In this decision, the Attorney General of Canada sought to revive a dissolved Alberta corporation to allow for the issuance of a notice of assessment. The Court of King's Bench of Alberta held that the Attorney General had standing to revive the corporation as an "interested person" and there were no limitation concerns with such revival.

Background

The Canada Revenue Agency (CRA) had audited 1835898 Alberta Ltd., formerly known as Whitecap Energy Inc. (Whitecap Energy), a wholly owned subsidiary of Whitecap Resources Inc. (WCP), for its 2013 and 2014 taxation years (the First Audit). Pursuant to the First Audit, CRA seemingly verified Whitecap Energy's allowable capital losses (the Tax Losses) under the Income Tax Act (Canada) (the Tax Act), which were carried forward and claimed by Whitecap Energy in its 2017 and 2018 taxation years. Whitecap Energy was wound up and dissolved in 2020, whereby all of its assets and liabilities were transferred to WCP.

Notwithstanding the First Audit, the CRA subsequently audited Whitecap Energy for its 2017 and 2018 taxation years and its claim of the Tax Losses in those years (the Second Audit). CRA has proposed to issue notices of reassessment (the Proposed Reassessments) against Whitecap Energy and presumably deny its claim of all or part of the Tax Losses. The Proposed Reassessments may not be issued against Whitecap Energy until it has been revived. For this purpose and on behalf of CRA, the Attorney General of Canada (the AG) made an application (the Application) to the Court of King's Bench of Alberta (the Court). WCP objected to the Application on the basis that the AG lacked standing to revive the corporation under the Business Corporations Act (Alberta) (the ABCA).

Issues and decision

The primary issue before the Court was whether the AG qualified as an "interested person" under section 206.1 of the ABCA. Paragraph (a) of section 206.1 provides that an interested person includes a creditor of a dissolved corporation. Paragraph (d) of section 206.1 provides that an interested person includes a person so designated as an interested person by an order of the Court.

The Court highlighted a technical problem in this case: the AG could not be considered a "creditor" of Whitecap Energy until the Proposed Reassessments were issued, but the Proposed Reassessments could not be issued until Whitecap Energy was revived. As such, the AG could not rely on s. 206.1(a) of the ABCA to be considered an "interested person" for the purposes of reviving Whitecap Energy pursuant to s. 208 of the ABCA. The AG required the Court to designate the AG as an "interested person" under s. 206.1(d) of the ABCA so the AG could apply to have Whitecap Energy revived, which would allow the CRA to issue the Proposed Reassessments.

Judge W.S. Schlosser analyzed the power of the Court to designate someone as an interested person under s. 206.1(d) of the ABCA. Noting there were no precedents directly addressing this matter, the Court determined the designation of an interested person is discretionary and should be exercised judiciously and for a legitimate purpose.

The Court held that the AG had a valid interest in the revival of Whitecap Energy. The valid interest was the conversion of Whitecap Energy's tax liabilities for its 2017 and 2018 taxation years, which arose when taxable income was earned in those years, into tax debts payable to the AG, which would not arise until the Proposed Reassessment were issued. As noted above, this conversion could not occur until Whitecap Energy was revived.

The Court went on to address whether there were any limitations on the Court's power to revive a dissolved corporation. Section 227 of the ABCA permits a person with a claim against a dissolved corporation to sue a shareholder of the dissolved corporation who has received corporate property, but the person must do so within two years of the dissolution of the corporation. The AG noted they did not intend to pursue WCP under s. 227 of the ABCA. The AG indicated they intended to pursue WCP under s. 160 of the Tax Act, which does not have any limitation period.

In allowing the AG's application and reviving Whitecap Energy, the Court noted that any battle on the merits of the Proposed Reassessments and WCP's liabilities for any of Whitecap Energy's tax liabilities would be waged at the Tax Court of Canada.

Conclusion

This decision clarifies the standing of the AG in seeking the revival of a dissolved corporation, notwithstanding the AG not yet being a creditor of the dissolved corporation. The Court used the discretionary power afforded to it in s. 206.1(d) of the ABCA to designate the AG as an "interested person." This designation gave the AG the ability to apply to the Court to have Whitecap Energy revived, thus allowing the CRA to issue the Proposed Reassessments. Once the Proposed Reassessments are issued, CRA may then issue notices of assessment (pursuant to s. 160 of the Tax Act) against WCP in respect of Whitecap Energy's unpaid tax debts resulting from the Proposed Reassessments.

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