Corporate List of Real Estate Holdings Will Soon Be Required

  • October 12, 2016
  • Don Perry

Commercial real estate lawyer Luc Bourque brought to my attention a new reason for corporations that own real property to panic. Recent amendments to the Ontario Business Corporations Act (“OBCA”) are intended to make it easier for the province to locate the assets of dissolved corporations, but the sweeping approach taken will significantly complicate corporate record-keeping.

The amendments come into force on December 10, 2016 and cause potentially large administrative headaches for companies with large real estate holdings, especially large developers (whose work Luc does) whose holdings change day to day as units are sold to purchasers. Luc explained it to me in small words so I could understand the amendments.

Corporations have to maintain minute books. They must contain various sections including an up-to-date register of directors, of officers, of shareholders, and now…of all interests in real property held by that corporation.

For a corporation that owns its head office and maybe a parking lot, this list would contain a couple of parcels and that’s it.  No big deal.

For a development corporation that owns lands that have been subdivided, this list could contain thousands of parcels because each lot is its own parcel and must be listed together with its PIN. 

In addition. larger homebuilders sell homes every day which means the register may be out of date on a daily basis.

Compounded with this is the fact that the list must include all “interests” in land, meaning that beneficial interests as well as registered interests in land must be listed.  Parcels must be added to the registers of all the beneficial owner corporations up the chain behind the nominee title owner.  Some of these structures are many layers deep, involving trusts with corporate trustees and beneficiaries, corporate partnerships, and corporate co-ownerships, with each level having an interest.

The issue is one of implementation.  Ministry enforcement is likely not an issue. But if the register is not maintained, the corporation will not be in compliance with the law, and that fact alone makes representations to banks and other stakeholders, not to mention corporate opinions on financing, impossible.

The Legislative Framework

Under Schedule 7 of the Budget Measures Act, 2015 S.O. 2015 c.38, the Forfeited Corporate Property Act, 2015 (“FCPA”) was enacted.  That act sets out numerous changes to the process and regime which govern how a corporation’s real and personal property is dealt with on corporate dissolution in situations where such property is forfeited to the Crown; usually on involuntary dissolution.

In order to make it easier for the Crown to identify and deal with forfeited corporate property, the FCPA amends the OBCA by adding specific record-keeping requirements relating to a corporation’s “ownership interests in land in Ontario”.  In short, the amendment will require every Ontario business corporation to keep in its minute book a full list of ALL its real property interests in Ontario land. Unlike other corporate records, this list MUST be kept at the registered office of the corporation, and must include:

1. the date the corporation acquired the property and, if applicable, the date the corporation disposed of it;

2. a copy of any deeds, transfers or similar documents that contain any of:

  1. the municipal address, if any;
  2. the PIN and LRO #;
  3. the legal description; and
  4. the tax roll number, if any.

The FCPA (and therefore the OBCA amendment) comes into force on December 10, 2016. Prior existing corporations are provided a grace period: any corporation incorporated or continued (eg. amalgamated) prior to December 10, 2016, will have until December 10, 2018 to prepare and insert the list into its records, in respect of real property interests held by it as of that date.  However, for any corporation incorporated or continued AFTER December 10, 2016, the list must be created and in place as at incorporation/continuation; that is to say, immediately.

There are some reasons not to panic – at section 139 the OBCA provides for a “reasonable” amount of time to make the register available to a person lawfully entitled to examine the records, and also permits electronic record-keeping.  That may reduce compliance concerns, but, as Luc points out, the new legislation still makes it nearly impossible to make representations to banks and other stakeholders.

About the Author

Don Perry, Hummingbird Lawyers LLP

[0] Comments