On December 10, 2016, Bill 144, the Budget Measures Act, 2015 will come into force with potentially onerous administrative consequences for Ontario corporations. Bill 144 will enact the Forfeited Corporate Property Act, 2015 (FCPA) which will amend the Business Corporations Act (Ontario) (OBCA) in several important ways.
The Ministry of Finance discussed the intent behind the FCPA in a press release on November 18, 2015. First, the FCPA aims to mitigate risks to Ontario taxpayers in cases where corporate property is forfeited and becomes Crown property upon the dissolution of a corporation. Second, the FCPA seeks to reduce the number of corporate properties forfeited to the Crown. Third, the amendments seek to increase corporate accountability for the costs associated with forfeited corporate property. Fourth, the amendments will increase transparency and certainty in the management and disposition of forfeited corporate property. Lastly, the goal of the FCPA is to return forfeited property to productive use more quickly and efficiently.
As a result of the FCPA, OBCA corporations will have increased book and record-keeping requirements. Section 140(1)(e) of the OBCA states that corporations must prepare and maintain at their registered office a register of “ownership interests” in land in compliance with the newly enacted requirements set out in section 140.1.
Of note, “ownership interest” is not defined. However, the term presumably includes both legal and beneficial ownership in real property (and may capture both freehold and leasehold interests in Ontario real property), so one property registered in the name of a nominee title holder will not only appear on the land register for such nominee title holder, but also on the land register for each beneficial owner that is an OBCA corporation.
Further, the FCPA provides that forfeited real property and “interests” in real property include a mortgage or charge under the Land Titles Act (Ontario). If this interpretation of “interests” is applicable to “ownership interests” under the OBCA, then the land ownership register would also need to set out a corporation’s charges and mortgages over land in Ontario.
Register of Interests in Ontario Land
The new section 140.1 of the OBCA requires that Ontario corporations maintain a land register that accurately:
- identifies each property; and
- shows the date the corporation acquired said property, and where applicable, the date the corporation disposed of it.
Additionally, supporting documents for each land interest must be kept with the land register. These include a copy of any deeds, transfers or similar documents that contain any of the following information:
- the municipal address, if any;
- the registry or land titles division and the property identifier number;
- the legal description of the land; and
- the assessment roll number, if any.
The land register cannot be kept at a place other than the registered office of the corporation. The land register obligation does not extend to real property outside of Ontario, nor does it extend to non-Ontario corporations.
Amendments Related to Dissolution
On dissolution of a corporation, the FCPA will require articles of dissolution to set out whether the corporation was at any time a registered owner of land in Ontario and state that the corporation is no longer a registered owner of land in Ontario. The Director is not required to endorse a certificate of dissolution upon learning that the corporation is a registered owner of land in Ontario. The Director is given additional broad powers in the event of dissolution; for example, the Director may revoke the dissolution order where the Minister responsible for the administration of the FCPA, the Minister of Northern Development and Mines or the Public Guardian and Trustee gives notice that revocation would be in the public interest.
These new record-keeping obligations will apply immediately to all corporations that are incorporated or continued under the OBCA on or after December 10, 2016. However, corporations that were incorporated or continued under the OBCA before December 10, 2016, will have until December 10, 2018 to ensure compliance with section 140(1)(e) of the OBCA.
These new record-keeping obligations on Ontario corporations may be particularly burdensome for certain corporations. For example, homebuilders, land development corporations or other corporations in the real property industry will be required to update the land register potentially on a daily basis to accurately reflect the ownership interests they hold in real property in Ontario.
Maintenance of the land register will be of critical importance to ensure representations regarding compliance with law are true when made to banks and other stakeholders, and to allow for unqualified corporate legal opinions to be provided in connection with financings or other transactions.
Corporations incorporated or continued under the OBCA on or after December 10, 2016 will need to be cognizant of these new requirements and will have to be compliant with such requirements immediately upon inception. Existing OBCA corporations will have to ensure compliance by December 10, 2018.