Part 18 Liquidation and Dissolution (clauses 101-112)

This Part includes a number of amendments designed to update and improve the efficient administration of the CBCA. In that regard, the revival procedure is being modified to clarify that a revival of a corporation is retroactive. Further, the Director would have the ability to attach conditions to a revival (s. 209). The dissolution powers of the Director would be expanded to provide the Director with the power to immediately dissolve a corporation which fails to pay the incorporation fee without having to wait one year to do so (s. 212(3.1)). In addition, the Director would be able to dissolve insolvent corporations (s. 208(1).

The good faith reliance defence available to liquidators would be replaced by a due diligence defence whereby a liquidator is not liable if that liquidator exercises the same degree of care, diligence and skill that a reasonably prudent person would have exercised in comparable circumstances (s. 222(2)). This is comparable to the due diligence defence proposed in respect of directors (Part 10).

A number of consequential amendments required as a result of amendments to other parts of the Act are also included in this Part. In addition, several minor technical amendments and amendments to the French version are made.

Briefing Book
An Act to amend the Canada Business Corporations Act and the Canada Cooperatives Act

Bill Clause No. 101
CBCA Section No. 208
Topic  Liquidation and Dissolution (Technical Amendments)

Sources of Proposed Law 

Changes From Present Law 
Sections 209 and 212 would be applicable to an insolvent corporation.

Purpose of Change 
By making ss. 209 and 212 applicable to insolvent corporations, the proposed amendment would permit the Director to dissolve insolvent corporations. In most cases, these corporations are either insolvent with no assets (proceeding under the Bankruptcy and Insolvency Act (BIA) has been completed, leaving a "shell corporation") or insolvent without sufficient assets to warrant a BIA proceeding. If the Director dissolves an insolvent corporation where the trustee in bankruptcy has not yet been discharged, it would be possible for the trustee to apply to the Director to have the corporation revived (see new definition of "interested person" in s. 209(6)(e)).

Similar Provincial Laws 

Current Wording 
208. (1) This Part does not apply to a corporation that is insolvent within the meaning of the Bankruptcy and Insolvency Act or that is a bankrupt within the meaning of that Act.

(2) Any proceedings taken under this Part to dissolve or to liquidate and dissolve a corporation shall be stayed if the corporation is at any time found, in a proceeding under the Bankruptcy and Insolvency Act, to be insolvent within the meaning of that Act.

Proposed Wording 
208. (1) This Part, other than sections 209 and 212, does not apply to a corporation that is an insolvent person or a bankrupt as those terms are defined in subsection 2(1) of the Bankruptcy and Insolvency Act.

(2) Any proceedings taken under this Part to dissolve or to liquidate and dissolve a corporation shall be stayed if the corporation is at any time found, in a proceeding under the Bankruptcy and Insolvency Act, to be an insolvent person as defined in subsection 2(1) of that Act.

Bill Clause No. 102
CBCA Section No. 209 (2), (3), new (3.1), (4), new (5) and new (6)
Topic  Liquidation and Dissolution (Government Administration)

Sources of Proposed Law 

Changes From Present Law 
Clarification of the revival provisions in the Act.

Purpose of Change 
The amendment to subs. (3) would clarify that the Director has the discretion to decide whether to issue a certificate of revival. Currently, the CBCA is not clear. There is a right to appeal from the Director's decision which suggests that there is a discretion. The real purpose of the discretion is to impose terms and conditions of revival. The discretion gives leverage to oppose a revival but also allows the Director to assist in the revival and to consider terms which may protect shareholders.

Proposed subs. (3.1) would clarify the date upon which the corporation is revived.

The proposed amendment to subs. (4) would clarify the current wording in the CBCA which is ambiguous as to whether a revival is intended to have retroactive effect. The amendment makes a revival retroactive by expressly providing that the corporation can benefit from and is bound and liable for all acts of the corporation taken while the corporation was dissolved and by validating any changes to the internal affairs of the corporation. It would make the revived corporation liable for the contracts and torts/faults occurring between dissolution and revival, something which is not explicit in the current provision. Par. (4)(a) and (b) clarifies that the rights, liabilities, privileges and obligations, arising before and after the dissolution, are restored to the revived corporation.

An amendment was introduced at the Senate Committee stage removing the reference to "property" from par. 4(a) in response to the submission of the Barreau du Québec that such reference together with the reference to "rights and privileges" in the same provision, creates an inference with respect to the amalgamation and continuance sections (ss. 186 and 187) that the word "property" referred to there does not include rights and privileges.

Proposed subs. (5) would clarify that legal actions respecting the affairs of a revived corporation taken between the time of dissolution and its revival are valid and effective.

Subs. (1) authorizes "any interested person" to apply to the CBCA Director for revival of a CBCA corporation which has been dissolved. The expression "interested person" is not defined, leaving it to the courts to develop the law. The proposed definition of "interested person" would add certainty to the law. An amendment was introduced at the Senate Committee stage at the request of the Barreau du Québec clarifying this definition.

Similar Provincial Laws 
Business Corporations Act (Ontario)
Corporations Act (British Columbia)
Corporations Act (Northwest Territories)
Business Corporations Act (Alberta)

Current Wording 
209. (2) Articles of revival in prescribed form shall be sent to the Director.

(3) On receipt of articles of revival, the Director shall issue a certificate of revival in accordance with section 262.

(4) A body corporate is revived as a corporation under this Act on the date shown on the certificate of revival, and thereafter the corporation, subject to such reasonable terms as may be imposed by the Director and to the rights acquired by any person after its dissolution, has all the rights and privileges and is liable for the obligations that it would have had if it had not been dissolved.

Proposed Wording 
209. (2) Articles of revival in the form that the Director fixes shall be sent to the Director.

(3) On receipt of articles of revival, the Director shall issue a certificate of revival in accordance with section 262, if

(a) the body corporate has fulfilled all conditions precedent that the Director considers reasonable; and

(b) there is no valid reason for refusing to issue the certificate.

(3.1) A body corporate is revived as a corporation under this Act on the date shown on the certificate of revival.

(4) Subject to any reasonable terms that may be imposed by the Director, to the rights acquired by any person after its dissolution and to any changes to the internal affairs of the corporation after its dissolution, the revived corporation is, in the same manner and to the same extent as if it had not been dissolved,

(a) restored to its previous position in law, including the restoration of any rights and privileges whether arising before its dissolution or after its dissolution and before its revival; and

(b) liable for the obligations that it would have had if it had not been dissolved whether they arise before its dissolution or after its dissolution and before its revival.

(5) Any legal action respecting the affairs of a revived corporation taken between the time of its dissolution and its revival is valid and effective.

(6) In this section, "interested person" includes

(a) a shareholder, a director, an officer, an employee and a creditor of the dissolved corporation;

(b) a person who has a contractual relationship with the dissolved corporation;

(c) a person who, although at the time of dissolution of the corporation was not a person described in paragraph (a), would be such a person if a certificate of revival is issued under this section; and

(d) a trustee in bankruptcy for the dissolved corporation.

Bill Clause No. 103
CBCA Section No. 210(3)(b) and (4)
Topic  Liquidation and Dissolution (Technical Amendments)

Sources of Proposed Law 

Changes From Present Law 
Replace in the French version par. 210(3)(b) the word "ou" with "et".

The Director would be allowed to set the form of the articles of dissolution.

Purpose of Change 
This technical change makes the French and English version equivalent.

See explanation clause 3.

Similar Provincial Laws 

Current Wording 
210. (3) La société, qui a des biens ou des dettes ou les deux à la fois, peut être dissoute par résolution spéciale soit des actionnaires soit, en présence de plusieurs catégories d'actions, des détenteurs d'actions de chaque catégorie assorties ou non du droit de vote, pourvu que :

b) d'autre part, la société ait effectué une répartition de biens ou un règlement de dettes avant d'envoyer les clauses de dissolution au directeur conformément au paragraphe (4).

(4) Articles of dissolution in prescribed form shall be sent to the Director.

Proposed Wording 
210. (3)b) d'autre part, la société ait effectué une répartition de biens et un règlement de dettes avant d'envoyer les clauses de dissolution au directeur conformément au paragraphe (4).

(4) Articles of dissolution in the form that the Director fixes shall be sent to the Director.

Bill Clause No.104
CBCA Section No. 211(7)(b), (10) and (14)
Topic  Liquidation and Dissolution (Government Administration)

Sources of Proposed Law 

Changes From Present Law
The requirement found in par. 211(7)(b) that a corporation shall publish notice of its intention to liquidate or dissolve in a local newspaper, would be removed.

Subsections 211(10) and (14) are amended by replacing the word "prescribed" by the words "that the Director fixes".

Purpose of Change 
A corporation would still be required to give notice in each province in Canada where it is carrying on business. However, the removal of this requirement would increase the flexibility afforded to corporations by allowing them to use the most appropriate means of conveying notice to the public. As well, it removes the necessity of giving notice in the province where the corporation has its head office if the corporation did not carry on business in that province.

Subsections (10) and (14): See explanation at clause 3.

Similar Provincial Laws 

Current Wording 
211. (7) After issue of a certificate of intent to dissolve, the corporation shall

…

(b) forthwith publish notice thereof once a week for four consecutive weeks in a newspaper published or distributed in the place where the corporation has its registered office and take reasonable steps to give notice thereof in each province in Canada where the corporation was carrying on business at the time it sent the statement of intent to dissolve to the Director;

(10) At any time after issue of a certificate of intent to dissolve and before issue of a certificate of dissolution, a certificate of intent to dissolve may be revoked by sending to the Director a statement of revocation of intent to dissolve in the prescribed form, if such revocation is approved in the same manner as the resolution under subsection (3).

(14) Articles of dissolution in the prescribed form shall be sent to the Director.

Proposed Wording 
211. (7)(b) without delay take reasonable steps to give notice of it in each province in Canada where the corporation was carrying on business at the time it sent the statement of intent to dissolve to the Director;

(10) At any time after issue of a certificate of intent to dissolve and before issue of a certificate of dissolution, a certificate of intent to dissolve may be revoked by sending to the Director a statement of revocation of intent to dissolve in the form that the Director fixes, if such revocation is approved in the same manner as the resolution under subsection (3).

(14) Articles of dissolution in the form that the Director fixes shall be sent to the Director.

Bill Clause No. 105
CBCA Section No. new 212(1)(iv), (2)(b), (3) and new (3.1)
Topic  Liquidation and Dissolution (Government Administration)

Sources of Proposed Law 

Changes From Present Law 
(A) The Director may dissolve a corporation that does not have any directors or is in the situation described in proposed subs.109(4).

(B) The reference to publish the required notice in the Canada Gazette would be eliminated.

(C) The words "in prescribed form" are replaced with "in the form that the Director fixes".

Purpose of Change 
Subsection 212(1)(iv): This new provision would provide an administrative means of quickly dissolving directorless corporations. Currently, under the CBCA, the earliest that the Director can start dissolution proceedings against a corporation is one year after the corporation is in default of paying a required fee. This amendment is linked with the new provision (s. 109(3), (4)) regarding directorless corporations (see clause 40).

Paragraph 212(2)(b): See explanation in clause 6.

Subsection (3): See explanation in clause 3.

Subsection 212(3.1): This provision would permit the Director to dissolve a corporation that fails to pay its incorporation fees without having to wait one year. Currently, under the CBCA, the Director can only start dissolution proceedings against that corporation when the corporation has been in default of paying a required fee for a period of one year.

Similar Provincial Laws 

Current Wording
212. (1) Subject to subsections (2) and (3), where a corporation

(a) has not commenced business within three years after the date shown in its certificate of incorporation,

(b) has not carried on its business for three consecutive years, or

(c) is in default for a period of one year in sending to the Director any fee, notice or document required by this Act,

the Director may dissolve the corporation by issuing a certificate of dissolution under this section or he may apply to a court for an order dissolving the corporation, in which case section 217 applies.

(2)(b) published notice of that decision in the Canada Gazette and in the periodical referred to in section 129.

(3) Unless cause to the contrary has been shown or an order has been made by a court under section 246, the Director may, after the expiration of the period referred to in subsection (2), issue a certificate of dissolution in prescribed form.

Proposed Wording 
212. (1) Subject to subsections (2) and (3), the Director may

(a) dissolve a corporation by issuing a certificate of dissolution under this section if the corporation

(i) has not commenced business within three years after the date shown in its certificate of incorporation,

(ii) has not carried on its business for three consecutive years,

(iii) is in default for a period of one year in sending to the Director any fee, notice or document required by this Act, or

(iv) does not have any directors or is in the situation described in subsection 109(4); or

(b) apply to a court for an order dissolving the corporation, in which case section 217 applies.

(2)(b) published notice of that decision in a publication generally available to the public.

(3) Unless cause to the contrary has been shown or an order has been made by a court under section 246, the Director may, after the expiration of the period referred to in subsection (2), issue a certificate of dissolution in the form that the Director fixes.

(3.1) Despite anything in this section, the Director may dissolve a corporation by issuing a certificate of dissolution if the required fee for the issuance of a certificate of incorporation has not been paid.

Bill Clause No. 106
CBCA Section No. 213(4)
Topic  Liquidation and Dissolution (Government Administration)

Sources of Proposed Law 

Changes From Present Law
(A) Eliminate the reference to publish the required notice in the Canada Gazette.

(B) The contents of the form would be fixed by the Director

Purpose of Change 
See explanation: clauses 6 and 3.

Similar Provincial Laws 

Current Wording 
213. (4) On receipt of an order under this section, section 212 or 214, the Director shall

(a) if the order is to dissolve the corporation, issue a certificate of dissolution in prescribed form; or

(b) if the order is to liquidate and dissolve the corporation under the supervision of the court, issue a certificate of intent to dissolve in prescribed form and publish notice of such order in the Canada Gazette and in the periodical referred to in section 129.

Proposed Wording 
213. (4) On receipt of an order under this section, section 212 or 214, the Director shall

(a) if the order is to dissolve the corporation, issue a certificate of dissolution in the form that the Director fixes; or

(b) if the order is to liquidate and dissolve the corporation under the supervision of the court, issue a certificate of intent to dissolve in the form that the Director fixes and publish notice of the order in a publication generally available to the public.

Bill Clause No. 107 CBCA Section No. 214(1)(a) and (1)(a)(ii)
Topic  Liquidation and Dissolution (Technical Amendments)

Sources of Proposed Law 

Changes From Present Law 
(A) The concept of "unfairly" found in the English version would be included in the French version.

(B) Amend the French version of subs. 214(1)(ii) by replacing the words "ses affaires tant commerciales qu'internes" with "ses activités commerciales ou ses affaires internes,".

Purpose of Change 
These technical changes clarify the wording and application of the Act.

Similar Provincial Laws 

Current Wording 
214. (1)a) il constate qu'elle abuse des droits des détenteurs de valeurs mobilières, créanciers, administrateurs ou dirigeants, qu'elle porte atteinte à leurs intérêts ou n'en tient pas compte :

214. (1)(a)(ii) soit par la façon don't elle conduit ou a conduit ses affaires tant commerciales qu'internes,

Proposed Wording
214. (1)a) il constate qu'elle abuse des droits de tout détenteur de valeurs mobilières, créancier, administrateur ou dirigeant, ou se montre injuste à leur égard en leur portant préjudice ou en ne tenant pas compte de leurs intérêts :

214. (1)(a) (ii) soit par la façon dont elle conduit ou a conduit ses activités commerciales ou ses affaires internes,

Bill Clause No. 108
CBCA Section No. 217(b)
Topic  Liquidation and Dissolution (Technical Amendments)

Sources of Proposed Law 

Changes From Present Law 
Replace in the French version of s. 217(b) the word "caution" with the word "cautionnement" where the provision incorrectly uses this term in relation to the security mechanism (as opposed to the person who provides the security, which is the correct use of the word "caution"). Also, the English version is amended to be gender-neutral.

Purpose of Change 
This technical change clarifies the wording and application of the Act.

Similar Provincial Laws

Current Wording 
217. À l'occasion de la dissolution ou de la liquidation et de la dissolution, le tribunal peut, s'il constate la capacité de la société de payer ou de constituer une provision pour honorer ses obligations, rendre les ordonnances qu'il estime pertinentes et en vue, notamment :

…

b) de nommer un liquidateur, avec ou sans caution, de fixer sa rémunération et de le remplacer;

(b) an order appointing a liquidator, with or without security, fixing his remuneration and replacing a liquidator;

Proposed Wording
217. b) de nommer un liquidateur, avec ou sans cautionnement, de fixer sa rémunération et de le remplacer;

(b) an order appointing a liquidator, with or without security, fixing the liquidator's remuneration and replacing a liquidator;

Bill Clause No. 109
CBCA Section No. 221(b)
Topic Liquidation and Dissolution (Government Administration)

Sources of Proposed Law 

Changes From Present Law 
The reference to publish the required notice in the Canada Gazette in the portion of the section immediately before subparagraph (i) would be eliminated.

Purpose of Change 
See explanation: clause 6

Similar Provincial Laws 

Current Wording 
221. A liquidator shall

…

(b) forthwith publish notice in the Canada Gazette and in the periodical referred to in section 129 and by insertion once a week for two consecutive weeks in a newspaper published or distributed in the place where the corporation has its registered office and take reasonable steps to give notice thereof in each province where the corporation carries on business, requiring any person

Proposed Wording 
221. (b) without delay publish notice by insertion once a week for two consecutive weeks in a newspaper published or distributed in the place where the corporation has its registered office and take reasonable steps to give notice of the appointment in each province where the corporation carries on business, requiring any person

Bill Clause No. 110
CBCA Section No. 222(2)
Topic  Liquidation and Dissolution (Directors' Liability)

Sources of Proposed Law 

Changes From Present Law 
A due diligence defence is provided for liquidators.

Purpose of Change 
This amendment would allow liquidators to rely on the same due diligence defence as directors. It will ensure that defences are consistent throughout the act.

Similar Provincial Laws 

Current Wording 
222. (2) A liquidator is not liable if he relies in good faith on

(a) financial statements of the corporation represented to him by an officer of the corporation or in a written report of the auditor of the corporation to reflect fairly the financial condition of the corporation; or

(b) an opinion, a report or a statement of a lawyer, an accountant, an engineer, an appraiser or other professional adviser retained by the liquidator.

Proposed Wording 
222. (2) A liquidator is not liable if the liquidator exercised the care, diligence and skill that a reasonably prudent person would have exercised in comparable circumstances, including reliance in good faith on

(a) financial statements of the corporation represented to the liquidator by an officer of the corporation or in a written report of the auditor of the corporation fairly to reflect the financial condition of the corporation; or

(b) a report of a person whose profession lends credibility to a statement made by the professional person.

Bill Clause No. 111
CBCA Section No. 223(4)
Topic  Liquidation and Dissolution (Government Administration)

Sources of Proposed Law 

Changes From Present Law 
Clarification of the application of the section.

Purpose of Change 
The purpose of this amendment is to help clarify the Act and its application.

Similar Provincial Laws 

Current Wording 
223. (4) A liquidator shall give notice of his intention to make an application under subsection (2) to the Director, each inspector appointed under section 217, each shareholder and any person who provided a security or fidelity bond for the liquidation, and he shall publish the notice in a newspaper published or distributed in the place where the corporation has its registered office or as otherwise directed by the court.

Proposed Wording 
223. (4) A liquidator shall give notice of their intention to make an application under subsection (2) to the Director, to each inspector appointed under section 217, to each shareholder and to any person who provided a security or fidelity bond for the liquidation, and shall publish the notice in a newspaper published or distributed in the place where the corporation has its registered office, or as otherwise directed by the court.

Bill Clause No.112
CBCA Section No. 226(1)
Topic  Liquidation and Dissolution (Technical Amendments)

Sources of Proposed Law 

Changes From Present Law 
Replace the term "legal representative" with the term "personal representative".

Purpose of Change
The purpose of this change is to harmonize the CBCA with other federal statutes, to clarify the language of the Act and to reduce ambiguity.

Similar Provincial Laws 
Bank Act

Current Wording 
226. (1) In this section, "shareholder" includes the heirs and legal representatives of a shareholder.

Proposed Wording 
226. (1) In this section, "shareholder" includes the heirs and personal representatives of a shareholder.