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Payroll withholdings — directors' liability (company dissolved)

My clients were two directors of a small company which was dissolved by the province in January 2008 for failing to file certain provincial forms. Two years later, in March 2010, the CRA proposed to assess the directors for the company's unremitted source deductions (payroll withholdings). They came to me for help.

I wrote to the CRA official to explain that since the company had been dissolved for more than two years, the directors could no longer be assessed. I cited authoritative case law, as well as CRA interpretation, confirming that once a company is dissolved, its directors cease to be directors and the two-year clock starts running beyond which they cannot be assessed. I also explained how my clients had acquired a right not to be assessed, and that the Business Corporations Act would allow them to successfully contest any attempt by the CRA to revive the corporation in a way that would make them liable.

Before coming to me, each of my clients had also signed an agreement with the CRA official, permitting the CRA to transfer their personal income tax refunds to the company's payroll arrears. I explained in my letter to the CRA that this agreement should not have been signed and was likely invalid under the Financial Administration Act, and that my clients were revoking their agreement on this issue.

The CRA official contacted me to confirm that my clients would not be assessed and that the "agreement" they had signed regarding their personal income tax refunds had been destroyed.

Problem vanished!

(2010)