Can my Ontario corporation lose the ability to enforce contracts if it is not in good standing?

Yes, in certain circumstances. Under the Ontario Business Corporations Act, a corporation that has been dissolved — whether voluntarily or administratively by the province — may face challenges enforcing contracts it entered into after dissolution, because a dissolved corporation generally has no legal capacity to carry on business or take legal action.

The more immediate risk is not losing the ability to enforce existing contracts, but rather that administrative dissolution or bad standing can surface during due diligence on transactions and cause serious problems. When you are selling your business, refinancing, or entering a significant new contract, the other party's lawyer will conduct registry searches. If your corporation is shown as dissolved or not in good standing, the transaction can be delayed or you can be required to fix the issue at your expense before proceeding.

There is also a practical risk: if your corporation is dissolved and enters into a new contract, the individuals who acted on behalf of the (technically non-existent) corporation may face personal liability for that contract. Reinstating the corporation cures most of these deficiencies retroactively, but relying on reinstatement to fix problems is an avoidable risk.

Keeping your annual returns filed and your corporation in good standing from year to year is far cheaper than dealing with the consequences of dissolution.