A corporate will (sometimes called a secondary will) is a legal document that sets out the specific instructions for the distribution of a corporation's assets upon its dissolution or winding-up. In Ontario, corporate wills are governed by the Business Corporations Act (Ontario) (the "OBCA").
As a business owner you can have two wills - a personal and a corporate one. An important aspect of a corporate will is that it allows a corporation to have control over the distribution of its assets after it has been dissolved. Without a corporate will, the distribution of a corporation's assets would be governed by the OBCA, which can lead to unexpected or undesired results. With a corporate you will, you can name specific individuals, such as your spouse, or entities, such as a trust or another corporation, as beneficiaries of the assets. This can be particularly useful for closely held corporations where there are a small number of shareholders and the distribution of assets is particularly important to the ongoing success of the business.
A corporate will can also serve as a tool for estate planning. By setting out the specific instructions for the distribution of assets in a corporate will, a corporation can ensure that its assets are distributed in a manner that is consistent with its overall business strategy and goals. This can help to ensure the continuity and success of the corporation, even after its dissolution.
In addition, a corporate will can help avoid disputes among shareholders and other stakeholders. By setting out the specific instructions for the distribution of assets in a corporate will, the corporation can help ensure that there is a clear understanding of the administration of the assets and avoid disputes that can arise due to ambiguity or confusion.
It is important to note that a corporate will must be in compliance with the OBCA and should be created or reviewed by a lawyer with expertise in corporate law. It's also important to keep in mind that a corporate will is not a substitute for a personal will, and it's important to have both in order to ensure that your personal assets and your business assets are distributed according to your wishes.
Your personal will may need to be probated, while the corporate will is designed to avoid probate. This will allow you to transfer the shares to the beneficiary without being subject to probate tax which is calculated based on the fair market value of those shares at the time of death. The reduction in probate fees may be quite significant when you are able to include in the corporate will real estate property owned in Ontario.
In conclusion, a corporate will is an important tool for any corporation operating in Ontario. It provides a mechanism for controlling the distribution of assets upon dissolution and can be used for estate planning, avoid disputes, and provide for the distribution of assets to specific individuals or entities. It's crucial for businesses to have a corporate will to ensure that their assets are distributed in a manner that is consistent with their overall business strategy and goals.
To learn more about corporate wills and if you need one, please download the free Arra Law Firm app in the App Store or Google Play or email us at reception@arralawfirm.com.
