Changes to Ontario’s Escheats Legislation
In December 2016, Ontario repealed the old Escheats Act, replacing it with two separate pieces of legislation, the Escheats Act, 2015 (the “EA”), which pertains to property of individuals who die without heirs, and the Forfeited Corporate Property Act, 2015 (the “FCPA”), which deals with the undisposed-of property of dissolved corporations. In so doing, the legislators appear to have increased the record-keeping burden on Ontario corporations and further expanded the Crown’s power to seize forfeited property via escheat.
Several related amendments to separate acts were introduced along with the FCPA. Specifically, a new section (140(1)(e)) incorporated into the Ontario Business Corporations Act (the “OCBA”) requires corporations to maintain a current register of their interests in land, as well as copies of deeds, transfers and other related documents. In his paper, “Ontario Corporations Beware: Changes to the Law Regarding Record Keeping and Forfeiture of Corporate Property,” Jeffrey Alpert points out that corporations with extensive real estate holdings stand to absorb a substantial administrative burden. As this section stipulates that the register of ownership interests in land must be located at the corporation’s registered office, it would also inconveniently obligate any corporations who outsource their “registered office” to their lawyer or accountant to constantly communicate the relevant, up-to-date information to those individuals.
The legislative changes further boost the Crown’s right to control escheated property. Firstly, upon seizing such property, the Crown can unilaterally terminate any encumbrances. The Crown is required to notify the sheriff and execution creditors of its intention to cancel. Whether such notice will serve as a practical deterrent, however, is unclear. Furthermore, the Crown now boasts near absolute power to seize and put to use forfeited corporate property. While not explicitly stated as such, the legislation essentially allows the Crown, post dissolution, to negate the claims of relief seeking parties and any secured creditors with interests in the forfeited corporate property. If the Crown gives notice for such action as required, those with interests in the pertinent property would have to act immediately to maintain those interests. Lawyers with clients in this position should therefore be clear and prompt in communicating the consequences of the Crown’s actions.
Although we don’t often come across these kinds of situations in our practice, when we do, it’s important to be aware of these recent changes. For an excellent article summarizing the changes, I refer you to this blogpost: Ontario dusts off the escheats rulebook – time to dust off your advice?
Thank you for reading.