The Ontario Ministry of Government Services (MGS), it appears, seems to believe that the sole director of a corporation cannot resign and leave the corporation without directors. The MGS will refuse to amend the public record for a corporation to show that it doesn’t have any directors if the sole director attempts to resign.
It’s an odd position to take given that the Business Corporations Act (Ontario) (OBCA) clearly contemplates the possibility that a corporation might be left without directors. Subsection 115(4) of the OBCA provides that
[w]here all of the directors have resigned or have been removed by the shareholders without replacement, any person who manages or supervises the management of the business and affairs of the corporation shall be deemed to be a director for the purposes of this Act.
In Goicoechea v. The Queen, 2010 TCC 539 (informal procedure), a director liability case, the Tax Court seemed to accept that the corporation had been left without a director even though the evidence did not clearly establish when (or whether) a “first shareholder meeting” had been held and even though the taxpayer seemed not to have told the CRA about the resignation until rather late in the dispute resolution process.
Unfortunately for Mr. Goicoechea, he was caught by subsection 115(4) of the OBCA because, according to the court, it doesn’t take much to be considered to manage or supervise the management of the business and affairs of the corporation:
[21] No reference was made to any specific action undertaken by the Appellant on behalf of the Corporation after May 3, 2004 [the putative resignation date], but it appears reasonable to assume that some actions, albeit minimal perhaps, must have been taken by the Appellant, actions such as communicating and meeting with CRA officials to help them with the collection of the amounts due, making claims against the franchisor for the failure to remit the source deductions and against the former employees for the theft of inventory, making reports to the police and to the insurer concerning the missing inventory, taking steps with a view to the settlement of the bank debt and the landlord’s and other third‑party claims, etc. Such actions could in many cases have taken several months to complete.
[22] The Appellant has not shown that he did not take any actions on behalf of the Corporation after May 3, 2004 or that the Corporation was dormant or completely inactive. In the circumstances, I consider that the Appellant is deemed to have been a director of the Corporation after May 3, 2004 by virtue of subsection 115(4), and consequently, the two‑year limitation period in subsection 227.1(4) of the Act does not protect the Appellant from liability under the reassessment.
