A corporation is a separate legal entity under the law. In BC, the Business Corporations Act allows for the dissolution of a corporation. The effect of dissolution is that the corporation no longer exists. There are four main ways in which a corporation can be dissolved:
- Dissolution for failure to file an annual report;
- Dissolution by request;
- Voluntary dissolution; and
- Court ordered dissolution.
It is a requirement under the Business Corporations Act that a corporation file an annual report each year with the BC registry. If a corporation doesn’t, it can be struck from the provincial company registry resulting in the dissolution of the corporation. Any assets of the company are then transferred to the BC government. As such, it is important to ensure you are filing your annual reports to avoid this result.
If a corporation has no assets or liabilities, the directors of the corporation can file a request for dissolution with the BC registry to have the corporation dissolved.
Conversely, if a corporation has assets or liabilities and the shareholders wish to dissolve the corporation, the shareholders can pass a special resolution to appoint a liquidator to sell the assets of the corporation, pay its liabilities, and then disburse the remaining funds, if any, to the shareholders. Once that is done, the corporation can be dissolved.
A liquidator can also be appointed by the Court on the application of the shareholders, directors, or creditors of the company. The Court may order the dissolution if a triggering event as set out in the corporation’s articles has occurred or if the court considers it just and equitable in the circumstances to order the liquidation.