Winding Down A Business

There are 2 prominent initiatives driving consideration of winding down a corporation:

1. First, retirement/capitalization on investment; sale to third party; or
2. While still operating, a desire to reduce complexity and possibly to merge holding companies with operating companies to result in fewer tax filings and simplification of administration.

These types of initiatives frequently arise from family maturation, change in business plans or maybe even declining business.

But regardless, many enterprises have complex structures of “tiered” corporations frequently determined by estate planning or for the purpose of segregating potential liability. The relevance of these related corporations should be seriously considered before the desire to simplify prevails over better business structure planning.

It’s natural to think of simply “shutting down”. Simple as that may seem, that will not stop government filing requirements, costs to complete tax returns and continual notices from various levels of government, sometimes rather costly as the result of the failure to file.

So we’ve counseled clients to consider amalgamations between and among holding companies and operating entities to result in just one corporation and therefore just one set of filings. Continuing a corporate existence to take advantage of corporate tax rates/income splitting and banking relationships should be considered. It is not infrequent that corporate structures have been established in a multitude of jurisdictions necessitating the bringing of a corporation from one jurisdiction (say, for example, the federal jurisdiction) into the jurisdiction of another company (say, an Ontario company).

One must also assess the effect of an amalgamation relating to liabilities. Remember that whatever were the assets and liabilities of each pre-amalgamation corporation automatically become the assets and liabilities of the post-amalgamated corporation.

There are admittedly certain savings and tax benefits, but at the same time before simply proceeding, serious consideration should also be given to the liability component of the effect of amalgamation.
We’d be pleased to assist you in your consideration.

Joint Family Ventures

The phrase “joint family venture” is a relatively new concept developed by our Courts to address the circumstance in which life mates/husbands and wives/boy and girl carry on a business together and eventually have their relationship disintegrate.

It is not unusual to have mature mates have their personal relationship fall apart yet part of their personal relationship had been the operation of a business which one or the other or possibly both operated.

Invariably, in these business ventures, there is no documentation to record things like shareholders’ agreements, what happens if the parties split up or rights and obligations as between the parties. These are, frequently, the most vexing of issues either Family Law lawyers or Commercial lawyers face because there is no fall-back to any established procedure for resolution.

Example: Gentleman has his own business and together with is life mate establishes a second business. The life mate operates the second business while the husband carries on his venture. The secondary business is essentially 50/50 but the wife carries the bulk of the responsibilities for day to day operations.

The relationship falls apart. There is no provision for husband to buy out wife or vice versa or for that matter any resolution of the division of the secondary business. All expenditures of the household in previous years whether paid by one or the other of the mates is largely irrelevant.

In these cases, first and foremost, each mate may require clarification of their respective rights, primarily to assist in determining what their legal parameters are. Then, if communication can be had between the mates, the reasonable approach suggests trying to settle matters on your own. A Collaborative Family Law lawyer may be of great assistance. Recommendation: Verena Fraser at Feltmate Delibato Heagle.

Thereafter, recording the agreements reached is critical and each mate should get Independent Legal Advice before completion.

We’d be pleased to be of assistance.

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