Does an executor have authority to sell a family business?

An executor stands in the place of the person who died, and the CRA calls the person doing this the legal representative. What the executor can do with a family business depends on how it was held: as shares of a corporation, as assets owned personally or as a partnership interest. This page covers shares and the tax duties; the will and provincial estate law govern the rest.

Where the authority comes from

The CRA describes the legal representative as typically the executor named in the will, responsible for administering the estate. To deal with the CRA, the representative must provide a document naming the executor, such as the will, a grant of probate or letters of administration. Where there is no will or no named executor, certain individuals can apply to the courts to administer the estate. In Quebec the equivalent role is the liquidator.

If the estate holds shares in the company

Under the Canada Business Corporations Act, a corporation must treat the executor of a deceased shareholder as entitled to exercise that shareholder’s rights where its articles restrict share transfers, and may do so otherwise, once the executor furnishes evidence of appointment. Subject to any applicable law on the collection of taxes, the executor can become the registered holder, or designate one, by depositing the grant or letters, an affidavit and the share certificate. Ontario’s Business Corporations Act has a parallel rule for the executor, administrator or estate trustee.

Selling the business itself

Holding the shares gives the executor the deceased’s rights as a shareholder, not the directors’ power to manage the business. A sale of all or substantially all of a corporation’s property outside the ordinary course needs shareholder approval by special resolution, so what the executor controls depends on the size of the estate’s holding and the votes of other shareholders. Selling the shares themselves is a different transaction from the corporation selling its assets. Whether the will gives the executor further powers or restrictions is a question for the will itself.

Tax duties before proceeds are paid out

The legal representative must make sure the deceased’s tax returns are filed and any balance owing is paid before distributing the estate. The CRA says the representative can be held personally liable for tax owing if assets are distributed without a clearance certificate, which matters when a sale produces cash.