Ontario corporations that hold a legal or beneficial interest in real property in Ontario will soon be subject to more onerous record keeping requirements.
The Forfeited Corporate Property Act, 2015 and the Escheats Act, 2015 come into force on Dec. 10, 2016; with their implementation will also come a number of amendments to the Ontario Business Corporations Act (“OBCA”) and the Corporations Act (“CA”). Consistent with the existing Escheats Act (which will be repealed in December 2016), the new legislation mandates that real property of corporations that are dissolved will be forfeited to the Crown immediately upon such dissolution (whether such dissolution is involuntarily or voluntarily, provided that for any voluntary dissolution, the property is not transferred, sold or distributed at the time of such dissolution).
While the existing provisions of the OBCA and CA provide corporate owners with a right to recover such property from the Crown for a 20 year period following dissolution if the corporation is revived, the new legislation will not be so generous. Although the 20 year revival right will continue, corporations will no longer be entitled to recover any forfeited property if the revival occurs more than 3 years following the dissolution (subject to some exceptions). Following expiration of the new 3 year time limitation, the Crown can use the forfeited property for its own purposes, dispose of it and, importantly, delete or amend certain encumbrances (including mortgages) registered against same. It is important to note that the Forfeited Corporate Property Act also extends the Crowns rights to any personal property left in, on or under any forfeited real property, which is another change from the existing legislation.
The OBCA and CA have also been amended to require a corporation to keep an updated register of the corporation’s ownership interests in real property. The legislation does not specify that this only applies to registered interests and therefore, both legal/registered and beneficial interests will be caught by these requirements.
The new real property register must identify each property, the date the corporation acquired the property and, if applicable, the date the corporation disposed of it. In addition, the corporation must keep with the register a copy of any deeds, transfers or similar documents that contain the municipal address, the registry or land titles division and property identifier number, legal description and any assessment roll number with respect to each property listed in the register.
The new real property register must be kept at the corporation’s registered office address. While other records and registers, such as registers of officers, directors, and shareholders, can be kept at any place in Ontario designated by the directors, the new amendments to the OBCA do not allow the directors to designate a separate location for the new real property register. Presumably, this is to ensure the Crown can determine from a search of public registries where the prescribed information is located.
It is also important to note that the new real property register (just like other registers) must also be available for examination to all directors, registered and beneficial shareholders and creditors of the corporation during normal business hours. Such persons are also entitled to take extracts of such records free of charge.
Law firms and other third parties who provide their address to Ontario corporations to use as their registered office will need to be aware of these provisions and ensure they are provided with the necessary registers and supporting documents. Ontario corporations who hold a beneficial interest in real property pursuant to a co-tenancy or co-ownership agreement, or who appoint a nominee corporation to hold legal title to real property, will need to take notice of these new requirements and obtain a copy of the required supporting documents from the property manager or trustee corporation (even if the registered holder is not incorporated under the OBCA).
Corporations who fail to comply with these requirements may be subject to a fine of not more than $25,000. If a Corporation is found guilty, every director or officer who authorized, permitted or acquiesced in the offence is also liable to a fine of not more than $2,000 and/or imprisonment for a term of not more than 1 year.
Existing Ontario corporations will have a 2 year grace period and will not be required to maintain a register of real property owned by the corporation and the related supporting documents until Dec. 10, 2018. However for any Ontario corporations incorporated after Dec. 10, 2016, these obligations come into effect immediately.