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Legal Ease
Legal Ease, Lawyer
Category: Canada Law
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Experience:  Lawyer
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Hello, I own 100% shareholder in a Limited company (LTD)

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Hello,
I own 100% shareholder in a Limited company (LTD) in BC (“XY”). I received an Arbitration Award that indebts the company by $50,000. I am unable to pay. The company has no revenues and no assets. Is my option best to close the company or file for bankruptcy? There are three Liabilities ‘on the books’. A debt owed to the company (A) and me as a shareholder and a debt owed by another company (B). I own both these companies as well (A & B), 100% shareholder. There are no secured liabilities between these companies. My accountant has informed me that closing the company “XY” would be simple and could be done immediately. How would the Supreme Court view this action? What is my best course of action and what risk and liabilities do I have?
Thanks!
Submitted: 9 months ago.
Category: Canada Law
Expert:  Legal Ease replied 9 months ago.
Thank you for your question.

Before I begin I want to explain a bit about how the site works.

It may be that I will find that I need to gather further information from you. As well, it's quite possible that you may feel the need to ask me additional questions for further clarification.Please do not worry that you will be charged additionally if I ask you questions or if you need to ask me questions. That is not at all how the site works.

As well, please understand that as a careful lawyer I will always give you an honest answer even if the answer is sometimes not what you were hoping for.

Finally, as we go through the process please do not feel rushed if I ask you a question. You are always free to take your time to gather more information before you post back. As well, please understand that even after you rate me the post will not lock and you could always come back for further clarification if you think of something a bit later on down the road.

If there are no assets in the corporation and the Judgment is against the corporation then it simply cannot be enforced.

There is no income to garnish. There are no assets to seize etc.

So there is really nothing stopping you from winding up the corporation.

If there are assets and you are moving them to another corporation taking them yourself that would be another matter.

Let me know if you need any further clarification.
Customer: replied 9 months ago.

  • Can I close the company XY or should I rather file bankruptcy?

  • If I close the company, could the Supreme Court come against me personally?

  • If I close the company “XY” or go into bankruptcy, can the Supreme Court mandate something against the other company “B” who owe money to XY (ie to force to pay, etc.)?

Expert:  Legal Ease replied 9 months ago.
If there has been a lawsuit already and the judgment has been rendered then the issue has been considered and it's done.

The only way you could be personally liable is if you transfer out assets from the corporation.

I don't see any reason to file for bankruptcy as there are no assets at all. And a bankruptcy costs money.

But you can see a Trustee in Bankruptcy for a consultation for free so perhaps do that and also discuss this with your accountant.
Customer: replied 9 months ago.

Thanks for the answer. Could you please also answer the question if I close the company “XY”, can the Supreme Court mandate something against the other company “B” who owe money to XY (ie to force to pay, etc.)?

Expert:  Legal Ease replied 9 months ago.
Was the other company sued before?
Customer: replied 9 months ago.

No there was never a lawsuit against the other company.

Expert:  Legal Ease replied 9 months ago.
Then if the other company owes money it can be sued for sure.
Customer: replied 9 months ago.

Thanks again.
Not sure I was very clear because of your question. Just that you understood right:


 


Company XY had an Arbitration and lost the case. Now XY has to pay $ 50,000. There is no assets and money in company XY. Only a liability owed by company B of $ 60,000 to XY.
XY owes me as a shareholder money of $ 100,000.



Would a Supreme Court goes after company B - even there is no 'secured liability' from B to XY - and collect the money from them?


 


Sorry about the confusion

Expert:  Legal Ease replied 9 months ago.
Sorry. I didn't quite understand that.

The Judgment cannot be enforced against B.

So they cannot go after B simply because B owes XY money.
Legal Ease, Lawyer
Category: Canada Law
Satisfied Customers: 85252
Experience: Lawyer
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