Canada Business Corporations Act

Section 226

Subsection 226(2)

See Also

Delia v. Agence du revenu du Québec, 2018 QCCQ 9487

assessment against dissolved corporation was void because audit commenced after its dissolution

The appellant (“Delia”) had been the sole shareholder and director of a corporation (“Motostar”) engaged in a recreational vehicle sales business. Motostar was dissolved pursuant to voluntary dissolution proceedings under s. 312 of the Business Corporations Act (Quebec) in November 2012. In September 2013, the ARQ commenced an audit of Motostar, assessed Motostar on June 5, 2014 the basis that there was no support for an entry in its accounts that reduced in recorded QST remittance obligation by $12,600, and then, on November 3, 2014, assessed Delia for this amount pursuant to s. 24.0.1 of the Tax Administration Act (the “TAA”) (similar to ETA s. 323(1) and ITA s. 227.1(1).)

In connection with finding (at para. 50, TaxInterpretations translation) that “the assessment of Motostar was completely void, having been made respecting a non-existent person without legal standing”), Cameron JCQ noted the contrast in wording between s. 306 of the Business Corporations Act (Quebec) (“QBCA”) (which did not apply to the type of dissolution engaged in by Motostar) and s. 313 (which did). Those provided:

306. Despite its dissolution, a corporation remains a party to any judicial or administrative proceeding to which it was a party before its dissolution, and a proceeding may be brought against it within three years after its dissolution.

313. As of the dissolution of the corporation, its rights and obligations become those of the shareholder, and the shareholder becomes a party to any judicial or administrative proceeding to which the corporation was a party.

Cameron JCQ stated (at para. 54) that under s. 313 (as contrasted to s. 306) “a fresh procedure is not permitted regarding a defunct corporation… .” Wesdome was distinguished on the basis that there, audit proceeding had already commenced by the time of the corporate dissolution. He further stated (at para. 61):

The situation is different in the case of a dissolution subject to Articles 306 and following of the BCA. In that situation, the Act provides for the possibility of initiating recourse against a corporation following its dissolution.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 323 - Subsection 323(3) there was no lack of diligence of the director in considering that the accounts accurately reflected no QST payable 367
Tax Topics - Income Tax Act - Section 227.1 - Subsection 227.1(3) director exercised due diligence in relying on the accuracy of company accounts 232
Tax Topics - Excise Tax Act - Section 323 - Subsection 323(1) assessment could be made of director for unremitted QST even though assessment therfor of dissolved corporation was void 340
Tax Topics - Income Tax Act - Section 152 - Subsection 152(1) dissolved corporation could not be assessed for QST assessed pursuant to an audit that commenced after its dissolution 205
Tax Topics - Excise Tax Act - Section 296 - Subsection 296(1) QBCA did not provide that audit or other proceedings could be commenced against a dissolved corporation 125

ARQ v. Wesdome Gold Mines Ltd., 2018 QCCA 518 (Queb. C.A.)

assessment issued in name of sub after its dissolution but also after its audit bound and was appealable by parent

Godbout J below had found that the assessment for each the two years of a corporation ("Wesdome") was invalid “as the Agency had not addressed such Notice of Assessment to the right legal entity,” given that the Notice was issued in the name of Wesdome shortly after its dissolution in voluntary dissolution proceedings for its winding-up into its sole parent. Levesque JCA found that such assessments were not void on this ground (although, as noted above, they were nonetheless to be reversed on the substantive CEE grounds). S. 313 of the Business Corporations Act (Quebec) provided that “As of the dissolution of the corporation, its rights and obligations become those of the shareholder, and the shareholder becomes a party to any judicial or administrative proceeding to which the corporation was a party.” He stated (at para. 70):

The dissolution of Wesdome was effected on March 14, 2011. This did not have the effect of obliterating the tax debt of Wesdome and of annulling the debt. That debt was assumed in conformity with B.C.A. section 313 by the respondent, the sole shareholder of the corporation that had ceased to exist.

This did not directly answer the point of Godbout J that the assessments had been issued in the name of the wrong entity (the dissolved sub rather than the parent). However, Levesque JCA had earlier stated that “the judge had concluded that an audit procedure was in progress at the time of its dissolution” (emphasis his).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 66.1 - Subsection 66.1(6) - Canadian exploration expense - Paragraph (f) - Subparagraph (vi) successful exploration from mine that had ceased commercial production did not extend a mine 582
Tax Topics - Income Tax Act - Section 152 - Subsection 152(1) a reassessment of a wound-up and dissolved sub bound its parent 403

Section 238

Cases

The Queen v. Sands Motor Hotel Ltd., 84 DTC 6464, [1984] CTC 612 (Sask QB)

The federal Crown was granted status as a complainant under the Saskatchewan equivalent of s. 238 of the CBCA.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 222 - Subsection 222(1) - Tax debt taxpayer insolvent in light of unassessed tax liability 104