If your small corporation took a CEBA loan during the pandemic and the business never recovered, you are not alone. Many owners now find themselves with a dormant or inactive corporation, no assets, outstanding CEBA debt, and a desire to wind everything down safely and legally.
The challenge is simple: you cannot complete a voluntary dissolution if the corporation still has outstanding liabilities, including an unpaid CEBA loan. So what are your options? Below is a clear, practical summary of what Canadian business owners can do.
1. You cannot do a voluntary dissolution if the CEBA loan is unpaid
Under the Canada Business Corporations Act, voluntary dissolution requires two things:
• All liabilities paid
• All property distributed before Articles of Dissolution are filed
If your corporation still owes CEBA, you do not meet these requirements. That means you cannot use the voluntary dissolution process.
2. You do not need to declare bankruptcy
Bankruptcy is often unnecessary. If your corporation has no assets and no ability to repay CEBA, bankruptcy will not benefit you, and it comes with cost and administrative work.
There is a simpler path.
3. Administrative dissolution is the practical solution
When a corporation stops filing its annual return with Corporations Canada, the government can dissolve it through a process called administrative dissolution.
It normally works like this:
• You stop filing annual returns
• After about 1 to 2 years, Corporations Canada sends a notice
• If nothing further is filed, the Director issues a Certificate of Dissolution
This route is free, avoids bankruptcy expenses, and is commonly used by inactive corporations with no assets.
Once the corporation is dissolved, CRA will close the T2 tax account once it receives the Certificate of Dissolution and Form RC145.
4. You should still file a final T2 return
Even though the corporation is not dissolved yet, the CRA allows you to file a final T2 return. For example, you can check “Yes final return up to dissolution” on the return.
CRA will accept it, but the tax account stays open until dissolution actually occurs.
If administrative dissolution takes longer than expected, you may need to file Nil T2 returns so CRA does not issue arbitrary assessments.
5. You must address statutory remittances before walking away
This is critical.
Directors can become personally liable for certain unpaid tax remittances:
• Payroll source deductions
• GST or HST
This liability lasts for two years after a director resigns.
You must confirm these are paid before resigning as a director. However:
• CEBA debt does not create personal liability
• CEBA is a corporate loan only, unless fraud or misuse occurred
This means that an unpaid CEBA loan alone does not follow you personally.
6. Notify creditors and close accounts
Before stepping away, most corporations:
• Notify the bank that administered the CEBA loan
• Notify any private lenders
• Disburse remaining corporate funds to pay small outstanding expenses
• Close the business bank accounts
• File final GST or HST returns
• Resign directors after statutory taxes are paid
These steps demonstrate that the corporation is not hiding assets or preferring one creditor over another.
Bottom line
You cannot dissolve a corporation voluntarily if the CEBA loan is unpaid.
But you can wind down the business safely through administrative dissolution, provided you handle tax remittances properly and follow the right steps.
If you are in this situation, a lawyer can help confirm the correct approach and prepare director resignations and notices so you stay protected.