
Legal Blog
Corporate Death
We have discussed the death of a corporation before: see June 1998 newsletter.
If a corporation does not live up to its obligations (e.g. file tax returns), it may be dissolved pursuant to section 241 of the Business Corporations Act. If it is dissolved, all is not lost. Under section 241(5) of the Act, an interested person, within five years of the dissolution date, may apply to revive the corporation. The Director under the Act may revive it subject to whatever terms and conditions the Director may impose. If the corporation is revived, it is restored to its legal position as of the date of its dissolution in the same manner as if it had not been dissolved, subject to any rights that any person acquired after the corporation’s dissolution.
Section 242(1)(b) allows a person to commence an action against the dissolved corporation as if it had not been dissolved. We assume that there is a reason to bring an action, but these reasons do not readily come to mind. Perhaps it might be important if the person seeks to establish an underlying debt before that person then turns his sights on another person for the now proven underlying debt.
What happens when a person brings an action against a dissolved corporation? Can the dissolved corporation defend the action? This was discussed in Malamas v. Crerar Properties Corp. 2010 CarswellOnt 3435 (Div. Ct).
Reciprocal
The simple answer to the question is yes. Both the motions judge and the Divisional Court judge refusing leave to appeal agreed that a dissolved corporation could defend the action. They felt that it was implicit in section 242(1)(b) that if a dissolved corporation could be sued, then that corporation could defend.
In any case, by the time that the matter had been dealt with in the Divisional Court, the corporation had been revived and the matter became moot.