Printer Friendly

Voluntary wind-up and dissolution: bringing your company to an end.

A company ceases to be a company when it is wound up and dissolved.

Generally speaking, a company is wound up when it has satisfied its debts to its creditors and distributed its remaining assets (if any) to its shareholders. It is dissolved when it has been granted Articles of Dissolution (or some other document having the same effect) by the governmental ministry having the authority to do so.

There are several reasons why you, as a shareholder, might wish to voluntarily wind up and dissolve your company. They include your business may have run its course; the company may be inactive (and therefore not serving any useful purpose); or you may simply wish to receive your share of its assets. Whatever the reason, you should know that the process of winding up and dissolving a company is not always a simple one. You should therefore consider the following matters beforehand, so that everything proceeds smoothly:

* Dissolving a company means paperwork. Sometimes, lots of it. This includes various shareholders' and directors' resolutions; a conveyance instrument, transferring all of the assets of the company to its shareholders; and Articles of Dissolution.

* Before your company can be dissolved, you will have to request and obtain a Clearance Certificate from Revenue Canada confirming that your company's tax liabilities have been satisfied and consenting to the dissolution. You will also have to prepare and file the company's corporate tax returns and calculate and pay any outstanding PST and GST owed by the company.

* Your company's day to day business arrangements must be wound up. That includes cancelling or transferring any licences, permits, insurance, equipment leases and bank accounts. It also means dealing with employee issues, including termination and severance pay.

* Your company may own real property. If that is the case, then steps will have to be taken to transfer and register title to the property in the name of the shareholders and ensure that any mortgages are paid out or otherwise dealt with to the satisfaction of the mortgagee. If your company leases real property from others, arrangements must be made to cancel or assign those leases. If your company leases real property to others, then a notice of new ownership should be prepared and distributed to each tenant directing it to make any future payments to the new owners.

* Your company may have creditors (i.e. persons to whom your company owes money). It may also have debtors (i.e. persons who owe your company money). Any outstanding accounts should be dealt with when winding up the company. Accordingly, you may be required to notify any secured creditors with registrations under the Personal Property Security Act in your jurisdiction (or similar legislation) of the wind-up and dissolution of your company. As well, some jurisdictions may require you to publish a notice of dissolution in a local newspaper.

It is worth noting that you are not allowed to wind up and dissolve your company to allow it to escape its debts. In that regard, the Articles of Dissolution must be signed by an officer of the company and provide, among other things, that the company has no debts, obligations or liabilities (or that its debts, obligations and liabilities have been dealt with to the satisfaction of the company's creditors) and that there are no proceedings pending in any court against the company.

Further, even if the company is dissolved, each jurisdiction has legislation which, in its essentials, states that

* a civil, criminal, or administrative action or proceeding commenced against the company before its dissolution may be continued as if the company had not been dissolved;

* a civil, criminal, or administrative action or proceeding may be brought against the company within a certain number of years (e.g. five) after its dissolution as if the company had not been dissolved; and

* any property that would have been available to satisfy any judgment or order if the company had not been dissolved remains available for that purpose after dissolution.

This last point entails that each shareholder of a dissolved company remains liable to any person who wins a claim against the company to the extent of the amount received by that shareholder on dissolution.

As you can see, the ease (or difficulty) with which a company can be wound up and dissolved depends on the nature of the business of the company, its assets, and its shareholders. It is therefore important that you consult your lawyer to properly assess your company's requirements, should you ever decided to wind up and dissolve your company.

Nishan Swais is a lawyer with the firm of Miller Thomson in Toronto, Ontario.
COPYRIGHT 1998 Legal Resource Centre of Alberta Ltd.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1998 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Author:Swais, Nishan
Publication:LawNow
Date:Dec 1, 1998
Words:772
Previous Article:Warring elements of a Confederation poet.
Next Article:Best interests and mobility.
Topics:


Related Articles
Business failure can lead to future professional success; don't look at it as a personal failure.

Terms of use | Privacy policy | Copyright © 2022 Farlex, Inc. | Feedback | For webmasters |