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Why "good standing" is important for your BC company or society

With the real estate market being so hot these days in many parts of British Columbia, it's become more important than ever to understand why it's important to keep your British Columbia company in good standing. If you used your company to buy land, you can lose that land to the government if you don't keep up with your company's annual filings. The same considerations apply to societies that are incorporated in British Columbia -- all those charitable groups, religious and community organizations, and so on.
 

What does "good standing" mean?

Every British Columbia company is required to file a document called an "annual report" with the Corporate Registry every year. The document must be filed online. At present, the government charges a filing fee of $45 for the annual report. Some people do it themselves, and others do it through their registered office service. INC Business Lawyers provides registered office services to keep these filings and their supporting documents, the annual shareholder and director resolutions, up to date. (A similar requirement exists for societies, though there are differences in the details.)

As with most kinds of government filings, there are deadlines attached. Annual reports must be filed within 60 days of the company's date of incorporation in British Columbia. It is possible to file reports later than that, almost always without penalty. Technically speaking, not filing the annual report on time is an offence and could be penalized, but there are huge numbers of companies that don't file the report on time, and the sky doesn't fall.

Because there's no penalty for late filings, many people delay filing their annual reports, just to defer an unwelcome expense for a year or so. The trouble arises when your BC company falls two years behind in its filings. When that happens, the Corporate Registry eventually starts a process that will result in the company ceasing to exist if the annual report filings are not brought back up to date. Fortunately, the Corporate Registry allows several months of grace after the two year anniversary before they'll start this dissolution process, so many people can save their companies at that point.

But some companies aren't saved. Sometimes that's intentional, but other times it's inadvertant. Perhaps the company moved from its registered office location and didn't bother updating that information with the Corporate Registry (through filing a notice of change of offices, which costs about $22 to file). Or the annual report reminder document got buried on someone's desk.

A company or society that gets struck from the BC register of companies is dead. It no longer exists, though it can be restored. Many people learn their company was struck when they go to file their corporate income tax returns and those returns get bounced by Canada Revenue Agency because the company has been struck.
 

Losing Land by Escheat

BC companies or societies that have been dissolved can be restored for a period of 10 years after the date of dissolution. But, for the purpose of this article, the important thing to note is that at the date of dissolution all of the assets of the company, whether personal property or real property (land), pass to the British Columbia government. The technical word for this passing is "escheat" (and you may think it's cheating for the law to be written that way, but it is something every company owner should be aware of).

We'll focus on land in this article. If you can get your company restored within two years from the date of dissolution, then there's no problem. Section 4 of the Escheats Act provides automatically that land owned by the company at dissolution will be automatically restored to any company that's revived within two years from dissolution. The Escheats Act also says that the government can't deal with the property for that first two years.

However, where more than two years have passed, then the procedure to restore your company (or society) will be more involved. At this point, the Escheats Act gives you two choices:
 

  1. If you're still within the 10 year window for restoration, most BC companies will be able, and want, to follow this first option. In general, the procedure here is to serve the government with legal notice of the court application to revive the company and then go to court to have the application dealt with. The Escheats Act empowers the court to make an order that restores the land to the company or society. The Act does, however, require the court to include in that order any costs that the government was put to by reason of the escheat of land. To restore a society, you'll be going to court anyway, so this extra part of the order doesn't mean a great deal of extra work. For BC companies, though, there would be some extra work, because under the new Business Corporations Act most restorations can be done without a court order.
  2. The second procedure available under the Escheats Act to obtain escheated land back from the government is to apply directly to the Cabinet of the provincial government. In order to do this, you'll need to follow the procedure and provide the information that the Escheats Office requires. They're located in Victoria, and will readily provide a memo setting out what is needed. In general terms, your corporation will need to be able to provide clear evidence that it actually owned the land, supported by affidavits from directors of the company. This procedure typically takes longer than the first procedure. It can be used within the 10 year window for revival of a BC corporation, instead of the first procedure, but it's main benefit is that it can also be used after the 10 year window has closed, when it will be impossible to revive the corporation.

INC Business Lawyers has processed many restoration applications. And, sad to say, we're getting experience now in the Escheats Act when it comes to recovering land for a dissolved BC corporation or BC society. If your company or society has fallen into this kind of trouble, please drop us an e-mail or give us a phone call, and we'd be pleased to help you out.

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