Businesses don’t last forever and it may be time for you to close yours down. If you have incorporated your organisation provincially or federally, then you are obligated to dissolve it to be able to exit your business. Dissolving a corporation can be a lengthy process and if you are not careful, a few errors can lead to a series of unnecessary legal and financial ramifications. That being said, it is not a difficult process, especially with the aid of a corporate lawyer. The only requirement for dissolving a corporation is that the business has no liabilities and is not bankrupt. Here’s a closer look at the process through which you can dissolve your corporation:
Meet the Board
A voluntary dissolution of a corporation requires unanimous approval from all the shareholders. For this, the first step is to organize a formal Board of Director’s meeting. Once their approval is received, the corporation shareholders need to give their consent for a Special Resolution. To achieve dissolution of the corporation, at least two-thirds of the shareholder members must give their approval.
Liquidate the Assets
The shareholders must approve another Special Resolution that allows for the liquidation of assets. The corporation can do this by redistributing the property or organising an auction. If there are several groups of shareholders, then each group must give their approval for the Special Resolution to liquidate the corporation’s assets.
File your Articles of Dissolution
To complete the dissolution of your corporation, you require a Certificate of Dissolution. To acquire this, you must file the Articles of Dissolution. You can download Form 17 from the Government of Canada site. Once completed and signed, the form must be submitted to the Corporations Canada either through email or post.
Complete the Final Tax Return
Canada Revenue Agency needs to be made aware of the dissolution of your corporation. You are required to file your business’s final tax return and along with a copy of your Certificate of Dissolution. Failing to do so could result in CRA assuming that your company exists even post dissolution and an annual tax return would be expected.
Close All Accounts
Accounts that are established in the corporation’s name need to be closed down. This includes bank accounts, credit lines and service accounts. Also, ensure that you pay and close all your payroll accounts as well. This includes CPP contributions, EI premiums, and income tax deductions. It is also crucial to verify that there are no outstanding payments.
Cancel any Permits or Licences
Assess what permits and licences are granted to the corporation. Terminate these permits or licences across national, provincial or local levels.
Notify all Associates
The last act is to formally inform everyone (vendors, customers, clients) of the corporation’s dissolution. This is not the only method to dissolve your corporation. Another process is to first liquidate your assets before notifying about the dissolution. In case, your company is on the verge of bankruptcy, dissolution of the corporation is not a clear cut process. In a situation like this, it is recommended to speak to a legal expert to determine whether dissolution or bankruptcy, which is the better choice for your organisation.
Dissolving a corporation is a complex process and it’s recommended that you have a legal consultant by your side to ensure the process is completed correctly.