Dissolution

If your corporation is ceasing operations, is already is no longer in business, or was never actively used, it must submit a filing called “articles of dissolution” with the government in which your corporation was formed in order to formally dissolve your corporation or non-profit corporation.

Articles of dissolution are the mechanism which the corporation files with the relevant corporation when it wishes to terminate its existence.

There are a number of steps involved in dissolving a business. CorporationCentre.ca can directly assist with the dissolution filing with the jurisdiction of incorporation.

There are six primary steps involved when dissolving a company. They are:

• Corporate action
• Filing articles of dissolution with the jurisdiction of incorporation
• Filing all necessary federal, provincial, and local tax forms
• Statutory notification to creditors
• Settling creditors' claims
• Distribution of remaining business assets

Corporate Action

The owners of the corporation must approve the dissolution of the business. With corporations, the shareholders must approve this action. For small businesses, the shareholders or members are often involved in the day-to-day operations of the business, and therefore know the circumstances leading to the dissolution.

The bylaws of a corporation typically outline the process for dissolution in terms of necessary approvals. To comply with the formalities of a corporation, the board of directors should draft and approve the resolution to dissolve the corporation. The shareholders should then vote on that resolution once approved by the directors. Both actions should be documented and placed in the corporate record book. The percentage required to approve dissolution depends on the jurisdiction, but is typically not less than 2/3 majority.

Filing the Articles of Dissolution with the Jurisdiction of incorporation

After the shareholders or members have voted to dissolve the corporation, the appropriate paperwork must be filed with the jurisdiction of incorporation in which the business was formed. If the business has qualified to transact business in other jurisdictions (i.e. provinces), the appropriate paperwork must also be filed in those jurisdictions.

The process for filing the certificate of dissolution varies by jurisdiction. Some jurisdictions of incorporations require the documents be filed before notifying creditors and resolving claims. Other jurisdictions require the documents be filed after that process.

Ontario corporations (not Federal corporations located in Ontario) require tax clearance for the corporation before the certificate of dissolution can be filed. In these cases, any back-taxes owed by the corporation must first be paid.

CorporationCentre.ca prepares and files certificates of dissolution in all Canadian jurisdictions. You can order our dissolution service online by clicking here.

Below are the current government dissolution fees for Canadian jurisdictions:

Moreover, if you are incorporating a federal corporation, you must also remove your federal corporation from the provincial registry.

File All Necessary Federal, Provincial, and Local Tax Forms

Because you are ceasing operations, your tax obligations do not immediately cease. You must formalize the closing of the business with the Canada Revenue Agency as well as your provincial and local taxing agencies. The CRA includes a form for closing business tax accounts. Also, do not overlook payroll reporting obligations if you have employees. Click here for more information. It is recommended that you consult with an accountant or tax advisor on the requirements for your particular business.

Notification to Creditors

You must notify by mail all of your company's creditors of the dissolution. The notice given should include the following information:

• That your corporation has been dissolved or has filed the statement of intent to dissolve.
• The mailing address to which creditors must send their claim(s).
• A list of the information that should be included in the claim.
• The deadline for submitting claims (this is often 120 days from the date of the notice).
• A statement of claims may be barred if not received by the deadline.

It is possible that your jurisdiction of incorporation may allow for claims from creditors that are not known to the corporation at the time of dissolution. In these jurisdictions, notice in the local paper of your company's dissolution may be required. It is best to seek the advice of an attorney regarding what your jurisdiction of incorporation mandates.

Quebec companies (not Federal corporations located in Quebec) are required to place an ad in a newspaper advising the public of its intent to dissolve.

Settling Creditors' Claims

Claims submitted to the company by creditors can be accepted or rejected by your corporation. Accepted claims must either be paid or arrangements that are satisfactory to creditor must be made for repayment. With rejected claims, you must advise creditors in writing that your corporation rejects their claims. It is advisable to seek the services of an attorney to assist in this process. Your attorney can advise you about the relevant statutes governing actions on rejected claims.

Distribution of Remaining Assets

After payment of creditors' claims, the remaining assets, if any, may be distributed to the owners of the company. Assets are distributed in proportion to the share of ownership of “common” and “participating” shares.

If you have a corporation that has multiple classes of stock, such as common and preferred shares, the corporate bylaws typically outline the procedure for distributing assets to these shareholders.

For additional information on the distribution of assets, it is best to contact an accountant or tax advisor.