Iovate: the directors' charge comes off without a claims process

The business began as a mail-order operation in Mississauga and launched its first Hydroxycut and MuscleTech products in 1995; Six Star followed in 2004, Purely Inspired in 2014, and by the time the group filed, its protein powders, creatine, pre-workout formulas, weight-loss capsules, gummies and drink mixes were selling in more than 90 countries, MuscleTech alone accounting for approximately 95% of international net sales, per the Affidavit of Wesley Parris, Oct. 29, 2025, paras. 49–54. The head office at 381 North Service Road West in Oakville ran to about 132,000 square feet and held a sensory testing lab, a product development lab and an accelerated stability chamber room. Almost nothing else was owned: the model was asset-light, with roughly 17 U.S. contract manufacturers, third-party warehousing and third-party logistics, and as of October 20, 2025 the group employed approximately 159 people in Canada, per the Affidavit of Wesley Parris, Oct. 29, 2025, paras. 55, 59–60, 67, 71.

What is left of all that is 2807727 Alberta Ltd., a numbered company with no operations and no employees, and the only remaining applicant in the CCAA proceeding, per the Sixth Report of the Monitor, Sept. 16, 2026, s. 2.0, para. 2. On September 22 its monitor, AlixPartners Restructuring, Inc., will ask the Commercial List to release the CAD$1,310,000 directors' charge without running a claims process, to release the directors and officers who held it, to pay the money securing the charge and most of what remains of the administrative reserve to Royal Bank of Canada as agent for the group's lenders, and to extend the stay to January 29, 2027, per the Notice of Motion (returnable September 22, 2026), Sept. 16, 2026, paras. 1(b)–(g).

The writ that froze Walmart

The company's own account of the collapse starts with a warehouse. In September 2023 Iovate Health Sciences U.S.A. Inc. moved its American distribution out of an in-house facility in Buffalo to a third-party logistics provider, Kenco Logistic Services LLC. "In retrospect, the arrangement entered into with Kenco was premised on assumptions that proved to be overly optimistic and ultimately incorrect," the group's chief executive deposes; by mid-2024 Iovate USA's direct and ancillary logistics costs had significantly exceeded budget and historical levels, per the Affidavit of Wesley Parris, Oct. 29, 2025, paras. 138–139. Revenue was also under pressure, the affidavit says, from reduced marketing expenditures, weaker performance in certain product categories and sales channels, pricing pressure, increased competition and difficulties in customer collections, per the Affidavit of Wesley Parris, Oct. 29, 2025, para. 148.

Running beside the logistics problem was a piece of intellectual property litigation. In August 2023 a jury awarded Orgain, Inc. a $10,035,481 judgment against Iovate International and Iovate USA; settlement talks followed, the parties fell out over whether a binding settlement had been reached, and on November 17, 2024 the United States District Court for the Central District of California issued an amended judgment of $12,500,000, which the applicants say they were in no position to satisfy, per the Affidavit of Wesley Parris, Oct. 29, 2025, para. 10. Orgain obtained a writ of garnishment in Arkansas on June 27, 2025 and served it on Walmart, the group's largest customer, whose payments had been averaging about $5.8 million a month. Walmart stopped paying Iovate USA from about August 4, 2025; by late October it had resumed remitting but was still holding approximately $13.7 million, per the Affidavit of Wesley Parris, Oct. 29, 2025, paras. 12, 135–137.

A motion to quash the writ was heard in the Circuit Court of Benton County, Arkansas on August 25, 2025 and dismissed at the end of the hearing. Two days later the syndicate demanded repayment of $115,700,995 as at August 26, 2025 and delivered notices of intention to enforce security under s. 244 of the BIA, having concluded that the prejudice to their collateral was "fundamentally untenable" and warning that they were actively considering creditor-driven CCAA proceedings if the group did not act promptly, per the Affidavit of Wesley Parris, Oct. 29, 2025, paras. 13, 150–152. The three Canadian and U.S. operating entities filed notices of intention to make a proposal on September 5, 2025. Recognition in the United States came quickly — provisional relief from the Southern District of New York on September 10, then recognition of the proposals as the foreign main proceeding by Judge Glenn on October 28, with an order that Walmart turn over what it had retained, per the Affidavit of Wesley Parris, Oct. 29, 2025, paras. 17–18, 22.

Justice Dietrich granted the Initial Order on October 31, 2025, continuing the proposal proceedings under the CCAA, staying matters to December 12, 2025 and extending the stay to five foreign affiliates. The directors' charge went in at CAD$1,310,000, subordinate to the administration charge; its quantum, the court was advised, was based on potential payroll, vacation pay and sales taxes, and Justice Dietrich noted that in future it is helpful to have that addressed specifically in the material, per the Endorsement of Dietrich J., Oct. 31, 2025, paras. 22, 25–26.

Twenty-five licences that could not be transferred

The sale process ran from November 13, 2025. Origin Merchant Partners, as sales agent, sent a teaser to 196 potential buyers — 160 financial sponsors and 36 strategic — of whom 61 signed non-disclosure agreements. Ten letters of intent arrived by the extended February 4, 2026 deadline and seven bidders went through to the second phase; four offers came in around March 20, two of them in the definitive form the process required, per the Fourth Report of the Monitor, Apr. 9, 2026, s. 3.1, paras. 3(b)–(g), s. 3.2, para. 1. On April 1 the monitor selected the bid of 1001542267 Ontario Inc., and a subscription agreement was signed the next day.

The structure was a reverse vesting order, and the reason was regulatory. Iovate International holds a Natural Health Products Site Licence, needed to import goods into Canada, and 25 product licences covering 34 products; none can be transferred, and fresh applications take 35 to 95 days for a site licence and 60 to 310 days for a product licence. As of December 31, 2025 the company also had approximately US$114 million in non-capital losses, whose value could not be realized through an asset sale, per the Endorsement of Cavanagh J., Apr. 16, 2026, para. 12. When the successful bid was selected the monitor understood the purchaser to be affiliated with Xiwang Foodstuffs Co., Ltd.; it was advised after signing that beneficial ownership had changed and that the purchaser was no longer related to the debtor, and it assessed the transaction against the additional criteria in s. 36(4) of the CCAA as though it were a related-party sale in any event, per the Endorsement of Cavanagh J., Apr. 16, 2026, paras. 5, 17.

Justice Cavanagh granted the approval and reverse vesting order on April 16, 2026, together with a distribution, stay extension and ancillary relief order. The purchase price is sealed: the unredacted subscription agreement and a summary of the first-phase letters of intent and second-phase bids were filed confidentially and sealed until closing, per the Endorsement of Cavanagh J., Apr. 16, 2026, paras. 20–21. The transaction closed on May 27, 2026. On closing, the numbered Alberta company was added as an applicant, the five original applicants and the five non-applicant stay parties came out from under the initial order, and the excluded assets, contracts and liabilities vested in the residual company, per the Fifth Report of the Monitor, June 19, 2026, s. 2.0, para. 2.

What the lenders got back

As at August 31, 2025 the syndicate was owed US$100,606,023 of principal under the term facility, US$14,000,000 under the revolver and a further US$1,179,465 of default interest accrued month to date — US$115,785,488.90 in all, secured by a package on which the monitor had opinions from Canadian and U.S. counsel, per the Endorsement of Cavanagh J., Apr. 16, 2026, para. 23. Principal payments of $2.5 million were made to the agent during the proceedings under an order of February 2, 2026. After closing the monitor distributed approximately $87.1 million to the agent out of US$90 million of cash proceeds, and paid out the sales agent and KERP charges, both of which then released automatically. More than $26.2 million is still owing before accruing interest, which leaves the lenders "the principal economic stakeholder in these proceedings", per the Sixth Report of the Monitor, Sept. 16, 2026, s. 2.0, paras. 3–4.

The monitor and its counsel have passed their accounts again. For the periods since the court last approved them — May 21 and May 7, 2026 respectively, in each case to August 31, 2026 — the monitor's fees are CAD$79,484.00 and Osler, Hoskin & Harcourt LLP's are CAD$269,280.00, both before disbursements and HST, at average hourly rates of CAD$637.56 and CAD$955.91, per the Sixth Report of the Monitor, Sept. 16, 2026, s. 7.0, paras. 2–4. The period that took in the sale and the closing ran to CAD$832,328.25 for the monitor and CAD$1,825,042.00 for its counsel; the monitor explained then that its enhanced powers, granted on December 12, 2025, had pushed onto Osler work that would ordinarily sit with the applicants' own counsel — motions brought on the applicants' behalf, template agreements for the transaction, employee matters — so that its counsel's fees exceeded its own, per the Fifth Report of the Monitor, June 19, 2026, s. 7.0, paras. 2–3, 7–8.

Two potential claims, and no claims process

The directors' charge is what has kept the file open. In June the monitor reported that it was aware of two potential claims against certain directors and officers, that it was gathering and reviewing information, and that it would likely return to court once that review was done; the charge had not been released at closing and was collateralized by a CAD$1,310,000 holdback in the monitor's trust account, per the Fifth Report of the Monitor, June 19, 2026, s. 2.0, para. 5, s. 3.0, paras. 1–3. The Sixth Report names the two parties who raised them: the administrative agent, and Xiwang Foodstuffs Co., Ltd., the indirect majority shareholder of the original applicants. Both have since confirmed to the monitor that they do not intend to pursue a post-filing claim against the directors and officers that could benefit from the charge, without prejudice to their rights to pursue other claims, per the Sixth Report of the Monitor, Sept. 16, 2026, s. 3.0, para. 3.

"The Monitor has not investigated the merits of the Potential D&O Claims. As neither of the parties with an interest in advancing them intends to do so, the Monitor is of the view that the cost of such an investigation, which would ultimately be borne by the Lenders as the principal economic stakeholders in these proceedings, is not necessary or desirable," per the Sixth Report of the Monitor, Sept. 16, 2026, s. 3.0, para. 4. What it asks for instead is a release of the charge and a release of the directors and officers themselves, running to claims based on facts existing between the October 31, 2025 filing date and closing, and carved out for gross negligence, wilful misconduct and anything ss. 5.1(2) or 19(2) of the CCAA do not permit to be compromised, per the Draft Order (Distribution and Fee Approval), Sept. 16, 2026, paras. 9–10.

The monitor is holding approximately $2,800,000 — the administrative reserve of about $1,750,000, which includes estimated professional fees through to the end of the proceedings and any bankruptcy of the residual company, plus the directors' charge holdback of CAD$1,310,000 converted to U.S. dollars. With the charge gone, it proposes to reduce the reserve to $550,000 and pay the balance to the agent, per the Sixth Report of the Monitor, Sept. 16, 2026, s. 4.0, paras. 1–3.

The fifty-two, and a question adjourned sine die

Approximately 52 Canadian employees were terminated by Iovate International between the Initial Order and closing, and approximately 103 remained employed at the date of the Fifth Report. All of the terminated employees received their full wages and accrued vacation pay to the date of termination; none received severance or termination pay, and under the reverse vesting order those claims went to the residual company, per the Fifth Report of the Monitor, June 19, 2026, s. 4.0, paras. 1–2.

In June the monitor asked the court to deem the residual company those employees' former employer for the purpose of entitlement to termination and severance pay under the Wage Earner Protection Program, or in the alternative to make the declaration contemplated by s. 5(5) of the Wage Earner Protection Program Act, so that it could facilitate claims for those who are eligible. It told the court there is "some uncertainty in the case law regarding the circumstances in which the WEPP is available in cases involving reverse vesting transactions", and that decisions were then pending before the Ontario court and the Court of Appeal of Quebec that might bear on the relief it was seeking, per the Fifth Report of the Monitor, June 19, 2026, s. 1.1, para. 1(d)(ii), s. 4.0, paras. 3–5.

At the June 25 hearing the monitor advised the court that the Attorney General of Canada had told it that the Attorney General would oppose the relief, and agreed to adjourn; Justice Myers adjourned it sine die, per the Stay Extension and Fee Approval Order, June 25, 2026, para. 3. The pending decision has since been released and the Attorney General has sought leave to appeal it to the Ontario Court of Appeal, which the monitor understands may take several months to rule on leave, per the Sixth Report of the Monitor, Sept. 16, 2026, s. 2.0, paras. 6–7, s. 5.0, para. 2. "At this time, the WEPP Relief remains adjourned. The Monitor will report further to the Court and to affected former employees in due course," per the Sixth Report of the Monitor, Sept. 16, 2026, s. 2.0, para. 8.

The stay extension is pinned to the same appeal. The monitor seeks an extension to January 29, 2027 on the footing that additional time is required for the Court of Appeal's decision on leave, that no creditor will be materially prejudiced, and that it is aware of no opposition; no cash-flow forecast is filed, because the residual company does not operate and its only anticipated costs are the professional fees, per the Sixth Report of the Monitor, Sept. 16, 2026, s. 5.0, paras. 4–5. The motion is returnable by video conference on Tuesday, September 22, 2026 at 10:30 a.m., before Justice Dietrich, per the Notice of Motion (returnable September 22, 2026), Sept. 16, 2026, p. 1.