What happens when a corporation forgets to file its annual report with the registrar of companies?
In addition to annual income tax filings, corporations have to file a few annual legal forms with the registrar of companies. The purpose of these forms is to keep the registry up to date with company information and inform the registry that the company is still active. A corporation can be involuntarily dissolved for failure to file its annual report. This can be a costly mistake.
The annual report is often overlooked by business owners. It might be because they confuse it with the annual tax returns or because the only reminder is often a single letter that can easily go missing. If the annual report is not filed for over 3 years, the registrar of companies could involuntarily dissolve the company for failure to file its paperwork. One of the best ways to ensure that you file every year is to retain a lawyer to look after your corporate records. Lawyers take care to ensure that this annual report gets processed as they understand the consequences if it is not filed.
Dissolution can have significant implications. Legal consequences may include loss of title to your assets, inability to conduct transactions like banking and drive company vehicles (because the insurance is no longer valid). From a tax perspective, the company is considered to have wrapped up its affairs and thus sales taxes are due on the deemed disposition of its assets and income tax is due on the final tax return. The directors are liable for this tax and CRA can and will arbitrarily calculate it and chase the directors for it.
If a company becomes dissolved, it can get reactivated. A BC company would need to fill out and file Form 30: Restoration Application, Full Restoration. Generally, a director, officer or shareholder of the company can only complete this form. There is also a $350 fee to pay in order for the form to be processed.
For more information on Dissolved for Failure to File, please contact us for our help on this issue. Please read our FAQ sheet on that topic.Download a copy of this issue here