Menu

Voluntary Liquidation and Dissolution by NFP Corporations

Except where the corporation has never issued any memberships, voluntary dissolution of a corporation under the Canada Not-for-profit Corporations Act requires the approval of members by special resolution (that is, the approval of at least two-thirds of the votes cast at a meeting of members, or all of the members if the approval is made by resolution in writing without a meeting). If there is more than one class or group of members, the corporation can only be dissolved by special resolution of each class or group of members, voting separately as a class. Even members who otherwise are not entitled to vote under the articles enjoy a separate class vote for purposes of voting on a dissolution or liquidation and dissolution. If the corporation has never issued any memberships, then it may be dissolved at any time by all of the directors - the only time that the Act requires a super-majority board approval.

If the corporation has no property and no liabilities or it has disposed of all of its property and it has no liabilities, it may be dissolved by filing articles of dissolution in Form 4017. On filing, Corporations Canada issues a certificate of dissolution. The corporation ceases to exist on the date set out in the certificate of dissolution.

Similarly, a corporation with either properties or liabilities (or both) may be voluntarily liquidated and dissolved in accordance with the following sequential steps.

Step 1: Directors propose the voluntary liquidation and dissolution of the corporation to the members or, alternatively, a member entitled to vote at an annual meeting of members may make a proposal to dissolve.

Step 2: Notice of a meeting of members to consider the proposal is given. The terms of the proposal are set out in the notice.

Step 3: Members (or each class of members, if there is more than one class of members outstanding) approve the liquidation and dissolution.

Step 4: A statement of intent to dissolve in Form 4019 is filed with Corporations Canada.

Step 5: Corporations Canada issues a certificate of intent to dissolve.

Step 6: The corporation ceases to carry on its activities except to the extent necessary for the liquidation.

Step 7: The corporation:

(a) immediately causes notice of the certificate of intent to dissolve to be sent to each of its known creditors;

(b) without delay, takes reasonable steps to give native of the certificate of intent to dissolve in each province and territory in Canada where the corporation was carrying on its activities at the time it filed the statement in Form 4019 with Corporations Canada; and

(c) does all acts required to liquidate its property (including collecting its property and converting any property not to be transferred or distributed in kind into money) and discharge all its liabilities.

Step 8: The corporation distributes its remaining property, either in money or in kind, in accordance with its statutory obligations and, to the extent consistent with those mandatory obligations, the distribution rights set out in articles. If the articles are silent, then, in the case of a registered charity under the Income Tax Act (Canada), a soliciting corporation or a corporation that, at any time within the previous five years, received more than $10,000 in funding from public sources, the liquidator must apply to court for an order to distribute the remaining property. In the case of any other corporation the articles of which are silent, the remaining property is distributed to its members, with each member receiving an equal share.

Step 9: The corporation prepares and files articles of dissolution in Form 4017 with Corporations Canada.

Step 10: Corporations Canada issues a certificate of dissolution, resulting in the corporation ceasing to exist on the date set out in the certificate.

Notwithstanding a dissolution:

● a civil, criminal or administrative action or proceeding commenced by or against the corporation before its dissolution may be continued as if the corporation had not been dissolved;

● a civil, criminal or administrative proceeding may be brought against (but not initiated by) the corporation within two years after the dissolution as if it had not been dissolved;

● any property of the dissolved corporation remains available to satisfy any judgment or order against the corporation; and

● a member to whom any property of the dissolved corporation has been distributed remains liable to a claimant to the extent of the amount that the member received. The claimant has two years after the date of dissolution to bring an action to enforce the member's liability to disgorge property.

No Comments

Leave a comment
Comment Information

Contact The Firm

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an lawyer-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

Contact

Gray, Whitley LLP
400 - 36 King Street E.
Toronto, ON M5C 3B2

Phone: 647-560-3705
Fax: 647-256-6601
Map & Directions

top