The lesson here is not to make all of your family members directors. Many directors find out about this after the corporation already owes money for these debts and cannot repay the debts. It is also important to understand that a director (member of the board of directors) of a corporation is jointly and severally liable for 100% of the unremitted HST and unremitted payroll source deductions of a corporation, including penalties and interest. Debts for unremitted payroll source deductions have a special status and can be difficult, but not impossible to deal with.
For instance, income tax debts and debts for unremitted HST have no special status under the BIA (in bankruptcy or a proposal) and are unsecured claims no different than a credit card debt or an unsecured debt owing to a supplier. That is not necessarily the case, particularly when an individual goes bankrupt or files a proposal under the provisions of the Bankruptcy and Insolvency Act (“BIA”). Many people believe that debts owing to CRA will never go away. In addition, if you transfer assets to related parties while you owe money to CRA, the related party could become liable for your debts to CRA.
Registration of such a judgment by CRA will typically prevent or complicate your refinancing or selling your house or getting any new financing such as for a car. This judgment can then be registered against any real estate you own and can also be registered under the Personal Property Security Act which then gives them a charge or lien on all of your non-real estate assets. They can also issue a judgment without actually going to Court. CRA can issue an RTP to your employer to garnish wages, to a pension plan (including CPP) to garnish pension income, to a customer to capture payment of an amount due or to your bank to capture the balance of your account and whatever deposits are made after the RTP is issued. The most common is a garnishment more accurately called a requirement to pay or “RTP”. CRA debts can be for personal or corporate income taxes and, where a business is involved, for unremitted HST (HST collected on sales net of HST paid on supplies) and unremitted payroll source deductions (amounts withheld from employees for income tax, Employment Insurance premiums and Canada Pension Plan premiums).ĬRA has some significant legislated powers to collect debts.
The Canada Revenue Agency (“CRA”) is a common creditor for individuals, unincorporated businesses and corporations.