Corporations under the Canada Corporations Act were
required to continue under the Canada Not-for-profit
Corporations Act before October 14, 2014. This process
requires corporations to pass articles of continuance and file them
with Corporations Canada. Corporations that have not taken these
steps can be dissolved by Corporations Canada. Earlier this year
Corporations Canada began issuing notices to corporations that had
not continued. The notices gave these corporations a 120-day
deadline to file articles of continuance, failing which the
corporations would be dissolved automatically.
Any federal non-share capital corporation that has not continued
should do so as soon as possible to avoid dissolution. Corporations
that have not already received a notice from Corporations Canada,
should expect one soon.
If a corporation has been dissolved under this procedure, it is
important to understand the consequences. A dissolved corporation
is no longer a legal entity. This lack of existence has
Loss of Charitable Status
First, if the corporation is a registered charity it will lose
its charitable status. The Canada Revenue Agency ("CRA")
has noted that "once a registered charity's or registered
Canadian amateur athletic association's corporate status is
dissolved, it ceases to exist as a legal entity, and the [CRA] will
take steps to revoke its registration under the Income Tax
CRA will send the (former) corporation a letter stating it must
provide proof that it is still a legal entity within 90 days,
failing which CRA will take steps to revoke the entity's
charitable registration. In order to provide this proof, the
dissolved corporation will need to obtain a certificate of revival
from Corporations Canada. This process is discussed below.
A revoked charity can no longer issue
official donation receipts, it no longer qualifies for an exemption
from income tax and, most importantly, it must transfer all of its
remaining property to an eligible donee. Failure to transfer the
property results in a revocation tax equal to 100% of the
charity's net property.
Inability to Deal with Assets
Second, a dissolved corporation and its directors and officers
can no longer deal with the property of the (former) corporation.
As the corporation is no longer a legal entity, it no longer has
directors or officers. Similarly, the dissolved corporation does
not have any legal status to access its bank accounts or any other
property that existed on the date it was dissolved.
Where a corporation voluntarily chooses to dissolve, it must
settle liabilities and dispose of all of its assets before it
winds-up. The corporation can choose to use up its assets for its
activities or can transfer its assets in accordance with its
dissolution clause to another entity. These actions must be
completed before the corporation is dissolved.
Where a corporation is dissolved and it has not taken steps to
wind-up its affairs, then the property of the corporation escheats
to the government. This means that the government takes over the
management of the property, and the government determines how the
property will be administered. In Ontario, the property of a
charity which is dissolved is administered by the Public Guardian
and Trustee. This is even the case for a federally incorporated
charity with assets in Ontario. Similar bodies administer
charitable property in other provinces.
If a corporation has been dissolved and it wants to continue to
operate or wants to distribute its assets and liabilities before
dissolving, then a person, such as a director or a member, can
apply to Corporations Canada for articles of revival. The
government will issue a certificate of revival if there is no valid
reason for refusing to issue the certificate. This will allow the
corporation to become a legal entity again. It can then operate,
deal with its property and retain its charitable status, if
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.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
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.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).