No Longer Open for Business. Now what?
Your business had a good run but now you have closed the doors for good. This may have happened for various reasons like poor market conditions, an unforeseen event, personal health or even the Big-Box competitor that has moved into the neighborhood. Is it time to consider a business bankruptcy?
This leaves you with a myriad of questions like: how does the corporation make final payroll?; what happens with the assets?; and how do we pay the creditors and our landlord? All tough questions but your Licensed Insolvency Trustee may have the solution,
How does a business bankruptcy impact the employees?
For the employees that have been left short, there is an advantage to bankrupting your corporation. Legislature created an act called the Wage Earner Protection Plan Act (WEPPA). Under WEPPA, and in conjunction with the Bankruptcy and Insolvency Act, employees may be able to receive a portion, if not all, of their unpaid wages. Time is of the essence though as there are time restrictions in play.
What happens to the assets in a business bankruptcy?
Do you keep the business assets, sell them or leave them? A licensed Insolvency Trustee will be able to answer these questions for you. The answers will depend on the kind of debt that the corporation has accrued and how much. Certain creditors will have security interest over the assets, a super priority or other rights under provincial legislation – like your landlord. Time is of the essence here as well as the longer you wait, the more inclined that your landlord may seize the assets and sell them to pay for rent arrears. If the assets are unencumbered, your Licensed Insolvency Trustee can liquidate them during a bankruptcy proceeding and use those proceeds to pay for the administration of the bankruptcy, saving you the cost.
What do we do with the creditors in a business bankruptcy?
Creditors are calling and the landlord has commenced legal actions. Can this be stopped? Bankrupting the corporation will stop legal proceedings against the corporation and stop the phone calls. Generally speaking, creditors will get very little money, if any, from the bankruptcy proceeding but at least the calls and legal proceedings will stop and the creditors will also get closure on their end.
If the business is bankrupt, how will I be impacted?
What does this all mean for the individual who owns and ran the shop?
On the positive side, there may be tax advantages from investment losses that could produce a personal income tax refund. This refund may be worth more than what you may have paid to bankrupt the corporation. Your obligations to file corporate income tax returns will also cease, not that filing nil returns is all that miserable. Most importantly though, you will also have closure on the matter and be able to move forward in your future endeavors.
On the negative side, you may be responsible for some of the unpaid corporate debt. Corporate debts that you have personal guaranteed or director liability claims (source deductions and HST) will flow to you on a personal level. This may lead to a personal insolvency filing (bankruptcy or proposal).
Does this sound like a similar situation or do you have more questions?
If so, please feel free to contact us or check us out on our website.