Nicolas Tétrault, one of three equal partners in 7954689 Canada Inc., doing business as TTP Media, declared personal bankruptcy last year, but he and company president Rajiv Pancholy insist that has no impact whatsoever on the company that owns the licenses of two AM radio stations about to launch in Montreal.

The two stations are on the air, broadcasting music (the English one at 600 just recently exited its on-air testing phase). They expect to launch some time before the end of 2017.

Because it has yet to begin operations, the company has not paid out any dividends or salary to its partners, Pancholy said.

And in any case, Tétrault said his stake in the company is protected from his creditors because he holds them through a family trust.

The trust

When it was formed in preparation of a CRTC application, 7954689 Canada Inc. had three shareholders, each with 1,000 shares. Those three shareholders were each companies entirely owned and managed by the three partners — Tétrault, Pancholy and Paul Tietolman. It’s not unusual for various legal and fiscal reasons to have an ownership structure like this, and it’s no problem for the CRTC either, just a bit more paperwork because it needs to go up the chain and determine who has effective control of the licensee.

But in 2014, Tétrault applied to the commission for a change in ownership, to sell all his shares in his company, 9225-8318 Québec Inc., to a family trust, Fiducie Familiale NT, for $100. This transaction, he told the CRTC, did not affect the effective control of TTP Media, because Tétrault is the principal trustee of the trust. The agreement of sale, filed with the commission, states that Tétrault has the power to act alone on the trust’s behalf, even though there was another trustee, Karim Dalati.

Tétrault confirms in his brief to the commission that he has 100% control over the trust. (Dalati, a fellow real estate broker, is listed as a second trustee strictly for legal reasons because Tétrault is also a beneficiary of the trust.) Tétrault said he filed the application on the advice of his lawyers.

The beneficiaries of the trust are listed as Tétrault, his wife, his father, the estate of his late mother, his sister, any of his children or grandchildren (he has two young children) and Pancholy. (Pancholy denied being a beneficiary, telling me he’s actually a trustee.)

Details about the trust itself (under what rules it can pay out benefits to beneficiaries, for example) were either not filed with the commission or not added to the public file.

The bankruptcy

On Feb. 17, 2016, Tétrault filed for personal bankruptcy. Two days later, bankruptcy trustee Litwin Boyadjian Inc. sent a notice to creditors proposing a settlement on about $2.4 million in unsecured debt. Tétrault proposed to pay $200,000 over five years, which would give creditors eight cents on the dollar. The alternative, the proposal states, would be a bankruptcy in which creditors would get an estimated 1.8 cents on the dollar.

At a meeting on March 9, the creditors rejected the offer. The Canada Revenue Agency, which together with Revenu Québec hold 70% of Tétrault’s unsecured debt, is leading the court battle over his assets.

The report of the bankruptcy trustee gives the reason for the bankruptcy as follows:

The debtor has accumulated debts, mostly resulting by the loss of an important account receivable, excessive tax assessments and the bankruptcy of his business in 2014.

The Canada Revenue Agency has been trying to get Tétrault to answer several questions about his assets and debts, including a bank account in the Cayman Islands and an investment that it estimates at between $500,000 and $700,000 in TTP Media. It says in court filings that Tétrault refused to answer those questions. It will likely be up to a court to clear all this up. The case had its last court date in March and no further one is listed.

Effective control

When I contacted him about this story, Tétrault insisted there was no story. Because his stake in TTP Media is held through his family trust, it’s protected, he said. Pancholy said the same. When I asked for further information, Tétrault suggested I talk to an accountant and abruptly ended the conversation.

So does the trust protect his stake in this company? Well, it depends.

I’ll preface this by saying I’m neither an accountant nor a lawyer, and my experience in bankruptcy law is fairly minimal. But experts on the matter, such as this one from Fasken Martineau, say that the protection in a trust comes from the structure of the trust. If you’re a beneficiary of a trust and you file for bankruptcy, your creditors can only get as much power as you have. If the trust doesn’t give you that power, your creditors can’t take it from you. So an asset protection trust should ensure that someone else that you don’t control acts as a trustee or has veto power. And bankruptcy law explicitly states that assets held in trust for someone else can’t be seized by creditors. So certainly anything held in trust for the other beneficiaries is protected.

I don’t know exactly how Fiducie Familiale NT is controlled and what the terms of the benefits are, but Tétrault has already told the CRTC that he is 100% in control of the trust.

The exercise may more academic than anything. Licensees cannot change effective control without CRTC pre-approval, for one. And TTP Media has no real value, its assets being paid for entirely out of its startup debt. Besides, Tétrault is only a minority shareholder in TTP Media.

But the whole process is undoubtedly difficult for Tétrault. As a result of the bankruptcy case, the professional order of real estate brokers restricted his licence in July, requiring him to be supervised.

CJMS

This wasn’t the first case before the OACIQ involving Tétrault. Another one also had connections to his radio venture. In 2015, the body found Tétrault guilty of violating rules governing real estate brokers because he represented the owner of land that hosted the antenna for CJMS 1040 AM while at the same time being a party interested in buying it.

Tétrault disclosed the conflict of interest to his client, but the tribunal found that this wasn’t good enough, particularly in light of the fact that he appeared to make no effort to find other buyers. It said he should have removed himself as the broker for the seller in the case. Tétrault’s licence was suspended for 30 days as a result of this.

TTP Media’s original application to the CRTC for stations at 690 and 940 AM proposed they transmit from the CJMS site in St-Constant. When TTP Media lost the 690 application and had to settle for 600 instead, it changed its plan to operate the stations from the former CINW/CINF site in nearby Kahnawake.

A separate legal case between the land owner, André Turcot, and Tétrault related to the same deal was decided against Turcot, who apparently believed he had settled a debt problem to another lender and then didn’t show up in court to defend against a suit by that lender and later tried to get a default judgment overturned. That case set the value of the real estate transaction at $1.4 million, but says Tétrault never paid the $30,000 required once the purchase deal was signed.

I hope for the sake of Tétrault, his family and the radio stations he and his partners are launching that he gets back on his feet and finds a solution to his debt problem.

Pancholy, at least, is not concerned. If he had any doubts about the viability of the radio station, he wouldn’t be carrying it on his shoulders, he told me.