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Ontario Unclaimed Property Consultation

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The Government of Ontario has commenced a consultation on a new proposed Unclaimed Intangible Property Program. The possibility of this new program for unclaimed property was mentioned in the 2012 Budget and reported on in a previous post. The Government has released a consultation paper, which includes a series of questions. The deadline for submissions is October 12, 2012. Given the additional burden this may pose for businesses, it is to be hoped that the consultation period is extended.

Ontario previously enacted an Unclaimed Intangible Property Act in 1989. However, this legislation was never proclaimed into force and ultimate was repealed as of December 31, 2011, by the operation of the Legislation Act, 2006.

The Government of Ontario is proposing that the new program for unclaimed intangible property would be based on the Uniform Unclaimed Intangible Property Act, which was developed by the Uniform Law Conference of Canada. This form of legislation would impose upon Ontario business the obligation to take prescribed steps to notify owners of abandoned unclaimed property. If the property remains unclaimed, holders must file a report and transfer the property to the Government of Ontario, which then can use the property until it is claimed (if ever). There would be fines for non-compliance. The Government of Ontario would maintain a publicly searchable registry of the property it has received. Owners may file a claim for the property.

What constitutes “property” for the purposes of the new program is up for grabs. The breadth of that definition will directly affect the number and types of business that will face additional administrative burdens. If, for example, Ontario were to include gift certificates and gift cards, this would have significant implications for Ontario retailers.

Another issue that is open for debate is the time period after which property should be considered to be abandoned. The general period of time is five years. Thus far, there has been insufficient consideration given to the interaction between Ontario’s Limitations Act, 2002 and an unclaimed property program. Legislation tends to ignore the effect of limitation periods on the enforceability of intangible property rights and, therefore, the issue of whether the property should be considered abandoned or the property rights considered unenforceable. In Ontario, the basic limitation period is two years from the date of discovery of the claim or the date on which a reasonable person with abilities and in the circumstances of the person could have discovered the claim.  However, the limitation period for demand obligations does not commence until a demand for performance is made.

The issue of limitation periods is also relevant to the transitional provisions of for an unclaimed intangible property program. Ontario is proposing not to enact a transitional period that would have exempted property that became unclaimed more than five years before the coming into force of the legislation. The effect of this is uncertain. Apart from the problem that businesses may have records for the past seven years, some businesses may have considered the rights of the property holders unenforceable for accounting purposes, provided the obligation was not a demand obligation.

During the consultation period, the Government is asking:

  1. Whether any modifications to the Uniform Unclaimed Intangible Property Act should be made?
  2. What types of property should be included or excluded? Do certain types of property present unique challenges?
  3. Are the time periods for considering property abandoned in the Uniform Unclaimed Intangible Property Act appropriate?
  4. What are the challenges for businesses in transitioning into the new program?
  5. Are there additional issues that the Government should be aware of?
  6. How should the Government continue the consultation as the new program is developed?

The consultation document is available here. Remember, the consultation deadline is October 12, 2012.