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Office of Support Enforcement - How Unpaid Support Obligations May Affect Corporate Liability

What is the Office of Support Enforcement?

The  Office of Support Enforcement (OSE) is a part of the New Brunswick Department of Justice and Consumer Affairs. Its goal is to promote a dependable flow of support payments. OSE focuses on helping parents support their children. OSE monitors and enforces support orders and agreements filed with the service by:

  • receiving payments from the Payer (the person paying the support);
  • keeping records of payments that are made;
  • forwarding the payment to the Beneficiary (the person receiving the support);
  • taking steps (when necessary) to ensure the Payer makes the required payments.

What is a ‘corporation’?

A corporation is an organization whose member(s) have chosen to formalize their relationship according to certain requirements set out in law. A corporation has a separate legal entity that is different from the legal status of the members. Corporations can sue and be sued in their own right.

What is Corporate Liability for Support?

Corporate liability for supportmeans that if you (the payer) have an order to pay support, a corporation you or your immediate family owns or controlsmay become responsible for your unpaid support obligations (arrears). If the corporation becomes liable, OSE may start enforcement action against the corporation. For example, OSE may report the corporation to a credit reporting agency or it may require anyone who owes the corporation money to pay it directly to OSE.

Once the corporation ismade liable under the Support Enforcement Act (SEA), you and your corporation will be legally responsible to pay the full amount owing in arrears and on-going payments under the support order.

Under what circumstances can OSE hold a corporation liable for support?

The Support Enforcement Act (SEA) has specific provisions that allow OSE to hold a corporation liable for your family support payments if your support order is filed with OSE and you do notmake full payments as ordered by the Court.

If you own a corporation: Section 28 (SEA) allows OSE to take steps to hold the corporation liable when:

  • you are the only shareholder and the only person with a beneficial interest in the corporation and
  • you have not made full payment as ordered by the Court and
  • the amount of money owing in arrears is more than 2 months of support payments.

If you have a controlling interest in a corporation: Section 29 (SEA) allows OSE to take steps to hold the corporation liable when

  • you, or you and your immediate family, hold enough shares to elect 50% or more of the directors of the corporation or otherwise control the operations of the corporation, and
  • you have not made full payment as ordered by the Court and
  • the amount of money owing in arrears is more than 4 months of support payments.

The Support Enforcement Act (SEA) has specific provisions that allow OSE to hold a corporation liable for your family support payments if your support order is filed with OSE and you do notmake full payments as ordered by the Court.

What steps must OSE take to hold a corporation liable for support payments?

The steps OSE must take to hold a corporation liable differ depending on whether you, the payer, own the corporation entirely or have a controlling interest in the corporation.

If you own a corporation: Under Section 28 (SEA), which applies to corporations where you are the sole shareholder and beneficiary, OSE does not need to go to court to make the corporation liable. OSE may simply serve the corporation with a notice of the amount you owe in arrears on the support order and a statement that the corporation is “jointly and severally liable” with you for the amounts owed.

If you and/or you and your family have a controlling interest in a corporation: Under Section 29 (SEA), which applies to corporations that involve more than one shareholder or beneficiary, OSE must obtain a court order to hold the corporation “jointly and severally liable”.  OSE must serve a Notice of Claim informing the corporation that it intends to seek an order from the court to hold the corporation liable. The Notice gives the corporation 30 days to make arrangements to comply with the order, or to persuade the payer to personally make the payments he or she owes.

If the corporation does not make satisfactory arrangements with OSE within the 30 days, OSE will proceed with the application to the court for an order to hold the corporation liable for the support you owe.

What does it mean to be“jointly and severally liable”? It means the corporation and you personally are equally responsible for the amount of money you owe on your support payment. It allows OSE to take action against you, the corporation, or both to enforce payment.

Must OSE try to enforce family support orders with me personally before it can hold the corporation liable?

OSE can choose to use enforcement measures against you personally, against the corporation, or both. OSE does not have to exhaust all the enforcement options against you personally before they can use enforcement measures against the corporation.

Any amount of money paid by a corporation for your family support becomes a debt you owe to the corporation. The corporation may demand payment from you and may seek a judgment against you for the amount paid.

How can OSE enforce payment after a finding of liability?

OSE can enforce payment against the corporation by issuing payment orders to the corporation’s income sources. An income source may be a person, corporation or financial institution that owes, or may in the future owe money to the corporation. These garnishment orders require a person or organization to pay anymoney they owe to the corporation to OSE to pay off your support order.

 Possible garnishees include:

  • clients or customers
  • suppliers
  • shareholders
  • corporate bank accounts (both single and joint accounts)

Section 12 (SEA) gives OSE the authority to ask about a corporation’s financial information. OSE may require clients, banks, and others to provide information on the corporation’s assets and accounts receivable. OSE will use this information to determine which individuals or organizations it may serve garnishment orders.

Before OSE begins enforcement procedures, it must take the proper steps and give consideration to the effect on the corporation. Again, these requirements differ depending on your relationship with the corporation.

If you own a corporation: If the corporation is liable under Section 28 (SEA), OSE may begin enforcement procedures when there is proof that the corporation was served with a Notice stating it is liable for the support payments and arrears. Before doing this, OSE will consider if enforcement action would be a significant risk to the solvency of the corporation. If enforcing the payment will place the corporation in financial jeopardy, OSE will proceed in a manner that will reduce the risk, yet allow for effective enforcement.

If you have a controlling interest in a corporation: If the corporation is liable under Section 29 (SEA), OSE may begin enforcement procedures when a court order has been issued making the corporation liable. The Court will have considered whether there will be a serious risk to the corporation’s continued solvency. If the Court determines that there would be a significant risk, it will impose conditions on the order to reduce the risk, yet allow for effective enforcement. OSE must enforce the support payments in accordance with any court imposed conditions.

OSE may require clients, banks, and others to provide information on the corporation’s assets and accounts receivable. OSE will use this information to determine which individuals or organizations it may serve garnishment orders.

How long will OSE use enforcement measures against a corporation?

OSE may continue enforcement action against the corporation until:

  • You or your corporation has paid the unpaid support and is consistently making the regular payments in accordance with your support order.
  • You no longer have a beneficial interest in the corporation. To stop enforcement against the corporation the directormust receive both:
    • Written notice from the corporation that you no longer have a beneficial interest in any shares of the corporation and the date this took effect.
    • The name and address of the person or organization that acquired your interest in the corporation. If known, the corporation must also provide information on what you have received or will receive in exchange for your shares in the corporation.
  • Your case has been withdrawn from OSE.

How can I get specific advice on my situation?

If you have an order to pay support and have an interest in a corporation, you or your corporation should consider obtaining legal advice on your specific situation. If there has been a significant change in your financial situation or ability to pay support, youmay consider applying to the court for an appropriate variation of your support order. This fact sheet provides only general information
about the law in this area.

For information about your support payments 7 days a week contact:
OSE 24 hour Toll-Free Infoline 1-888-488-3767
Fredericton clients can call 444-3767
Clients who live outside New Brunswick can call long distance 1-506-444-3767*
*Long distance charges will apply.

 

This pamphlet was produced by Public Legal Education and Information Service of New Brunswick (PLEIS-NB) in collaboration with ProgramSupport Services, New Brunswick Department of Justice. It does not contain a complete statement of the law in this area and laws change from time to time. This booklet is part of a series of publications that provide general information on the support enforcement system in New Brunswick, the rights and responsibilities of payers and beneficiaries, and the tools available to the Family Support Orders Service to enforce support.

PLEIS-NB is a non-profit organization that educates the public about the law. PLEIS-NB receives funding and in-kind support from the Department of Justice Canada, the New Brunswick Law Foundation and the New Brunswick Department Office of the Attorney General. You can find more general information support and other related legal topics on the PLEIS-NB website at www.legal-info-legale.nb.ca.

Published by:

Public Legal Education
and Information Service
of New Brunswick
P.O. Box 6000
Fredericton, NB E3B 5H1
Telephone: (506) 453-5369
Fax: (506) 462-5193
Email: pleisnb@web.ca
www.legal-info-legale.nb.ca

In collaboration with:

Program Support Services
NB Department of Justice
P.O. Box 6000
Fredericton, NB E3B 5H1

ISBN 978-1-55396-966-2

Reprinted March 2014



 

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Disclaimer: Please note that our website contains general information about the law. This is not a complete statement of the law on particular topics. We try to update our publications often, but laws change frequently so it is important for you to check to make sure the information is up to date.  The information in our publications is not a substitute for legal advice. To receive legal advice about your specific situation, you need to speak to a lawyer.