Dissolving a Corporation in Ontario
Disclaimer: This article on dissolving a corporation in Ontario is intended for the purpose of providing information only. It is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.
Whether you’re in the process of closing your business, embarking on retirement, or facing any other situation that leads to the conclusion of your corporation, ensuring a smooth and effective closure is essential.
If you’re seeking guidance on the best approach to dissolving your corporation, you’ve come to the right place. In this article, we’ll provide you with valuable insights to ensure that the process of ending your corporation is executed correctly.
Reasons for Dissolving a Corporation
There are various reasons why a corporation may need to be dissolved in Ontario. While corporations may be involuntarily dissolved under the Ontario Business Corporation Act, this article will only consider voluntary dissolutions. It could be due to the company no longer being profitable, a change in business direction, the owner retiring, or the decision to pursue other opportunities.
Corporations may choose to dissolve if they want to consolidate or restructure their business. This could involve merging with another company or spinning off certain divisions. Dissolution provides a legal framework for these changes.
Whatever the reason, it’s important to understand the implications and legal requirements that come with dissolving a corporation.
What happens when you dissolve your corporation?
When a corporation is dissolved, it means that the legal existence of the corporation comes to an end. The company is officially closed, and its operations cease. The process involves settling all debts, distributing assets to shareholders, and fulfilling legal obligations.
It is worth noting that you can only dissolve your corporation if there are no lawsuits against it and you will need to make a statement to this effect. Therefore, if there are any lawsuits against you and you do dissolve the corporation, the other party will file a motion with the court to have you revive the corporation, and the lawsuit will continue.
Once a corporation is dissolved, it cannot continue to conduct business under its previous legal structure. The business activities associated with the dissolved corporation must stop. This includes sales, transactions, and any other operational functions.
Legal Requirements for Dissolving a Corporation in Ontario
There are differences between dissolving an Ontario corporation and a Federal corporation. Here’s a broad breakdown of what is involved.
Step 1: Make sure your corporate minute books are up to date.
First, make sure your minute book is up to date. You can learn more about what should be in your minute book here.
Step 2: Drafting Resolutions
Next, your corporation’s lawyer will craft resolutions that authorize the dissolution of your corporation. This includes a special resolution that needs approval from the corporation’s shareholders.
Step 3: Fulfilling Debts and Obligations
Before proceeding, it’s vital to settle all outstanding debts and obligations. Speak to your accountant, as the corporation must clear any unpaid taxes, file its final tax returns, and obtain essential tax clearances.
But what if there are remaining assets after settling debts and obligations? These should be distributed among shareholders according to their rightful entitlements, such as the Articles of Dissolution in Ontario.
Step 5: Government Filing
If the corporation is devoid of assets and debts, the next phase involves filing the appropriate forms and supporting documents. To dissolve an Ontario corporation, you must file Articles of Dissolution. Once confirmation of the dissolution is received—typically in the form of a “Certificate of Dissolution”—it’s important to update the corporation’s minute book to reflect this change.
Step 6: Retaining Records
Once your corporation has been dissolved, retain your records, such as your corporate minute book, proof of dissolution, and other pertinent corporate records. This ensures that your documentation remains intact and accessible for any future requirements.
By following these steps, you can successfully dissolve your corporation and move on to your next venture.
Tax Considerations When Dissolving a Corporation
Dissolving a corporation involves significant tax considerations. You must think about your final tax returns and seek professional tax advice to identify potential benefits like capital losses and deductions. Shareholders should also account for personal tax liabilities, particularly if assets are distributed as dividends, in order to effectively plan and minimize tax burdens.
Seeking Professional Assistance for a Smooth Dissolution
If you want to move on to the next chapter, you want to ensure you are doing so correctly. You need support from knowledgeable professionals, such as your accountant and an experienced business lawyer.
So, if you’re considering dissolving a corporation in Ontario, don’t hesitate to reach out to Beeksma Law. Our team of business lawyers has the expertise and knowledge to provide you with the necessary support and guidance to dissolve any worries you may have.