Has your Lawyer ever told you that your company is in danger of being dissolved, but you’re not quite sure what that means? Or are you interested in dissolving your company, but you’re unsure how to go about it?
Dissolving a company represents the end of its existence. A dissolved company is a company that was once a validly existing company but has since been struck from the BC Registry (in the case of a BC company) and no longer exists. In the article below, we discuss the various means by which a company may be dissolved in British Columbia. The two most common are outlined below together with our comments. The third is a formal liquidation and involves the appointment of a liquidator.
1. Voluntary Dissolution
Voluntary dissolution involves the shareholders of the company passing an ordinary resolution to request the Registrar of Companies to dissolve the company. The company then files with the registrar an application for dissolution stating, among other things, that an affidavit of a director of the company has been obtained and deposited in the company’s records office. That affidavit must state that the company’s dissolution has been authorized, that the company has no assets and that the company either has no liabilities or has made adequate provision for the payment of each of its liabilities. This method allows the registrar to dissolve the company immediately upon the filing of the application with the registrar.
2. Failure to File
In British Columbia, a company which fails for two successive years to file an annual report, or any other return, notice or document as required under the British Columbia Business Corporations Act will be in default under the Act. The Registrar will then send a notice of commencement of dissolution to the registered office of the company. The Notice will state that the company is in default and that if the registrar is not advised within one month of the date of the Notice that steps are being taken to correct the default, the company may be dissolved.
This approach involves minimal action and cost on the part of the company but has the disadvantage of requiring the passage of time before the company is dissolved by the registrar. It also involves a breach of the Act, although no penalties other than dissolution have traditionally flowed from such a breach.
Furthermore, the Act provides that the liability of every director, officer, liquidator and shareholder of a company that has been dissolved shall continue, and may be enforced as if the company had not been dissolved. The limitation period for liability under the Income Tax Act runs from the time of director resignation. The limitation period is not triggered by dissolution; therefore, we recommend that directors resign upon dissolution. In addition, if the company owns any assets when it ceases to exist, these assets will become the property of the provincial government. Accordingly, allowing the company to be dissolved for failing to file annual reports is not recommended if the company has any assets or liabilities.
If the liabilities of the company are complex and uncertain, a formal liquidation and the appointment of a liquidator may be required. We would be pleased to explain what that would involve.
If you would like to learn more about partnerships, or alternate forms of business entities, please do not hesitate to contact one of the lawyers practicing in the area of business law at 250-448-2637 or firstname.lastname@example.org.
Alternatively, if your company has been dissolved and you are looking for more information on how to restore your company, please visit: http://touchstonelawgroup.com/kelowna-lawyers/restoring-company/
Author: Sasha Platz
This information is general in nature only. You should consult a lawyer before acting on any of this information. This information should not be considered as legal advice. To learn more about your legal needs, please contact our office at (250)448-2637 or any of our lawyers practicing in the area of business law at the following:Una Kuzio: email@example.com Jane Otterstrom: firstname.lastname@example.org Sasha Platz: email@example.com