Section 4: Business Challenges and Dissolution of a Business

Involuntary Dissolution

Involuntary dissolution implies a dissolution that is normally initiated by the Registrar of Companies. The Business Corporation Act sets out the reasons for which such action may be taken. For instance, the Registrar may dissolve a company for the following reasons:

it has not begun business within three years after the date shown on its Certificate of Incorporation
it has not carried on business for any three consecutive year period
it has not filed any necessary government forms for one year

Businesses should be aware of the above factors, especially the last one, so that the Registrar does not unnecessarily dissolve their business.

Business contracts which are under dispute often are settled in the Civil Division of Provincial Court, as it hears cases where the amount involved is up to $5000.00.

Bankruptcy

The bankruptcy process recognizes the fact that a debtor's position can reach a point where it would be unreasonable to expect them to ever be able to meet all of their obligations to creditors. Bankruptcy is designed to minimize the negative impact of this situation for both the debtor and the creditor.

The Bankruptcy and Insolvency Act provides a uniform system to deal with this problem. The objectives of bankruptcy are to arrive at a reasonable and fair distribution of a debtor's assets among creditors, and to allow the debtor to resume business activity. In doing so, the Act provides protection to the debtor against any arbitrary actions of creditors.

Summary

Bankruptcy provides a viable alternative to businesses that find themselves entangled in a financial nightmare. However, the bankruptcy process itself involves a number of technically precise procedures and, therefore, the expertise of professionals in this field is a necessity. Businesses end for a variety of reasons. Among other factors, the form of business ownership plays an integral role in determining the requirements of its closure.

Legal Studies 3050 Summary

CONGRATULATIONS!

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