Closing a business deal in Canada

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how to terminate your corporation how to stop its existence cancel or in legal terms dissolve the corporation hi and welcome back again me eugene from cbes canadian business and enterprise services and today i would like to explain you how legally to approach the process what it means which considerations to consider how to proceed with the process of dissolution and what are the alternatives for the dissolution which i think are better more valuable than the solution itself so before we proceed with the actual dissolution let's remember the nature of the corporation and remember as i always say corporation is a legal entity we can create it but it cannot down itself it doesn't have physical existence there are multiple corporations that uh outlive and well outlive their creators one of the most famous is the hudson's big company of uh canada that was created back in 1670 it's the longest living corporation in the english-speaking world another famous corporation is a ford motors company which was established in 1903 and you can look for the articles of that company there are on the internet and it well outlived henry ford and still is with us so in order to terminate the cooperation we have to follow a proper legal process there are multiple alternatives for the terminating of a corporation one would be amalgamation where cooperation stops its existence but it's not terminated per se it is being either amalgamated with two companies to create a new entity or being absorbed by an existing company and that one continues its existence while the first one stops its existence then there is a dissolution which we'll discuss today we will discuss the voluntary that's when we as business owners decide to terminate our corporation and that is as an opposite involuntary in the case of bankruptcy or insolvency as a legal process the corporation after the distribution of its assets being terminated and no longer exists and then there's a technical poor cancellation where the register cancels the registration of a corporation for technical reasons uh one of them is you are not filing your annual informational returns or not filing taxes and eventually the corporation will be cancelled so uh before we come to the actual process let's talk about types of dissolutions and what to do before the dissolution itself there are two processes one is a straightforward the easier process for corporations that did not start their business operations and did not issue share capital technically mistake corporation you opened it you didn't intend it or you opened it you didn't think through and now you just want to cancel it not to bear this headache on yourself so you terminated a straightforward process two documents attached no headaches and nothing to take into consideration actually the second process is for the actual operating businesses that have business operations have liabilities and issued shares they have to follow a little bit more complicated process the forms that i refer in today's presentations are from the federal process they're similar form in each of the provincial registers that just could be named differently you'll have to search them i'll provide link for the dissolution processes for ontario and federal corporation in the description section below now before we dissolve the corporation we have to prepare the corporation for the process make sure that we are ready this is a legal process with its requirements we have to make sure that we comply with them so evaluate all your assets and liabilities compare them make a thorough list of those make sure that you are capable of covering your liabilities with your existing light assets and that there will not remain uncovered liabilities when you approach the process of dissolution because we will be declaring that there are no such as a child as a part of the process identify who are the affected parties employees contractors creditors suppliers whoever we owe money to whoever can claim certain claims from from the company identify them communicate with them make sure that you're capable of covering those liabilities wind up your business operations which means technically terminate them and this will include first of all settle all your employment matters so if you have employees terminate the employments pay out their severance base make sure they sign settlement agreements so you can declare that they're not stunning liabilities settle bank accounts so don't forget about credit cards which are also liabilities on your corporation any lines of credit borrowing mortgages cover them before you proceed discuss with your suppliers and creditors same thing you have to cover those liabilities and eventually terminate your business operations so stop incurring new liabilities and to complete the process complete and pay all your tax liability so if you didn't file your reporting do it if you did and you still didn't pay pay because you will have to comply with the cra requirements and you'll see it in the next stage so once you see the corporation is prepared we can proceed to the actual dissolution process and this will include just a couple of steps steps first prepare corporation resolutions and make sure that they're signed by directors and shareholders consenting to dissolve the corporation you will need it in the future if something happens best case both should sign the consent to dissolve then you have to apply for a letter of consent to dissolve from cra remember the tax liability that we had to pay out serie will verify if there are any they will not consent so make sure that everything is paid out and then sarah will provide you with the letter of consent it's very informal process you just send an email with the details of your corporation and within approximately a month you will get the letter if they agree prepare and file the articles of dissolution forms okay so form 10 or form 11 in the federal jurisdictions any other name in other jurisdictions but these are the forms that should be filed and if everything is in order first stage you will get the articles of the solution from the register this is technically the death certificate of your corporation with the date on it the date there for multiple reasons one of them is that you are not allowed any longer to use your corporation its name to refer to it uh from that day on for your business activities okay the corporation stopped its existence it's no longer here for you to use it pay out any remaining liabilities any fees that you owe for the dissolution process make sure that there are no outstanding claims they will come back to the directors of the corporation which in most of the private businesses we are a director so make sure everything is paid out and whatever is left distribute among shareholders by this point you will have your corporation completely terminated dissolved no longer existing okay now let's talk about considerations and alternatives that we can have instead of dissolving preparation so first of all look cooperation itself has volume okay uh not only good will for its name or trademark the actual existing envelope of legal entity that is there on the market for many years has value people are prepared to pay thousands upon thousands of dollars to purchase empty shelf corporation and your corporation if it was in existence and it was operating might cost a lot okay so why to dissolve why to throw out something that could cost money remember another consideration cra throughout the process you're communicating with the cra letting them know that you're dissolving the corporation this red flags your company from the very beginning which increases the chances that you will be audited by the cra if you're prepared to it perfect then you done your business in proper way everything is clean and you're ready to waste your time on siri audits that's okay but not everybody and you might want to avoid this process not because there's something wrong but because it just will take a lot of your time a lot of your resources and of course a stress so what are the alternatives and alternatives could be two one sell it to someone okay if it has value if it costs thousands of dollars why would you waste thousands of dollars sell it to someone who is prepared to pay and there are enough people i'm being contacted almost every day with these questions they will pay good money for you and the best thing when they buy a corporation they take all the liabilities with them you will of course indemnify them for whatever historical liabilities until the day of transaction but you know what there's a good chance that for the couple of years nothing will pop up or there are no liabilities and then you're clean the corporation moved on with its new owners and you got your thousands of dollars and the second option look you can retain the corporation just an empty legal envelope of a corporation to use it in the future purposes and what it means is that let's say you start to you'll decide to start a new business you already have a cooperation with many years of history in it you have articles that were created years ago you can use that goodwill of your cooperation for your personal benefit in the new business endeavor you technically will be introducing yourself as something that exists already for many years and not just was incorporated yesterday gets a little bit different treatment from the parties you will be working with banks creditors investors partners so these are two options which i think much more valuable and reasonable than this solution they will provide you with value well dissolution with none so unless you really insist on dissolving a corporation i don't see a reason why you would do that do one of these two so that completes our presentation today thank you for being with me eugene from cbs canadian business and enterprise services please do not forget to subscribe in the uh below leave your comments in the section below as well help me to understand what you like what you don't like what can i improve in my presentations which additional topics you would like me to cover and of course help the channel to grow to help more people to develop their businesses so thank you for being with me today eugene and i'll see you soon with new topics bye