October 19th, 2018
As is said in the metric world, a gram of prevention is worth a kilogram of cure. This is especially true when it comes to corporations. A client approached me in a bind: while turning his attention to estate planning, he realized there was a problem with the central asset he owned - it was no longer his. The asset? A 95-acre, multi-generational farm. The reason he no longer owned it? The doctrine of escheat.
In the 1970s the client transferred title to his farm to a corporation he controlled. However, when he did not keep up with corporate filings, the corporation was involuntarily dissolved, or cancelled. When a corporation is dissolved while owning property, that property “escheats”, or is transferred, to the Crown. For the client, this meant neither he nor his corporation actually owned “his” farm.
Luckily, a remedial process is in place through the “relief from forfeiture” section of the Forfeited Corporate Property Act, and the Crown offered to sell the client’s farm back to him for a nominal amount. However, the success of the relief from forfeiture application is not guaranteed. With an asset so valuable, don’t bet the farm.
So in the spirit of preparedness, and because corporations run best as recipients of regular upkeep, the following date should be marked in red, and underlined, on the calendars of those Ontario corporations holding land: December 10, 2018.
Corporations incorporated under Ontario’s Business Corporations Act before December 10, 2016, have until this holiday season to prepare a register of the corporation’s “ownership interests” in Ontario land.1 Corporations incorporated under the Business Corporations Act on or after December 10, 2016, must be currently maintaining their register of “ownership interests”. 2
What qualifies as such an interest? Unfortunately, the term is not defined under statute, and courts have not yet considered it. So a broader register would seem presently advisable, inclusive of, for example, beneficial and leasehold interests, as well as fee simple interests, in Ontario real property.
The register must describe each property, as well as the date the corporation acquired the property (and the date of disposal, if applicable). A copy of the transfer/deed, or related documentation, must be kept with the register. The register itself is to be kept at the corporation’s registered office.
These changes to Ontario’s laws have been partially justified as a means of lessening costs to taxpayers.3 However, the additional record-keeping requirements for corporations cannot be ignored, since failure to comply can lead to sanction under the Business Corporations Act, or impair a corporation’s ability to make representations respecting compliance with laws.
1Business Corporations Act, R.S.O. 1990, c. B.16, s. 140(4).
2Business Corporations Act, R.S.O. 1990, c. B.16, s. 140(5).
3Amendments 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