Canada: Out With The Old, In With The New: A New Regime For Forfeited Corporate Property And Corporate Real Property Administration

When the talented Sam Cooke sang that “a change is gon’ come” he was not referring to Ontario’s Escheats Act. But a change did come on December 10, 2016, when the Escheats Act was repealed and replaced by two new Acts – the Escheats Act, 2015 and the Forfeited Corporate Property Act, 2015 (FCPA). These changes will impact all corporations incorporated under Ontario’s Business Corporations Act (OBCA) or Corporations Act (CA).

An escheat of property occurs automatically when there is an intestate death of an individual (that is they die without a will) or the dissolution of a corporation. For Ontario corporations, the OBCA and the CA each contain escheat provisions whereby any property of a corporation not disposed of on the date of dissolution is forfeited to and title vests in the Crown. Changes brought by the FCPA will undoubtedly bring additional administrative burdens and risks for creditors in enforcement matters.

So, What’s New?

The FCPA was enacted to implement a more comprehensive regime for the Crown’s dealings with forfeited corporate property. The types of property falling under the purview of the new legislation are:
 

  1. real property and interests in it; 
  2. personal property located in, on or under forfeited corporate real property; and
  3. personal property not in, on or under real property but required for administering or managing the real property or business being conducted on it.

Of all the changes being introduced with the new legislation, three in particular stand out: (1) a three-year deadline to recover forfeited corporate property from the Crown; (2) the ability of the Crown to cancel encumbrances on title; and (3) the use of forfeited corporate property for Crown purposes.

The introduction of a three (3) year timeframe to apply to recover forfeited corporate property after dissolution is a significant policy change as no timeline existed previously. Corporations dissolved prior to the FCPA coming into force have three years from December 10, 2016, to recover their forfeited property by applying to the Ministry of Economic Development, Employment and Infrastructure. A corporation may still be revived under its enabling statute for up to 20 years after dissolution, but any property that was forfeited will remain vested in the Crown and not returned. An added risk is that the Ontario Minister of Economic Development can accelerate the Crown’s disposition of forfeited property. This is accomplished by:
 

  1. notifying the prior corporate owner;
  2.  publishing a notice on a Government website or another website available to the public; and
  3. by posting a notice on the forfeited corporate property itself and, in the case of personal property, on the real property that is located in, on or under the real property in question.

The cancellation of encumbrances is another new addition to the regime. The Minister will have the power to make an order cancelling encumbrances against forfeited corporate property that were enforceable and valid prior to becoming forfeited corporate property, or are deemed to be enforceable and valid under the FCPA. The order would be registered on title and would terminate the right to enforce the encumbrance. Such encumbrances could include mortgages and collateral security related to mortgages.

Ninety (90) days notice of the Crown’s intent to cancel the encumbrances must be given to: a) those with an interest on registered title to the Property; b) execution creditors; c) PPSA registrants; and d) security interest registrants. Any reply to the notice must be made in writing in accordance with the FCPA and not in the manner provided under any other statute (e.g., OBCA, CA, Mortgages Act, etc).

The last notable new addition to the regime is the use of forfeited corporate property for Crown purposes. With the new legislation the Minister may at any time register a notice on title of the Crown’s intention to use real property for Crown purposes. The Crown can take this step before the three-year timeframe post-dissolution, mentioned above, has elapsed if it gives the prior corporate owners notice of its intention to go this route. The use of forfeited personal property for Crown purposes follow the same rules as those for real property, with the exception that once a notice is registered on title for the real property the Crown may begin to use any personal property located there.

Something to Think About...

In light of these changes, lenders should consider requiring Ontario incorporated borrowers to provide evidence of their corporate existence on an annual basis, leaving ample time to take any necessary steps to protect the security if a borrower is dissolved. This could be accomplished by obtaining a Certificate of Status, which is an inexpensive search to conduct at a current cost of approximately $40 per corporation. Depending on the terms of the lending agreement, this administrative cost may be charged to the borrower. The FCPA does allow a revived prior corporate owner to make an application to have forfeited corporate property restored to it if the property was not returned at revival.

Even if a prior corporate owner is not revived, when forfeited corporate property is sold the Minister must give notice to all persons or entities the Ministry identifies as potentially being entitled to receive the proceeds of the sale, which would include the holders of a mortgage secured by such property unless it had been cancelled in accordance with the procedure described here. It may be necessary to negotiate an alternative distribution with the Ministry, but all persons or entities entitled to receive payments must be in agreement.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Kwaku Tabi
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.