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Dissolving an Inactive Corporation
Are Directors Really Going To Be Prosecuted For Not
Filing Tax Returns For Inactive Corporations?
The Answer Below May Surprise You.
As a director of an inactive corporation you may not see the value in paying your accountant to file “nil” returns every year. Therefore, in the past, your answer may have been to do nothing.
But this time, doing nothing WILL COME BACK TO BITE YOU!!!
The government has introduced new, tougher measures to enforce compliance with tax filing requirements for Ontario Corporations.
To clear up the “facts” from the “fiction”, our firm has consulted with the Project Manager of the Ministry of Finance and with the Ministry of Consumer and Business Services to find out whether the government is serious about their commitment to prosecute directors for not filing tax returns for inactive corporations.
We discovered that - this time - the government is on a mission to enforce corporations and their directors to comply with the tax laws for filing their returns and to clean up the backlog or in the alternative to dissolve these inactive corporations.
The government has sent out about 350,000 “First Notices” to corporations in Ontario that did not file their tax returns. The government received about 100,000 responses from that First Notice. The government then sent out over 250,000 Second Notices.
The next step is that the government will begin contacting directors of inactive corporations and begin laying charges against them personally, as directors under the Provincial Offences Act.
A charge against you as a director will require you to personally attend in Provincial Court and expose you to fines.
In fact, we are aware of directors who have already been fined as a result of not filing their tax returns.
The Legal Requirements to Dissolve Inactive Corporations
Before an inactive corporation can be dissolved the following legal requirements
and steps need to be taken:
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The dissolution must comply with specific requirements set out under the
Business Corporations Act;
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The proper search needs to be conducted under the Corporations Information Act to verify who are the registered active directors and officers of the inactive corporation. Given that there are legal liabilities and responsibilities of the directors this is an important step not to be overlooked;
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There can be no proceedings pending in any courts against the inactive corporation;
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The corporate minute book of the inactive corporation is to be examined to determine if it is up-to-date and to confirm who the shareholders of record are; and
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The consent of all shareholders is required to carry out the dissolution. There are legal implications if not all of the shareholders sign the dissolution or are not able or available to do so.
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Announcing: The Dissolution Solution*
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For Legally Dissolving Inactive Corporations
To help directors and shareholders easily and legally dissolve their inactive corporations we have developed a process called The Dissolution Solution*
The following is an overview of The Dissolution Solution* process:
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We review the minute book to verify title to issued shares and determine whether the minute book is up-to-date. We note present shareholders, directors, officers, head office, year-end and auditor/accountant;
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We conduct the necessary search under the Corporations Information Act;
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We obtain the Letter of Consent from you when you or your accountant receives it from the Ministry of Finance after the final return is filed;
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We prepare Articles of Dissolution in duplicate and attend to having the director sign them.
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We file the Articles of Dissolution which must be filed within 60-days of receiving the Letter of Consent to dissolve.
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The NEXT STEP:
If you, as a director or shareholder, want to dissolve an inactive corporation then:
Call our corporate clerk at 905-856-8100 ext 24 to start this process and to see if you qualify.
*The Dissolution Solution is a trademark of Di Mondo Consiglio LLP, 2004
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