What happens to contaminated sites when their corporate owner
goes bust? Most of them end up escheating to the province, which is
increasingly concerned about costs of managing them.
Now, Ontario's Ministry of Infrastructure is seeking
comments on a proposed new management framework for forfeited
corporate property. One of the changes would allow the
provincial government to impose legacy cleanup costs on anyone who
was a director or officer of the corporation in its last two years.
Comments are due by December 21, 2012.
Ontario law provides that when a corporation, incorporated under
an Ontario statute, is dissolved, any property that it owns at the
time of dissolution forfeits to the government of Ontario. This
could be a for-profit corporation, a non-profit, a co-operative, a
credit union, or a corporation incorporated in other provinces, or
outside of Canada, which has land in Ontario. (There is some
dispute as to which government gets property of a federally
In most cases, the government of Ontario is unaware when
property is forfeited. Title to the real property continues to show
the dissolved corporation as the owner. Forfeited properties often
come to the attention of the government only when an expensive
issue arises such as contamination, health or safety concerns, or
squatters. Governments have found themselves left to deal with
expensive clean-ups on thousands of sites across the country. One
well known example is Giant Mine in the Northwest Territories where
the federal government was left with 237,000 tonnes of highly toxic arsenic trioxide
dust stored underground when the owner of the gold mine went into
receivership. The Northstar chlorinated solvent plume in Cambridge
is likely to be the next.
On the other hand, some family companies with historic
contaminated sites look at escheat as their best option for
avoiding complete ruin.
The Ministry of Infrastructure is responsible for most forfeited
corporate property. According to the proposed management framework,
the proposed directors and officers liability provision is in line
with the polluter pays principle and "would serve as a
disincentive to directors and officers of corporations to allow
property with legacy issues to forfeit to the government of Ontario
and would encourage prudent ownership of corporate property prior
to dissolution. It would also support increased corporate
accountability by making directors and officers deal with issues
associated with forfeited corporate property and would avoid
imposing these obligations on the taxpayer."
One problem the proposed change does not take into account is
the situation where the director or officer is not responsible for
the pollution. Consider, for example, a failing business on land
that is already contaminated. New directors may come in to try to
turn the business around and institute effective environmental
control. Unfortunately they are ultimately unsuccessful and the
corporation is dissolved. Under the proposed framework, these
directors would be liable for the whole cleanup cost. This could
make it very difficult to find anyone willing to take office in
such companies, except perhaps for seniors with no assets, and
should drive a boom in business for directors and officers'
A second obvious problem is the potential for conflict with the
federal insolvency regime.
MEI says: The proposed changes are being presented for the
purpose of obtaining stakeholder feedback and do not represent
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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