Need to Dissolve Your BC Company? Here Are Your Options
At some point, you may find yourself in the position of having to close down your business. Shutting down your operations may be straightforward, but how do you officially end your company’s legal existence?
If you have a company registered under BC’s Business Corporations Act (the “Act”), you have a few different options for dissolving your company:
Voluntary or “Short Form” Dissolution
The first option is to file an application with the BC Registry to dissolve your company. The benefit of this option is that you have control over the date of dissolution. This can be helpful if you want to time the date of dissolution with your company’s fiscal year end, as an example.
This method can only be used if the company is solvent and has no assets or liabilities. You’ll need to make sure all the company’s debts and liabilities have been paid out and all of the company’s remaining assets, if any, have been distributed to the shareholders.
There is some paperwork involved with this method, including shareholder and director approvals, a director’s affidavit, and a dissolution request, which will need to be filed with the BC Registry.
Let It Die
Another option is to "let it die". This would happen if the company fails to make the annual filings required under the Act and is eventually dissolved by the registrar. This is often used as an inexpensive form of dissolution.
This method should only be used if the company has no assets or liabilities. If the company has assets at the time of its dissolution, those assets will vest in the government.
Another factor to consider is that it takes two years of not filing annual reports before a company is dissolved in this way, and in those two years, you will need to continue to make tax filings with the CRA. So, you will want to weigh the savings in legal fees (for not filing a formal dissolution) versus the accounting fees for the two years of tax filings.
Voluntary Liquidation or “Long Form” Dissolution
Another option is to go through a liquidation process, where the shareholders appoint a liquidator who meets certain qualifications. The liquidator would take over the powers of the directors of the company during the liquidation and would call in the company’s assets, settle its debts, and distribute any remaining assets to the shareholders.
This method is not very common as it is an expensive and inconvenient way to end a company's existence. It is typically only used when the affairs of a company are too complex for the simple voluntary dissolution method.
A company can also undergo a court-ordered liquidation where the court makes an order that the company be liquidated and dissolved, and appoints a liquidator to carry out the liquidation.
This method is typically only used in the case of an impasse, either at the shareholder or director level, where the only suitable option is to ask the court to step in.
Similar to the voluntary liquidation route, with a court-ordered liquidation, the liquidator would call in the company’s assets, settle its debts, and distribute any remaining assets to the shareholders. A key difference is that the liquidator has to report to the court throughout the liquidation.
While most jurisdictions will have some variety of the options set out above, this post only covers companies registered in BC under the BC Business Corporations Act. If your company is registered in another jurisdiction, for example, federally under the Canada Business Corporations Act, you’ll need to review the rules in that jurisdiction.