Failure to File Annual Returns Could Lead to Company Dissolution
In the past few years, both federal and Ontario corporate regulations have updated their requirements for annual returns. Prior to 2021, these returns could be filed through the CRA when submitting taxes. Now, businesses are required to file them separately, and additionally, they must report or update information on the individuals with significant control of the company.
Failure to file in a timely manner can result in significant consequences. Federal corporations may face administrative dissolution after more than two years of non-compliance, and Ontario corporations could face similar penalties. Once a company is dissolved, its assets may, in theory, escheat to the Crown(the government). However, if detected early, steps can be taken to revive the company or reclaim its assets.
Typically, the issue comes to light when a company is in the process of finalizing contracts, disposing of assets, or transferring shares, only to discover that it has been dissolved. At that point, applying to revive the company may lead to contract breaches or delays, causing unnecessary losses.
Disclaimer:
This blog is for reference only and does not constitute legal advice. For specific issues, please consult your lawyer.
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