I am close to filing or being petitioned into bankruptcy. I also am the director and sole shareholder in a private corporation. All the debts in question are personal and not corporate. The corporation has never had any income and has been mostly dormant over the last 2 years. The company does however owe money to a couple friends of mine. If I file bankruptcy, can I hand over my shares in the company to these two friends or must I dissolve the company? Would the debtors try to dissolve the company or take over the company. There is a slight chance the company could make its first sale over the next few months. Should I get rid of these shares before I file bankruptcy, I would sell them to these two friends for a dollar?

If you have shares in a corporation while in bankruptcy your Trustee will need to see the financial statements to verify that there is no value to the shares. If you transfer the shares immediately prior to the bankruptcy the Trustee must determine that they were sold at fair market value and not given away to avoid having their value made available for creditors. The corporation shouldn't have to be dissolved. While an undischarged bankrupt, however, you cannot be the director of a corporation.

Ann Clarke
phone: (403) 296-2972
aclarke@moneyhelp.ca