Voluntary winding-up under Ontario Business Corporations Act

In one of our blogs last year, A Solution is Dissolution, we discussed how to voluntarily dissolve a federally incorporated business in accordance with the Canada Business Corporations Act. Dissolution is one of the possible responses to the pressures of the pandemic. Some of these pressures include the following: low or lack of cash flow and debt, including arrears of rent.

As a refresher, there are two ways in which the dissolution can be achieved: (1) liquidating assets and then applying for a Certificate of Dissolution or 2) starting the dissolution process before the liquidation process by filing a Statement of Intent to Dissolve. According to the Act, “on receipt of a statement of intent to dissolve, the Director shall issue a certificate of intent to dissolve under section 262.”[1] Finally, once the liquidation process is completed, the corporation ceases to exist with the date showing on the Certificate of Dissolution.[2] A lawyer can advise on which one of the ways is preferable for a body corporate in each situation.

What does the process of voluntary winding up entail if the company is incorporated under the laws of Ontario?

In this blog, we discuss a voluntary winding up of an Ontario corporation according to the rules outlined in the Ontario Business Corporations Act, R.S.O. 1990, c. B.16 (the “OBCA”).[3] It is beneficial for shareholders to know that no action or proceedings can be commenced against a corporation after voluntary winding up except by leave of the court.[4] However, the limitation periods cease to run against any creditor as per Re Northern Ontario Power Co.[5] 

If the shareholders want to dissolve the corporation, they need to hold a meeting and pass a special resolution to that effect.[6] The meeting’s agenda should contain a notice of the intended winding up. All parties, including minority shareholders and creditors, must be informed.

If the majority shareholders pass the resolution to dissolve, the decision is binding on any minority group of shareholders, who opposed the motion. However, the minority of the shareholders may seek an investigation of the corporation as in Mexican Light and Power Co. v Shareholders of Mexican Light and Power Co.[7] In this case, the minority of the shareholders of Mexican Light and Power Co. wanted a court-appointed liquidator and to dissolve the corporation under the supervision of the court because they believed that the actions of the corporation and its directors were unfair. As a result, the court decided that the directors should have asked for an independent valuation of the assets supports and acquire those asserts in a legitimate fashion.

The shareholders must appoint a liquidator[8] with a mandate to settle the list of contributories and call on some contributories to pay any sum to satisfy liabilities.[9] Furthermore, a liquidator has the power to make arrangements with creditors and compromise with debtors and contributories.[10]

Usually, voluntary winding up takes a year. However, if more time is required to facilitate the process, the liquidator must call a shareholder meeting at the end of the first year and provide the liquidator’s updates on the winding-up process and deliverables.[11]

For more information, please review an information sheet for corporations that explains how to dissolve their business using Articles of Dissolution Forms 10 and 11. Although this government of Ontario resource provides valuable information, it does not replace professional legal advice.

Contact Us

This material is for informational purposes only and should not be relied upon as legal advice. To book a consultation with the Buzaker Law Firm’s team member regarding the dissolution of a corporation under the Ontario Business Corporations Act or under the laws of Canada, email us at info@vblegal.ca or call 905-370-0484.

[1] CBCA, s. 211 (5).

[2] CBCA, s. 201(6).

[3] OBCA, Sections 193-205 Part XVI “Liquidation and Dissolution.”

[4] OBCA, s. 199(b).

[5] Re Northern Ontario Power Co., [1953] O.J. No. 769, 33 C.B.R. 260 (Ont. Master.).

[6] OBCA, s. 193(1).

[7] Mexican Light and Power Co. v. Shareholders of Mexican Light and Power Co., [1989] O.J. No. 2312, 46 B.L.R. 14 (Ont. H.C.J.).

[8] OBCA, s. 193(2).

[9] OBCA, s. 200(1)(a) and (b).

[10] OBCA, s. 202 and s. 203

[11] OBCA, s. 201 (2).

Buzaker Law corporation

Buzaker Law corporation

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Buzaker Law Firm strives to provide high-quality legal services with integrity, professionalism, and respect for our clients and the community. Our law firm focuses on ethics while solving and negotiating any situation with significant knowledge and skills gained through years of practicing law in Toronto, Ontario.

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