The Compulsory Cooperative Dissolution Process: Procedures and Guidelines

In the world of cooperatives, dissolution is a significant and often complex process. It marks the legal termination of a cooperative, effectively ending its existence. This article delves into the intricacies of dissolution, outlining the requirements, approval processes, and necessary documents while shedding light on the effects of dissolution. Let's explore the effect of dissolution on a cooperative in detail. What does the term 'compulsory cooperative dissolution process' mean? ACC Group will address your question. 

I. What does the compulsory cooperative dissolution process entail?

A compulsory cooperative dissolution process refers to the forced or involuntary termination of a cooperative organization. This typically occurs when certain legal or regulatory conditions are met, and it is initiated by an external authority or entity rather than by the cooperative members themselves.

II. What is Dissolution?

Dissolution is the legal termination of a cooperative. In other words, dissolution is the act of ending the existence of a cooperative. A cooperative is dissolved when Corporations Canada issues a Certificate of Dissolution.

III. Requirements for Dissolving a Cooperative

Before a cooperative can embark on the dissolution journey, several requirements must be met.

No Property or Liabilities

A cooperative can apply to dissolve when it has no property or liabilities, unless the cooperative is bankrupt or insolvent. It's important to note that bankruptcy doesn't automatically end a cooperative's existence.

Bankrupt or Insolvent Cooperatives

If the cooperative is bankrupt or insolvent, it cannot apply to be dissolved under the Coop Act. For more information on this topic, refer to the section on Bankrupt and Insolvent Cooperatives.

IV. Approval of the Dissolution

The dissolution of a cooperative requires approval, and the process varies depending on the cooperative's circumstances.

Dissolution with Members

If the cooperative has members but no property or liabilities, members can approve the dissolution by special resolution. This step is crucial in the dissolution process.

Dissolution with Investment Shares

In cases where the cooperative has issued investment shares, each class of shares must pass a separate special resolution to authorize the dissolution, even if these shareholders aren't typically entitled to vote.

V. Dissolving a Cooperative with Property or Liabilities

Dissolving a cooperative that owns property or has liabilities is a more intricate process. There are two distinct approaches to handle this situation.

Liquidation Before Dissolution

Cooperatives can pass a special resolution authorizing the directors to distribute any property and discharge any liabilities in accordance with the cooperative's articles and the Coop Act's requirements. Special resolutions for each class of shareholders are required if investment shares are involved.

Starting the Dissolution Process Before Liquidation

Cooperatives that will cease their business operations during the liquidation process can apply for a Certificate of Intent to Dissolve. This stage requires special resolutions for both the liquidation and dissolution, even if investment shares are present.

VI. Post-Issuance of Certificate of Intent to Dissolve

After receiving a Certificate of Intent to Dissolve, the cooperative must adhere to specific requirements.

Notice to Creditors

The cooperative must notify its creditors of the intent to dissolve.

Liquidation and Discharge

It must perform all necessary acts for the liquidation of property and discharge of liabilities according to the Coop Act.

Distribution of Property

The cooperative is required to distribute its remaining property among the members and shareholders, respecting their respective rights as per the articles and provisions of the Coop Act.

VII. Applying for a Certificate of Dissolution

Upon completing the liquidation process, the cooperative can proceed to apply for a Certificate of Dissolution. To obtain a Certificate of Dissolution, you must complete and sign Form 3017 – Articles of Dissolution and send it to Corporations Canada. In certain circumstances, a cooperative may decide to reverse the dissolution process.

To stop the dissolution process, a cooperative must apply for a Certificate of Revocation of Intent to Dissolve by submitting a completed and signed Form 3019 – Statement Intent to Dissolve or Revocation of Intent to Dissolve to Corporations Canada. If a Certificate of Dissolution has already been issued, it's not possible to revoke it. However, revival offers a chance for a dissolved cooperative to be restored to its previous legal position. To initiate the revival process, you must complete and sign Form 3015 – Articles of Revival and send it to Corporations Canada.

VIII. Bankrupt and Insolvent Cooperatives

Bankrupt and insolvent cooperatives face different scenarios when it comes to dissolution.

In conclusion, the dissolution of a cooperative is a significant legal process that must be approached with precision. Meeting the requirements, securing approval, and completing the necessary paperwork are crucial steps in this journey. Cooperatives must carefully consider their financial situation, property ownership, and liabilities before embarking on the path of dissolution.

FAQs

1. Can a cooperative be dissolved if it is bankrupt?

No, a bankrupt cooperative cannot apply for dissolution. It can only be dissolved under specific circumstances. Refer to the section on Bankrupt and Insolvent Cooperatives for more information.

2. How do members approve the dissolution of a cooperative?

Members can approve the dissolution by special resolution, provided the cooperative has no property or liabilities. The process may vary if investment shares are involved.

3. What is the difference between liquidation before dissolution and starting the dissolution process before liquidation?

Liquidation before dissolution involves distributing property and discharging liabilities before applying for dissolution. Starting the dissolution process before liquidation allows the cooperative to apply for a Certificate of Intent to Dissolve while in the process of liquidation.

4. Can a dissolved cooperative be revived?

Yes, under certain conditions, a dissolved cooperative can be revived, restoring it to its previous legal position. Refer to the section on Reversing a Decision to Dissolve for details