Section 88 Windup Agreement: What You Need to Know
A Section 88 windup agreement is a legal process that allows a company to voluntarily wind up its affairs and dissolve the company. It is a way for a company to close its operations and avoid the expenses and liabilities associated with keeping the company open.
In Canada, Section 88 of the Canadian Business Corporations Act (CBCA) sets out the rules and procedures for a windup agreement. The CBCA applies to all federal corporations in Canada, and many provinces have similar legislation that applies to provincially incorporated companies.
Why Windup a Company?
There are many reasons why a company may choose to wind up its operations, but most commonly it is because the company is no longer profitable or viable. The company may have lost its competitive edge or faced financial difficulties that cannot be resolved. Alternatively, the owners may wish to retire or move on to other ventures.
Whatever the reason, a windup agreement is a way to close the doors on a company that is no longer viable and move on to new opportunities.
The Windup Process
Before a company can enter into a windup agreement, it must first obtain the approval of its shareholders. The company must hold a special meeting of shareholders, where the shareholders will vote on whether to wind up the company.
If the shareholders approve the windup, the company will then appoint a liquidator to wind up its affairs. The liquidator is responsible for selling the company`s assets, paying off its liabilities, and distributing any remaining funds to the shareholders.
During the windup process, the company must also notify its creditors and provide them with an opportunity to make a claim against the company`s assets. Once all the company`s assets have been sold and its liabilities paid off, the remaining funds are distributed to the shareholders in accordance with their shareholdings.
Conclusion
A Section 88 windup agreement is a legal process that allows a company to close its operations and dissolve the company. It is a way for a company to avoid the expenses and liabilities associated with keeping the company open and move on to new opportunities.
If you are considering a windup agreement, it is important to seek professional legal and financial advice to ensure that you are aware of all the legal and financial implications of the process. With proper guidance and planning, a windup agreement can be a strategic way to close the doors on a company that is no longer viable and move on to new ventures.
