The taxpayer in this case was assessed for his corporation’s payroll remittance failures. He argued that he was protected by the two-year limitation period in ITA s. 227.1(4). He said that when the CRA assessed him in 2010 he had ceased to be a director more than two years earlier when: (a) the corporation made a bankruptcy assignment in February 2003 and the trustee was appointed because he lost his powers as director in favour of the trustee; (b) in May 2005, Quebec struck the corporation’s name from the register of businesses; or (c) the trustee was discharged in April 2007, at which time, the taxpayer said, the corporation ceased to exist. (See ¶9.) Chief Justice Rip rejected each of these events as points when a director loses his status as director.
First, a director does not lose his post simply because of the bankruptcy of the corporation. (See ¶11 and Kalef v. R, [1996] 2 C.T.C. 1 (FCA).) Second, the Quebec register of businesses is not the incorporating statute. So, though being struck from the register can impact the corporation’s ability to carry on business in Quebec, it doesn’t dissolve a corporation incorporated under the Canada Business Corporations Act. (¶13.) Last, the bankruptcy of a corporation and discharge of its trustee does not, according to the Chief Justice, cause the dissolution of the corporation. Had the corporation been properly dissolved under the CBCA, Mr. Jobin “would have ceased to be its director”. (¶17, my tranlsation.)
From this decision, one might conclude that to protect yourself from directors’ liability, if you bankrupt your corporation, you should also submit to the trustee your resignation as a director at the same time.