Companies can cease to be a qualifying company voluntarily or through an automatic process.
Companies can remove their qualifying company status by completing a revocation election. This election can be led by:
- a board of directors for directors’ elections
- any shareholders who previously elected for qualifying company status for shareholders’ elections.
When a company fails to meet one of the eligibility requirements, it automatically loses its QC status from the start of the income year in which the event occurred.
Companies may also lose their QC status when valid re-elections are not filed within the grace periods.
If a company loses QC status through a shareholding change and is eligible to re-elect, the re-elections should be filed as soon as possible. The company or a tax-agent should inform us of the event that stopped the company from being QC eligible.
A change of control for a QC will result in QC status being lost. Control is measured using a shareholder continuity test. The QC’s shareholders must maintain minimum voting interests.
Companies that do not meet QC status for an entire year will not be able to become a QC again.
Liquidating or winding up a QC
Once a company is removed from the Companies register it is technically no longer a QC. However, the QC will not necessarily lose its status just because the company has ceased. If the company is later restored, it will still be considered a QC if the eligibility requirements are still met.