Although there is no limit to a corporation’s lifetime as compared to human beings, nevertheless, sometimes corporations cease to exist. Today we will discuss a voluntary dissolution.
Why would a corporation dissolve voluntarily?
- The corporation could have been formed for a specific purpose only which has been achieved;
- The dissolution can be a part of a complex acquisition in which the assets of the company are transferred to another corporation whereas its legal “shell” is being formally liquidated afterwards;
- In a small size corporation (more similar to a sole proprietorship) – the retirement of a sole shareholder;
- Avoidance of annual returns and mandatory fees in case of a non-operating but still existing corporation.
How to dissolve a corporation?
A corporation can apply to dissolve when it has no property or liabilities. The dissolution can be done in 2 ways. First, in case the corporation still possesses assets, it may consider liquidating those assets before applying for dissolution. In this case, the corporation distributes the property and discharges liabilities according to the Articles and Canada Business Corporation Act. It may then apply for a Certificate of Dissolution.
Second, the corporation can start the dissolution process before the liquidation process. In this case, the corporation can apply for a certificate of intent to dissolve. The certificate of intent to dissolve serves as public notice that the corporation is no longer carrying on its activities, except to the extent necessary for the liquidation.
When a certificate of intent to dissolve is issued, the corporation must cease to operate its regular activities except to the extent needed for the liquidation.
Once the liquidation process is completed, you can apply for a certificate of dissolution.
It should be noted that the above detailed applies to corporations incorporated according to the Canada Business Corporations Act. If the company is incorporated under the laws of Ontario, the process is a bit different.
This material is for informational purposes only and should not be relied upon as legal advice. To book a consultation with Buzaker Law Firm’s team in regards to the dissolution of a corporation under the Canada Business Corporations Act or under the laws of Ontario, you can email us at firstname.lastname@example.org or call 905-370-0484.