Dissolve your corporation

Voluntary corporate dissolution step by step

A voluntary dissolution is a decision of the corporation itself. The business has stopped, its assets were sold, the founders are moving on, or the corporation was set up and never used. Dissolving is different from simply going inactive: an inactive corporation still exists, still owes its annual filings and can still be dissolved by the registry if it falls behind. Dissolution closes the file, subject to the revival rules described further down.

Each corporate statute has its own forms and conditions, but the sequence is broadly the same in every Canadian jurisdiction. The dissolution is always filed with the registry of the jurisdiction of incorporation: a federal corporation dissolves with Corporations Canada even if it operates only in one province.

1. 1Shareholder approvalThe shareholders approve the dissolution by resolution, generally a special resolution, as the governing statute requires. The ResolutionResolutionFormal decision of directors or shareholders, recorded in the minute book.See definition → is kept in the minute bookminute bookOfficial record holding a corporation’s articles, by-laws, resolutions and registers.See definition → with the corporation's other records.
2. 2Debts, contracts and tax accountsThe corporation pays or provides for its debts, ends or assigns its contracts, files its final tax returns and closes its payroll and sales tax accounts.
3. 3Distribution of the remaining assetsWhat is left once creditors are paid goes to the shareholders, according to the rights attached to each class of shares set out in the Articles of incorporationArticles of incorporationDocument filed with the registry setting the name, share capital, number of directors and restrictions.See definition →.
4. 4Filing with the registryThe articles of dissolution, or the equivalent form in the jurisdiction, are filed with the registry and the government fee is paid.
5. 5Certificate of dissolutionThe registry issues a Certificate of incorporationCertificate of incorporationRegistry-issued document confirming the corporation’s legal existence from its effective date.See definition → of dissolution. From its effective date, the corporation no longer exists as a legal person and can no longer sign contracts or hold property.

When a corporation still has property or liabilities, several statutes provide a longer route. Federally, the corporation can first obtain a certificate of intent to dissolve, notify its creditors, liquidate, then file the articles of dissolution. If the shareholders change course before the dissolution is final, the intent can be revoked: $50 online, $100 otherwisesource.

In Quebec, the Business Corporations Act distinguishes a dissolution, used when the corporation has no debts or property left or has provided for them, from a liquidation, used when assets must first be realized and distributed under the supervision of a liquidator. The filing goes to the Registraire des entreprises, which updates the corporation's file and its NEQNEQNumber assigned by Quebec’s enterprise registrar on registration. Separate from the federal business number (BN).See definition → in the enterprise register.

Before you dissolve: taxes, debts and assets

The registry filing is often the shortest part of the process. Most of the work comes before it, and much of that work involves the Canada Revenue Agency (CRA) and, for corporations active in Quebec, Revenu Québec. The checklist below is general; the order and the details depend on the corporation's activities.

• Final corporate tax return: the corporation files a final T2 return for the period ending on the dissolution date, plus a final Quebec CO-17 return if it files in Quebec.
• Payroll and sales tax accounts: the last source deductions and GST/HST (and QST in Quebec) are remitted, final returns are filed and the accounts are closed.
• Clearance certificate: before property is distributed, the person in charge of the distribution can ask the CRA for a clearance certificate confirming that the corporation's tax debts are paid. Distributing without one can make that person liable for the unpaid amounts.
• Creditors and contracts: suppliers, landlords, lenders and employees are paid or settled; leases, subscriptions and service contracts are terminated or assigned.
• Bank accounts and property: property is sold or transferred, and the bank accounts are closed once the last payments clear. Property still held by a corporation when it is dissolved can pass to the Crown.
• Other registrations: extra-provincial registrations in other provinces, municipal permits, business names and licences are cancelled, so that nothing keeps running in the corporation's name.

Distributions made to shareholders on a wind-up carry their own tax consequences: deemed dividends, capital gains, and in some cases the capital dividend account. Those consequences depend on the history of the corporation and on each shareholder's situation, which is why the final distribution is usually planned with an accountant.

Government fees for dissolution (sourced)

Government fees for a voluntary dissolution vary widely across Canada: some jurisdictions charge nothing, others a fixed filing fee. The amounts below come from each registry's fee schedule and are sourced and dated. Fees for the other provinces and territories appear in your quote before you pay.

The government fee is only part of the cost of closing a corporation. The final tax returns, the accountant's work on the distribution and, where needed, a lawyer's review usually weigh more than the filing itself. Our own service fee is shown separately, before you pay anything.

Administrative dissolution and revival

A registry can also dissolve a corporation on its own initiative, most often because its annual returnsannual returnsMandatory yearly filing with the registry, separate from the tax return. Missing it can lead to dissolution.See definition → or required notices were not filed. Notices are generally sent first to the registered office address on file, which is one more reason to keep that address current. The trigger differs from one jurisdiction to the next.

Letting the registry dissolve a corporation is not a clean way to close a business. Debts and tax obligations do not disappear, property can pass to the Crown, and while it is dissolved the corporation cannot sign contracts, collect what it is owed or defend itself in court. A voluntary dissolution leaves a clear record that the corporation was wound up in an orderly way.

A dissolved corporation can generally be brought back by a revival application (called restoration in some provinces). The file brings overdue returns up to date and pays the revival fee. Federally, the fee is $250 by email or mail (10 days)source, and a NUANS report is part of the file (Revival, amalgamation, NFP continuance (import), all cooperative services, registered intermediary filingssource). In Quebec, a corporation struck off the register applies for the striking-off to be revoked: $134 ($201 priority)source.

How Incorpo handles your dissolution

1. 1Guided questionnaireYou tell us the jurisdiction, the corporation's number and whether it still has property, debts or employees. The questionnaire points out the steps that usually come before the filing.
2. 2Documents prepared from your answersWe prepare the shareholders' resolution and the dissolution form required by the registry. You review them before anything is filed.
3. 3Electronic signatureDirectors and shareholders sign online. The signed resolution is added to the corporation's records.
4. 4Filing with the registryWe file the dissolution with the registry of the jurisdiction of incorporation and pay the government fee on the corporation's behalf.
5. 5Certificate kept in your accountThe certificate of dissolution is added to your account with the minute book, so the records remain available after the corporation ceases to exist.

Incorpo does not prepare tax returns and does not provide legal or tax advice. The final returns, the clearance certificate and the distribution plan belong with your accountant; an insolvent corporation or a disputed wind-up calls for a lawyer, and sometimes a licensed insolvency trustee.