On December 10, 2015, the Ontario government passed Bill 144, the Budget Measures Act, 2015, which will come into force on December 10, 2016. This Bill will enact several new statutes, including the Forfeited Corporate Property Act, 2015 ("FCPA") and the Escheats Act, 2015.
This legislation addresses what happens to forfeited corporate property once a corporation is dissolved. The introduction of the FCPA amends other Ontario legislation that may have an impact on a corporation's day-to-day reporting requirements and long-term consequences for corporations that are dissolved and not revived within a strict timeline.
The Legislative Intent of the FCPA
The Ontario Ministry of Finance stated in a press release on November 18, 2015, that the intended effect of the introduction of the FCPA will be to:
- Mitigate risks to Ontario taxpayers that may arise when corporate property forfeits to and becomes Crown property when a company is dissolved.
- Reduce the number of corporate properties that are forfeited to the Crown.
- Increase corporate accountability for costs associated with forfeited corporate property.
- Increase transparency and certainty in the management and disposition of forfeited corporate property.
- Return forfeited property to productive use as quickly and efficiently as possible. 1
Ongoing Reporting Requirement
On the surface the FCPA appears to have the best intentions. However, the practical application of the new requirements places a burden on corporations. The introduction of the FCPA has the effect of amending the Ontario Business Corporations Act, the Corporations Act, and the Ontario Not-for-Profit Corporations Act (the "Corporate Acts") by introducing a requirement to maintain an updated register of the corporation's ownership interest in land at its registered office or at another location determined by the directors.
This register must identify each such ownership interest and show the date of acquisition and disposal, if applicable. In addition, the corporation has to keep a copy with the property register of any deeds, transfers, or similar documents that contain the municipal address, the registry or land titles division, the property identifier number, the legal description, and the assessment roll number, if any.
The practical implication of this amendment can be more onerous than it may appear. For example, corporations that have a registered address in Toronto but have properties across the province or the country must ensure that the property register is maintained and held at the registered office of the corporation, or other single location as determined by the directors by resolution, together with copies of the ownership documents of each property.
Additionally, and most importantly, where a law firm maintains the corporation's records, it is a corporation's obligation to provide the law firm with the information to be inputted into this register together with the copies of deeds, transfers, and similar documents described above.
While these legislative amendments will come into force on December 10, 2016, there is a grace period of two years before the requirement comes into effect in order to prepare and maintain this register. It is advisable, however, especially for corporations that have ownership interests in many properties, that these registers be prepared and maintained sooner than the two-year deadline, as it may take extensive time to gather all of the required information
Dissolution and How It May Affect Your Corporation
The new FCPA also introduces a new way for the Crown to manage forfeited corporate properties and sets out new timelines within which owners can revive corporations and recover their assets.
The Corporate Acts provide that in the event that a corporation is dissolved and the corporation is the owner of real property, such property is forfeited to the Crown. Until the introduction of the FCPA, the corporate owners had 20 years from the date of dissolution to revive the corporation and recover their assets.
With the introduction of the FCPA, the timelines have changed. While the dissolved corporation can still be revived within 20 years from dissolution, it will not recover its assets if the revival takes place more than three years after the date of dissolution, subject to some exceptions.
In addition to the forfeiture of real property, the FCPA also provides that any personal property left in, on, or under forfeited real property is also forfeited to the Crown, regardless of who owns the personal property.
After the three-year deadline, the Crown can use the forfeited property for Crown purposes, dispose of it, and delete or amend any encumbrances registered against the property from title (in the case of real property) and under the Personal Property Security Act (in the case of personal property).
Conclusion
The enactment of the FCPA and the coming into force of the amendments to the Corporate Acts will place the onus on directors and officers of corporations to maintain updated property registers and will also make it more difficult to recover assets forfeited to the Crown in the event of dissolution. It is important and advisable that corporate owners come to terms with their new reporting requirements and take heed of the strict deadlines under the FCPA in the event the corporation is dissolved.
Footnote
1. Backgrounder: Amendments and Proposals in the Budget Measures Act, 2015. (2015, Nov 18). Retrieved from: https://news.ontario.ca/mof/en/2015/11/amendments-and-proposals-in-the-budget-measures-act-2015.html.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
