrances affecting such Property.
(Id. ¶ 6.)
B. The Chapter 15 Cases
On May 20, 2025, (the “Petition Date“), the Foreign Representative filed, among other things, (a) voluntary petitions in this Court for relief under chapter 15 of the Bankruptcy Code for each of the Debtors, (b) a Verified Petition for (I) Recognition of Foreign Main Proceedings, (II) Recognition of Foreign Representative, and (III) Related Relief Under Chapter 15 of the Bankruptcy Code [ECF Doc. # 3], and (c) a Motion for Provisional Relief Pursuant to Section 1519 of the Bankruptcy Code [ECF Doc. # 6]. (Id. ¶ 7.)
On May 30, 2025, the Court entered the Order Granting Provisional Relief Pursuant to Section 1519 of the Bankruptcy Code [ECF Doc. # 28] (the “Provisional Recognition Order“), giving provisional recognition to the Giftcraft Receivership and granting full force and effect to the Appointment Order on a provisional basis. (Id. ¶ 8.)
On June 16, 2025, the Court entered the Order Granting Verified Petition of Foreign Representative for (I) Recognition of Canadian Proceeding as Foreign Main Proceeding, (II) Recognition of Foreign Representative; and (III) Related Relief Under Chapter 15 of the Bankruptcy Code [ECF Doc. # 37] (the “Recognition Order“) recognizing the Giftcraft Receivership as a foreign main proceeding on a final basis and granting various related relief. (Id. ¶ 9.)
C. Marketing Process
Upon the Canadian Court‘s entry of the Appointment Order, the Receiver immediately began working to fulfill its responsibilities under the Appointment Order with the aim to pursue a sale process with respect to the Debtors’ assets in an effort to maximize value for the benefit of all stakehоlders. (Id. ¶ 10.)
In furtherance thereof, the Receiver contacted a total of eighteen (18) potentially interest parties (the “Interested Parties“), consisting primarily of strategic buyers, in connection with a sale or other strategic restructuring transaction involving the Debtors’ business and assets. (Id. ¶ 11.) The Interested Parties contacted by the Receiver include parties that had previously expressed an interest in some or all of the Debtors’ assets through formal or informal marketing efforts conducted by the Debtors prior to entry of the Appointment Order. (Id.)
The Receiver held introductory calls with many of these parties, and ten (10) of the Interested Parties executed non-disclosure agreements (“NDAs“) with the Receiver and were provided access to a virtual data room maintained by the Receiver containing financial, operational, and other diligence information concerning the Debtors and their assets to assist the Interested Parties in evaluating a potential transaction. (Id. ¶ 12.) The Receiver also held follow-up diligence calls with many of the Interested Parties that executed NDAs and, to the extent requested, organized site visits to the Debtors’ headquarters in Brampton, Ontario to allоw such Interested Parties to view the Debtors’ operations and meet with management. (Id.)
On or about May 30, 2025, the Receiver received letters of intent from two Interested Parties regarding a potential transaction
(“CTG“) was the highest or otherwise best offer for the Purchased Assets (as defined in the APA) and that it was in the best interest of all stakeholders to move forward and finalize documentation with respect to such proposal. (Id.) A summary of the terms of the APA is contained in the Motion at paragraph fourteen (14). Accordingly, on July 7, 2025, the Receiver entered into the APA with the Purchaser, an entity formed by CTG, providing for the sale of substantially all of the Selling Debtors’ assets on the terms and conditions set forth therein.1 (Id.)
II. LEGAL STANDARD
A. Recognition of the Canadian Court‘s Vesting Order
B. Asset Sale Pursuant to Section 363 of the Bankruptcy Code
1. General Order M-383: Amended Guidelines for the Conduct of Asset Sales
The United States Bankruptcy Court for the Southern District of New York has established аmended guidelines (the “Guidelines“) for the conduct of asset sales under
2. Sale of a Debtor‘s Assets under Section 363(b)
“[T]he trustee, after notice and a hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate.”
the best interests of the company.” Official Comm. of Subordinated Bondholders v. Integrated Res., Inc., 147 B.R. 650, 656 (Bankr. S.D.N.Y. 1992).
A determination that there are sufficient business reasons to justify a particular sale depends on the facts and circumstances of each particular case. In re Lionel Corp., 722 F.2d at 1072. However, courts should consider factors such as: (1) the proportionate value of the asset to the estate as a whole, (2) the amount of time elapsed since the filing, (3) the likelihood of proposing and confirming a plan in the near future, (4) the effect of the proposed sale on any reorganization, (5) the sale price to be obtained with reference to any appraisals of the property, (6) alternative uses of the property, and (7) whether the asset is increasing or decreasing in value. (Id. at 1071.)
3. Sale of Assets Free and Clear of Liens under 363(f)
Bankruptcy Code
4. Protections to Good Faith Purchasers under 363(m)
Bankruptcy Code
faith, whether or not such entity knew of the pendency of the appeal, unless such authorization and such sale...were stayed pending appeal.” The Second Circuit has held that “[g]ood faith of a purchaser is shown by the integrity of his conduct during the course of the sale proceedings...A purchaser‘s good faith is lost by ‘fraud, collusion between the purchaser and other bidders or the trustee, or any attempt to take grossly unfair advantage of other bidders.‘” Licensing by Paola v. Sinatra (In re Gucci), 126 F.3d 380, 390 (2d Cir. 1997) (citations omitted).
5. Waiver of Bankruptcy Rules 6004(h) & 6006(d)
Bankruptcy Rule 6004(h) provides that “an order authorizing the use, sale, or lease of property...is stayed until the expiration of 14 days after entry of the order, unless the Court orders otherwise.”
Collier suggests that because the purpose of the rules is to “protect the rights of an objecting party,” a court should eliminate the 14-day stay period and allow the sale or the assignment, as applicable, to close immediately in all cases where there has been no objection to the procedure. 10 COLLIER ON BANKRUPTCY § 6004.10 (16th 2019) (discussing Bankruptcy Rule 6004(h)); id. § 6006.04 (discussing Bankruptcy Rule 6006(d)).
Under the Guidelines, if a debtor seeks relief from the 14-day stay imposed by Bankruptcy Rule 6004(h), the sale motion must disclose the business or other basis for such
request.” (Guidelines § I.4.D.16.) Additionally, if the Debtor seeks findings limiting the purchaser‘s successor liability, the sale motion must disclose the proposed notice of such relief. (Id. § I.4.D.12.)
C. Assumption and Assignment of Executory Contracts
The assumption or rejection of an executory contract or unexpired lease is subject to review under the business judgement standard. If the debtor has exercised “reasonable” business judgment, courts typically approve the proposed assumption or rejection. See, e.g., Mission Prod. Holdings v. Tempnology, LLC, 139 S. Ct. 1652, 1658 (2019) (noting that a bankruptcy court will generally approve a debtors’ choice to assume or reject an executory contract under the deferential business judgment rule) (citation omitted); NLRB v. Bildisco and Bildisco, 465 U.S. 513, 523 (1984); In re Gucci, 193 B.R. 411, 415 (S.D.N.Y. 1996) (“A bankruptcy court reviewing a trustee‘s decision to assume or reject an executory contract should....apply its best ‘business judgement’ to determine if it would be beneficial or burdensome to the estate to assume [it].“) (citations omitted); In re Child World, Inc., 142 B.R. 87, 89 (Bankr. S.D.N.Y.
1992) (“A debtor may assume or reject an unexpired lease in accordance with
The “business judgment” standard is not a strict standard; it requires only a showing that either assumption or rejection of the executory contract will benefit the debtor‘s estate. See In re Orion Pictures Corp., 4 F.3d at 1098-99; In re Balco Equities, Inc., 323 B.R. 85, 99 (Bankr. S.D.N.Y. 2005) (“In determining
1. Section 365 of the Bankruptcy Code
A debtor-in-possession may generally assume and assign any executory contract or unexpired lease of the debtor, subject to court approval, if it (a) cures, or provides adequate assurance that it (or its assignee) will promptly cure, any applicable defaults and (b) provides adequate assurance of future performance under such contract or lease, including by its assignee.
Bankruptcy Code
(b)(1) If there has been a default in an executory contract or unexpired lease of the debtor, the trustee may not assume such contract or lease unless, at the time of assumption of such contract or lease, the trustee—
(A) cures, or provides adequate assurance that the trustee will promptly cure, such default...
(B) compensates, or provides adequate assurance that the trustee will promptly compensate, a party other than the debtor to such contract or lease, for any actual pecuniary loss to such party resulting from such default; and
(C) provides adequate assurance of future performance under such contract or lease.
In addition,
(determining that the assignee‘s financial status and assumption of the debtor‘s ongoing obligations constituted adequate assurance of future performance).
III. DISCUSSION
For the reasons discussed below, the Court GRANTS the Motion and APPROVES the recognition and enforcement of the Canadian Court‘s vesting order, APPROVES the sale of assets located in the United States pursuant to
A. This Court Should Recognize and Enforce the Canadian Court‘s Vesting Order
This Court has recognized the Canadian proceeding as the foreign main proceeding. (See Recognition Order.)
B. The Court Approves the Asset Sale Pursuant to § 363 of the Bankruptcy Code
1. Compliance with the Guidelines
As required by the Guidelines, the Motion includes a copy of the Proposed Order, and the proрosed purchase agreement. (See Guidelines at I.A.) Additionally, the Debtors’ Motion complies with the notice provisions of the Guidelines. (Guidelines § I.4.D.16.) The Foreign Representative states it will provide notice to (a) the Debtors; (b) all persons or bodies authorized
to administer the Debtors’ foreign proceedings; (c) counsel to the Debtors’ secured lender; (d) all known creditors and contract counterparties of the Debtors in the United States; (e) the Office of the United States Trustee for the Southern District of New York; (f) any other creditors and parties in interest, as set forth on the Consolidated Verified List Pursuant to FED. R. BANKR. P. 1007(a)(4), 1008, and 2002(q) attached to the Petitions; and (g) all other parties that request notice in these chapter 15 cases as of the date of such service. This list of parties to be provided notice is consistent with the Guidelines. (Guidelines § II.B.)
Accordingly, the Motion complies with the Guidelines.
2. Articulation of a Business Judgment
As required, the Foreign Representative has articulated a sound business purpose for the Auction Sale. See In re Ionosphere Clubs, Inc., 98 B.R. 174, 175 (Bankr. S.D.N.Y. 1989). The Foreign Representative has a sound business judgment to consummate the sale pursuant to the APA. Debtors represent that the sale furthers the Foreign Representative‘s mandate and “presents the best opportunity for the Foreign Representаtive to maximize the value of the Purchased Assets. (Motion ¶ 20.) The Debtor further represents
Representative‘s business judgment is sufficient. See In re Borders Grp., Inc., 453 B.R. 477, 483 (Bankr. S.D.N.Y. 2011).
3. Sale of Assets Free and Clear of Liens under 363(f)
The Foreign Representative has satisfied the requirements of
The Foreign Representative is also permitted to sell the property free and clear of all interests, including non-lien interests.
4. Good Faith Protections Under §§ 363(m) & (n)
Again, the Debtors represent that APA was the product of good faith, arm‘s length negotiations between it and the Purchaser. (Motion ¶ 21.) The Foreign Representative conducted а robust marketing process, and the APA reflects the highest bid received through the process. (Id. ¶¶ 10-13, 21.) Eighteen (18) parties were contacted in connection with this marketing process, with ten (10) parties executing NDAs and two (2) bids were ultimately received. (Id. ¶¶ 11-13.) The Purchaser is not an insider of any of the Debtors, and no common identity of incorporators, directors, or controlling stockholders exists between the Purchaser and
the Debtors. (Id. ¶ 14.) Therefore, the Foreign Representative has adequately demonstrated that the Court should grant the Motion with the protects available under
5. Waiver of Bankruptcy Rules 6004(h) & 6006(d)
The Foreign Representative requests relief from Bankruptcy Rule 6004(h). (Motion ¶¶ 36-38.) A Debtor seeking relief from Rule 6004(h) “must disclose the business or other basis for such request.” (Guidelines § I.4.D.16.) Rule 6004(h) and the Advisory Committee Notes are silent as to when a court should “order otherwise” and eliminate or reduce the 14-day stay period, commentators have suggested that the 14-day stay period should be eliminated to allow a sale or other transaction to close immediately “where there has been no objection to the
The Court finds that the Foreign Representative has made a sufficient showing to waive Rules 6004(h) and 6006(d). The Foreign Representative has demonstrated good cause and a sound business purpose for the immediate consummation of the Transaction as contemplated by the APA and waiver of Rules 6004(h) and 6006(d) is warranted.
C. The Court Approves the Assumption and Assignment of Executory Contracts
The Debtors have a sound business judgment for assuming and assigning the contracts to the Purchaser. A schedule of the contracts to be assumed and assigned are annexed to the APA as Schedule D. The APA provides that the Purchaser must make reasonable commercial efforts
to obtain all necessary third-party consents to the assumption and assignment of the contracts to be assumed (the “Assumed Contracts“). (Id. ¶ 34.) The APA further provides that nothing “shall be construed as an agreement to assign any Assumed Contract that is not assignable in whole or in part without the consent, approval or waiver of the party or parties thereto other than the [Receiver], unless the consent, approval or waiver required to assign such Assumed Contract has been given.” (Id.; APA § 4.10.) Absent the consent of the relevant counterparty, applicable contract will not be an Assumed Contract and will not be assigned to the Purchaser at closing. (Id. ¶ 34.)
1. Business Judgment
The assumption and assignment of the Assumed Contracts is a sound exercise of the Foreign Representative‘s business judgment. By assuming and assigning the Assumed Contracts tо the Purchaser, the Debtor will avoid any damages claims that would arise from the rejection of the Assumed Contracts and will be relieved of the burden of performance under such agreements. (Id.) Accordingly, the Debtor submits that assumption of the Assumed Contracts and assignment to the Purchaser is an appropriate exercise of the Debtor‘s business judgment and should be approved. (Id.)
Courts in this district have routinely granted relief similar to the relief requested herein. See, e.g., In re SVB Financial Group, No. 23-10367 (MG) (Aug 16, 2023), ECF Doc. # 501 (authorizing assumption and assignment of certain executory contracts); In re Purdue Pharma L.P., No. 19-23649 (SHL) (May 30, 2023), ECF Doc. # 5644 (same); In re Celsius Network, LLC, No. 22-10964 (MG) (Dec. 13, 2022), ECF Doc. # 1686 (same); In re GBG USA Inc., No. 21-11369 (MEW) (Dec. 22, 2021), ECF Doc. # 432 (same); In re Evergreen Gardens Mezz LLC,
No. 21-10335 (MG) (Nov. 29, 2021), ECF Doc. # 266 (same); In re LSC Communications, Inc., No. 20-10950 (SHL) (Oct. 7, 2020), ECF Doc. # 877 (same).
For these reasons the assumption and assignment of the Assumed Contracts is a sound exercise of the Foreign Representative‘s business judgment.
A debtor-in-possession may generally assume and assign any executory contract or unexpired lease of the debtor, subject to court approval, if it (a) cures, or provides adequate assurance that it (or its assignee) will promptly cure, any applicable defaults and (b) provides adequate assurance of future performance under such contract or lease, including by its assignee.
Any Assumed Contracts, to the extent there are any cure costs, will be paid in full. (Motion ¶ 35.) The APA provides that the Purchаser and the Debtors will each pay 50% of all amounts necessary to cure any monetary default under any Assumed Contract. (Id. ¶ 34.) The Foreign Representative represents that the Purchaser is in the process of contracting counterparties to obtain consent for the assignment of the Assumed Contracts and regarding the payment of cure costs. (Id.)
In addition, the parties have adequate assurance of the Purchaser‘s future performance under the contracts. Although the Motion does not contain a fulsome discussion of adequate assurance, the Court finds proof of adequatе assurance through the affected counterparties’ consent to have their contract assumed and assigned. Again, the APA requires the counterparty‘s consent for a contract to be assumed and assigned. (Id.; APA § 4.10.) Therefore, this Court finds that the parties are adequately protected through their consent to have their contract assumed and assigned.
Therefore, the Court GRANTS the request to assume and assign contracts to the Purchaser.
IV. CONCLUSION
For the reasons discussed above, the Court GRANTS the Motion, APPROVES the recognition and enforcement of the Canadian Court‘s Approval and Vesting Order, APPROVES the asset sale pursuant to
A separate Order will be entered.
Dated: August 13, 2025
New York, New York
Martin Glenn
MARTIN GLENN
Chief United States Bankruptcy Judge