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.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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