Recently in the Supreme Court of B.C. a decision was released, Higginson v. R.T.D. Enterprises Ltd., regarding a court ordered liquidation and dissolution of a Company.  In this case two brothers, Reggie and George Higginson were the only directors of a British Columbia Company, R.T.D. Enterprises Ltd. (the “Company”) which was incorporated in 1987. Reggie and G&L Bulk Sales Ltd. (another company owned by George Higginson), were the only shareholders in the Company with each holding 150 voting shares.

George applied to the court for the Company to be dissolved pursuant to s. 324 of the Business Corporations Act, (the “Act”).

The Company had been used by the brothers to purchase lands in Golden, British Columbia (the “Property”).  From 1994 to 1995 George and Reggie operated a business from the Property called Bumper to Bumper.  After George left the business in 1995 Reggie operated a business on the Property called “Reggies’s Garage”.

In 2010 George found out that Reggie was selling the Property for $650,000.00.  After approaching his brother to ask about the details Reggie told George of various debts that the Company owed that had to be paid out prior to the shareholders receiving anything from the sale.  These debts apparently included funds owing to Reggie.  When the Property was sold the brothers agreed that some debts could be paid out from the sale proceeds, they both received a small portion of the funds and the remaining funds amounting to $441,811.82 were held in a solicitors trust account pending the resolution of their dispute.

A chartered accountant was hired to determine if the Company was indebted to Reggie, however, Reggie was not forthcoming with all of the information that the accountant required.  George then decided to apply to the court for an order that the Company be liquidated and dissolved pursuant to the Act.

An order for liquidation and dissolution may be granted by the Court when there is an event that occurs that triggers the liquidation of the Company, or, if the Court otherwise determines that it is “just and equitable” to liquidate the company.  In this case, because the main asset of the Company was now cash and there were no plans for the brothers to continue in business with the company (N.B. as they were no longer speaking to each other), the Court decided that it would be just and equitable for the Company to be dissolved.

What were the benefits of George obtaining an order for liquidation and dissolution?  In this case, it can be assumed that George decided that liquidation and dissolution would be the most efficient way to liquidate and distribute the assets owned by the Company to the Shareholders as the brothers could not agree as to where the remaining funds should be paid.

The Court appointed a liquidator to liquidate the company.   The liquidator would follow the statutory liquidation process, satisfy any creditors accounts, pay out the remaining funds to the shareholders and have the Company dissolved.

It is not very common to apply to the court to dissolve a Company and it should be noted that there are other options available.  However, in this case, because the brothers could not reach an agreement between themselves and were at a stalemate, this was the remedy that George chose to pursue.