A final reminder to Ontario corporations with ownership interests in land, you have just over one month left to comply with the record-keeping requirements under the Forfeited Corporate Property Act, 2015 (the “FCPA”). Effective December 10, 2018, all Ontario corporations will be required to maintain comprehensive registers of any ownership interests in land.
On December 10, 2016, the FCPA came into force. Under the FCPA, corporations incorporated under Ontario’s Business Corporations Act (the “OBCA”) prior to December 10, 2016, have until December 10, 2018 to prepare the above mentioned register. Ontario corporations incorporated after December 10, 2016, must be currently maintaining their register of “ownership interests”.
Through a series of amendments to the OBCA, the FCPA mandates record-keeping requirements designed to assist the Crown in tracing the assets of dissolved corporations, ultimately providing a more orderly system for re-claiming property that escheats to the Crown as a result of a corporation’s dissolution.
According to the Ontario Ministry of Finance, the goal of the FCPA is to:
1) mitigate risks to Ontario taxpayers that may arise when corporate property is forfeited and becomes Crown property when a company is dissolved;
2) reduce the number of corporate properties that are forfeited to the Crown;
3) increase corporate accountability for costs associated with forfeited corporate property; and
4) increase transparency and certainty in the management and disposition of forfeited corporate property.
Under this regime, any Ontario corporation incorporated under the OBCA will be required to maintain a register of all ownership interests of land to be kept at the corporation’s registered office. While the legislation does not define “ownership interests”, it will be prudent for corporations that possess either legal or beneficial interests in land to comply with these requirements.
A corporation’s register must clearly identify each property owned, and list the date on which the corporation acquired and/or disposed of each property. Corporations must retain all supporting documentation, including copies of any deeds, transfers, or any similar documents that contain:
1) each property’s municipal address;
2) the registry or land titles division and property identifier number;
3) the legal description of the property; and
4) the assessment roll number, if any.
Under the OBCA, any corporation that does not comply with these requirements without reasonable cause is guilty of an offence and will be held liable to a fine of up to $25,000. Furthermore, directors or officers who authorized, permitted, or acquiesced in the offence may be held liable to fines of up to $2,000, imprisonment for a term of not more than one year, or both.
While it remains to be seen how strictly these rules will be enforced, Ontario corporations possessing any “ownership interests” in land should take all steps necessary to ensure compliance. In addition to the statutory penalties described above, non-compliance could have a material impact on a corporation’s ability to secure financing. In order to provide funding, most financial institutions in Canada require prospective borrowers to provide a representation that they are in compliance with all applicable laws. In the event a corporation does not comply with these record-keeping requirements, the corporation could not rightly make this representation.
For corporations with relatively few real property holdings, these requirements will not be overly onerous. However, for corporations engaged in the business of acquiring and disposing of real property, compliance with these requirements will require a significant administrative investment. As a result, corporations should begin turning their minds and resources to these requirements now, as the December 10, 2018 deadline approaches.