Effective October 18, 2014, the Director of Corporations Canada has the legal authority to dissolve any corporation initially incorporated under the then Canada Corporations Act for failure to transition to the Canada Not-for-profit Corporations Act (NFP Act). The good news is that corporations that have not transitioned as of October 17, 2014 will not automatically be dissolved as of that date. Rather, steps will need to be taken by Corporations Canada that are intended to ultimately lead to dissolution.
A Notice of Intent to Dissolve will need to be served on such corporations. Such notice will inform the recipient that it has a period of 120 days to effect the needed transition, failing which dissolution will occur. Any corporation that fails to respond to the Notice of Intent to Dissolve will be assumed to be inactive and will be dissolved.
A corporation that has been dissolved for failing to transition to the new NFP Act will have the ability to be legally revived. The process will involve both a revival process followed by the transition to the NFP Act. Unlike the transition process in place prior to October 17, 2014, which sees a Certificate of Continuance issued by Corporations Canada, and for which there is no fee, there will be a fee charged for the revival and transition process.
If a corporation is dissolved in law, there are serious and negative ramifications. Any and all assets of the corporation are lost. Any loan agreements and other banking agreements are effectively breached because the corporation no longer has legal authority to pledge its assets. Any monies and bank accounts would effectively be lost, as again, the result of dissolution is effectively a legal elimination of the entity.
Many corporations avoid this process out of a sense that it requires a complete re-writing of the bylaws in order to be compliant with the new act. This is not true. More importantly, the timeframe for the filing of the revised bylaws is 12 months following the date of the issuance of the Certificate of Continuance. Consequently, all that needs to be done to avoid the legal results of dissolution, and more importantly the financial costs and expense of reviving the corporation can still be easily undertaken in a timely manner.
We strongly suggest that you take the necessary steps to arrange for the completion and filling of the continuance documents with Corporations Canada as soon as possible, and well before the termination date of October 17, 2014.
David A. Stout is a partner at Nelligan O'Brien Payne LLP and the leader of the Business Law Group.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
