Companies are great when you need them, but a pain when you don’t. When a company has outlived its utility the legal process for shutting the company down is called dissolution. In the case of an Ontario company incorporated under the Business Corporations Act (Ontario) (the “Act”), a company can be dissolved either involuntarily or voluntarily.
A company can be involuntarily dissolved by the government, or more precisely by the Director of the Ministry of Government and Consumer Services for a variety of defaults, most of which are listed in subsection 241 of the Act. Typically, a company is involuntarily dissolved for failing to comply with specific filing requirements. If a company is involuntarily dissolved by the Director, any interested person can apply to the Director to revive the company, upon which the company is deemed never to have been dissolved subject to specific requirements in the Act.
Where the decision is made to voluntarily dissolve a company, there are two methods for dissolution that depend on the circumstances of the business.
If you issued shares and the company carried on business, the company is required to complete and file a Form 10 – Articles of Dissolution. In advance of submitting the Form 10, the shareholders must resolve to authorize the dissolution of the company. This can occur by a special resolution at a shareholder meeting in accordance with Section 237(a) of the Act or by consent in writing by all of the shareholders entitled to vote at a meeting had a meeting taken place.
If the company has not issued shares and did not carry on any business, the company is required to complete and file a Form 11 – Articles of Dissolution. In the case of a Form 11, Section 237(c) of the Act requires all the incorporators or their personal representatives to authorize the dissolution.
In advance of dissolving the company and filing a Form 10 or Form 11, you must determine whether the company has any debts, obligations or liabilities. If it does, the company must deal with its debts, obligations or liabilities, or obtain the consent to its dissolution from its creditors. In addition to dealing with any debts, you must also deal with any property owned by the company and either distribute it among the company’s shareholders in accordance with their respective rights and interests, or in the case of a company that has not yet issued shares, to the persons entitled thereto.
Unlike involuntary dissolution, a voluntarily dissolved company cannot be revived in the same manner. Instead, a company that has been voluntarily dissolved can only be revived by special Act of the Legislature.
This blog post was written by Mark Fortier-Brynaert, a member of the Business Law, Estate Litigation and Wills and Estates teams. Mark can be reached at 613-566-0380 or at email@example.com.