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Non-Linear Recovery: Tracking Nova Scotia Business Bankruptcies Through COVID-19 and Beyond

Published:

August 13, 2026

Author(s):

• Paul Egbeyemi
• Benjamin Durnford

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Covid-19 has impacted nearly every aspect of life, not the least of which is its effect on business owners. Between 2020 and 2026, the number of business bankruptcies in Nova Scotia in any given year have seen a roller coaster of events that included sharp increases and decreases year over year. Policy decisions have played a large role in the fluctuation of bankruptcies, the timelines of which can be described as “eras:” the support era, the cliff era, and the post-cliff era. An understanding of what took place over the past six years will provide valuable insights into industry stabilization going forward. 

The Support Era (2020-2021)

In a March 2020 decision, Nova Scotia’s Registrar in Bankruptcy Raffi Balmanoukian quoted W.B. Yeats when he wrote that “mere anarchy is loosed upon the world - It is not business as usual. Virtually nothing is.” Scotian Distribution Services Limited 5-6 (“Scotian Distribution”). He went on to note that, given the pandemic, a bankruptcy of an operating enterprise would be “nasty, brutish, and anything but short” (Scotian Distribution para 25). Creditors were advised to consider the viability of proposals. This line of reasoning helped usher in the “support era.” Businesses on the verge of bankruptcy were given a cushion through both the courts and government support programs like the Canada Emergency Rent Subsidy (“CERS”), and Canada Emergency Wage Subsidy (“CEWS”). 

Following the March 2020 decision in Scotian Distribution, the next fiscal quarter showed a steep 80% drop in Nova Scotian business bankruptcies. At the end of year, Registrar Balmanoukian continued to actively encourage proposals as an alternative to bankruptcy, viewing proposals as a “win-win” (Little (Re) 2020 para 24). His stance carried into 2021 and was reinforced with the introduction to “HASCAP” (Highly Affected Sectors Credit Availability Program). HASCAP, announced in January 2021, provided government‑guaranteed, low‑interest loans to businesses in severely impacted sectors to cover operating costs and support continued operations during the COVID‑19 crisis. Considering this legislative backdrop, Nova Scotia followed suit, resulting in a 19% drop in Business Bankruptcies in 2021. Throughout 2021, reduced demand caused by the pandemic reaffirmed the role of support programs in keeping financially vulnerable businesses operational. 

The Cliff Era (2022–2024)

While businesses were propelled through 2020-2021 with government support, by 2022-2023, mounting pressures forced insolvency proceedings. 

The Kellogg v. Zwicker 2022 decision illustrates this timeline through the defendant’s gift shop business. When the pandemic hit in early 2020 the business was shuttered for months at a time under public health directives. At other times, when it was allowed to open, sales were poor. Despite this, the business continued operating with diminished revenues until June 2021, when resources were finally exhausted. This delayed failure pattern, multiplied across many Nova Scotian businesses, helps explain the rising insolvency numbers in 2022. Nationally, inflation peaked at an 8% Consumer Price Index (CPI) in June 2022, prompting the Bank of Canada to raise the benchmark overnight rate from 0.25% to 5.0% by mid-2023. (Balasubramanian, Williams, 2025) 2025 Canadian loan trends | Insights | Torys LLP

The delayed failure pattern evident in Kellogg continued into 2023. Many businesses did not collapse immediately when revenues declined during the pandemic. Instead, insolvency was postponed through cost-cutting measures, borrowing, and government support. As these measures were exhausted and operating costs continued to rise, a growing number of businesses entered insolvency proceedings in 2023. 

The Office of the Superintendent of Bankruptcy (“OSB”) statistics show that Nova Scotia business bankruptcies increased by approximately 65% between 2022 and 2023. The scale of these failures is reflected in the financial figures reported by the OSB, which recorded approximately $21.9 million in business assets and $91.5 million in liabilities, resulting in a deficiency of roughly $69.6 million. Although a debtor’s liability exceeding its assets in bankruptcy proceedings is naturally to be expected, the size of this deficiency underscores the significant financial distress experienced by many Nova Scotia businesses as post-pandemic economic pressures intensified. The trend continued into 2024, with Nova Scotia business bankruptcies increasing by 54%, resulting in a deficiency approximating $43.1 million. Together, the 2023 and 2024 figures indicate that many businesses were unable to restore their financial footing despite the removal of public health restrictions, contributing to a prolonged period of elevated business insolvencies in Nova Scotia. 

Post-Cliff Era (2024-Present)

Quarterly numbers from the OSB confirm a 21% decrease in Nova Scotian business bankruptcies between 2024 and 2025, in keeping with national economic trends. After signs that inflation was moderating and growth was slowing, the Bank of Canada began cutting rates in late 2024, bringing the overnight rate down to 2.75% by March 2025, with a bias toward supporting economic growth without reigniting inflation (Balasubramanian, Williams, 2025). 

This economic shift is reflected through Nova Scotia case law of this period. The Nova Scotia Supreme Court's 2024 decision in Fiera Private Debt Fund v. SaltWire Network Inc.  reflects a restructuring environment increasingly geared toward business preservation. By extending the stay and approving additional financing, the court recognized that the debtor companies retained a realistic prospect of recovery if provided sufficient time and resources. The decision suggests that, rather than facing inevitable collapse, some businesses were once again able to pursue restructuring and investment opportunities, indicating a measure of stabilization in the province's insolvency landscape.

This gratuity extended into 2025 with HealthHub Patient Engagement Solutions Inc.  Here, the court extended the debtor's time to file a proposal and approved interim financing after concluding that the statutory criteria under the BIA had been met. The decision underscores that relief remained available to businesses acting in good faith, exercising due diligence, and demonstrating a realistic prospect of presenting a viable proposal. The court's willingness to facilitate restructuring efforts suggests that, by 2025, insolvency proceedings were increasingly being used as a mechanism for business recovery and preservation, rather than solely as a precursor to liquidation.

Further 2025 Nova Scotia case law shows creditors increasingly willing to work with debtors. In Re Blue Lobster Capital Limited, despite failed refinancing efforts and impending enforcement proceedings, the parties ultimately agreed to proceed under the CCAA rather than through receivership, reinforcing the growing confidence that financially distressed businesses could still achieve a viable recovery. 

The first quarter of 2026 is already showing a fiscal decrease in business bankruptcies, compared to 2025’s first quarter demonstrating creditors’ continued willingness to work with debtors, and signaling the onset of post-covid stabilization.  

Protecting Nova Scotia Businesses moving forward

When financial difficulties emerge, proactive engagement with creditors can often preserve flexibility and avoid formal insolvency proceedings. Informal restructurings, forbearance agreements, and negotiated repayment arrangements may provide time to stabilize operations. However, where creditor cooperation is unavailable and a viable business remains, formal restructuring mechanisms such as BIA proposals or CCAA proceedings (for matters over $5 million) can offer an opportunity to preserve value and continue operations.

Directors should remain mindful of their duties and potential personal exposure for certain employees and tax-related liabilities. Seeking advice from trusted insolvency counsel at an early stage can significantly improve the prospects of a successful turnaround. 

Please contact your McInnes Cooper lawyer or any member of our Bankruptcy & Insolvency team to discuss your concerns as a creditor or debtor.

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