Propagating Unclaimed Property Laws North of the Border Presented by: Jacqueline D. Shinfield, Partner Blake, Cassels& Graydon LLP

Transcription

1 Propagating Unclaimed Property Laws North of the Border Presented by: Jacqueline D. Shinfield, Partner Blake, Cassels& Graydon LLP Alena Levitz, Executive Director, BC Unclaimed Property Society Darren Jack, Managing Director Impact 360 UPPO Presentation Disclaimer Use of the Unclaimed Property Professionals Organization, Inc., (UPPO) name or copyrighted materials in this presentation does not constitute an endorsement by UPPO of a member, vendor, product or service. The content represents the opinions of the author and not necessarily those of UPPO. This information is not intended as legal advice and should not be used to replace the advice of legal counsel. UPPO Antitrust UPPO has a policy of strict compliance with federal antitrust laws. UPPO members and/or meeting attendees cannot come to understandings, make agreements, or otherwise concur on positions or activities that in any way tend to raise, lower or stabilize prices or fees. Members and/or attendees can discuss pricing models, methods, systems, and applications, as well as certain cost matters that do not lead to an agreement or consensus on prices or fees to be charged. However, there can be no discussion as to what constitutes a reasonable, fair or appropriate price or fee to charge for any service or product. Information may be presented with regard to historical pricing activities so long as such information is general in nature and does not include data on current prices or fees being charged in any trade area. Any discussion of current or future prices, fees, discounting, and other terms and conditions of sale, which may lead to an agreement or consensus on prices or fees to be charged, is strictly prohibited. 1

2 CPE Credit CPE credit is available at this conference. However, NASBArules require proof you attended the sessions. For UPPO to provide verification of attendance, you MUSTbe scanned in ANDout of each session to be eligible to receive credit(s). Please see the room monitor(s) at the back of room to have your name badge scanned. Canada s 10 Provinces and 3 Territories Source: Wikipedia Federal Unclaimed Property Laws in Canada The Bank of Canada is the ultimate legal custodian of: Dormant / unclaimed bank accounts Dormant financial instruments (e.g. bank drafts, certified checks) issued, processed and handled by banks Abandoned safe deposit box contents The dormancy period is 10 years for all property types, after which the funds are remitted to the Bank. The law governing these types of unclaimed property is applicable exclusively to Chartered Banks. It does not apply to Credit Unions. 2

3 Background Provincial legislation in Canada is mainly based on the Uniform Unclaimed Intangible Property Act(the Uniform Act ). The Uniform Actwas introduced in 2003 by the Uniform Law Conference of Canada. A number of key provisions in the Uniform Act are similar to parallel provisions in the US Uniform Unclaimed Property Act (1995). Provincial Legislation Unclaimed property legislation has been enacted in five provinces: British Columbia Manitoba Prince Edward Island (not) The Ontario government s 2012 budget announced the intention to establish an unclaimed property program. Jurisdiction As a general rule, in considering which jurisdiction s unclaimed property rules apply, it is the last known address of the property owner, or if it is a corporation, the jurisdiction of incorporation/dissolution. 3

4 Applicable legislation: The Unclaimed Personal Property and Vested Property Act legislation applies if the last known address of the owner is in orif there is no last known address of the owner where the holder is a reporting holder. A reporting holder is a person: who carries on business in or is based in. Under the legislation, a person carries on business in a jurisdiction if they are required by law to have a registered office or business address in the jurisdiction or if according to law the person has a registered address in the jurisdiction where process may be served or has nominated an agent in that jurisdiction on whom process may be served. The Unclaimed Personal Property and Vested Property Act applies to unclaimedtangible and intangible personal property other than to land. Tangible means any property that is not intangible or excluded by regulations. Intangible personal property is defined as follows: intangible personal property means an interest that is held, issued or owing by a business organization or by a government or governmental organization, and includes, without limitation, an interest that is referred to as or is evidenced by a. money or a cheque, money order, traveller s cheque, draft, deposit, interest or dividend, b. a security deposit, refund, credit balance, unpaid wage or salary, unused ticket or unidentified remittance, c. a security certificate or other evidence of ownership of an interest in a business organization, d. a security or security entitlement, e. a bond, debenture, note or other evidence of indebtedness, f. money deposited to redeem shares, bonds, coupons or other securities or to make distributions, g. an amount due and payable under the terms of an annuity or insurance policy, including a policy providing life insurance, property and casualty insurance, workers compensation insurance or accident and sickness insurance, and h. an amount distributable from a trust or custodial fund established under a plan to provide education, health, welfare, vacation, severance, death, share purchase, profit-sharing, employee savings, supplemental unemployment insurance or similar benefits, but does not include any thing or class of thing excluded by the regulations 4

5 Types of property excluded by regulations include: gift certificates including a gift card, stored value card or prepaid card that can be used to purchase goods or services at a particular store or group of stores retail business credits a credit owed by a business to a consumeras a result of a return of merchandise or cancellation of a transaction that cannot be redeemed for cash Supplementary Retirement Plan for Public Service Managers abandoned vehicles and various trust exclusion Of Note: there is an exemption in the legislation for intangible personal property with a value of less than $250 and tangible personal property with a value of less than $1,000 regulator takes the view that the $250 threshold should be calculated on an aggregate basis per apparent owner over an indefinite number of years this requires that individual amounts be tracked by the holder and totaled over an indefinite period of time solution: voluntary remittance provisions Abandonment of property The applicable periods after which personal property is presumed to be abandoned varies by the type of property. 5

6 the applicable periods after which personal property is presumed to be abandoned are as follows: for a traveller s cheque, 15 years after issuance; for a money order, 7 years after issuance; for a security or any other equity interest in a business organization, 6 yearsafter the earlier of the date of the first dividend, share split or other distribution that was unclaimed by the apparent owner, and event or action that the apparent owner did not respond to or complete as required; for the contents of a safety deposit box, 6 years after the date of the last indication by the apparent owner of interest in the contents of the safety deposit box; for a street certificate, 5 yearsafter the dissolution of the corporation that issued the certificate if the bearer has not redeemed the value of the certificate in a distribution of the property of the corporation on dissolution; for a debt of a business organization that accrues interest, 5 years after the date of the earliest payment that was unclaimed by the apparent owner; for a demand deposit, certificate of deposit, guaranteed investment certificate, guaranteed investment confirmation or other deposit made for a fixed period that has matured, including a deposit that is automatically renewable, 5 years after the later of maturity, and the date of the last indication by the apparent owner of interest in the deposit; for a savings or other deposit that does not have a fixed period or does not mature, 5 yearsafter the date of the last indication by the apparent owner of interest in the deposit; for an amount owed by an insurer on a life or endowment insurance policy or an annuity that has matured or terminated, 3 yearsafter the obligation to pay arose or, in the case of a policy or an annuity payable on proof of death, 3 years after the insured has attained, or would have attained if living, the limiting age under the mortality table on which the reserve is based; for personal property of a corporation or society distributable in the course of a dissolution, one year after the date of the dissolution; for personal property to which section 270 of the Companies Act applies, one yearafter the personal property becomes distributable to the member or creditor, as the case may be, if during that time reasonable inquiry has failed to locate the owner or apparent owner of the personal property; for personal property received by a court as proceeds of a class action and not distributed under the judgment, one yearafter the distribution date set out in the judgment; for personal property held by a court, government or governmental organization, one year after the personal property becomes distributable; for wages or other compensation for personal services, one yearafter the compensation becomes payable; 6

7 for a deposit or refund owed to a subscriber by a utility, one yearafter the deposit or refund becomes payable; personal property in a registered retirement savings plan or a registered education savings plan under the Income Tax Act (Canada) or other plan or account that is qualified for tax deferral under the income tax laws of the jurisdiction in which the plan or account is registered or held, 3 years after the earliest of the date of distribution or attempted distribution of the personal property, the date of the required distribution as stated in the plan or the trust agreement governing the plan, and the date, if determinable by the holder, specified in the income tax laws of the jurisdiction in which the plan or account is registered or held, by which the distribution of the personal property must begin; for money paid out of a registered retirement income fund under the Income Tax Act (Canada), 3 years after the date of payment although the money within the registered retirement income fund is not, while it remains within that fund, presumed to be abandoned; for all other personal property, 5 years after the earlier of; the date on which the apparent owner s right to demand the personal property arises, and the date on which the obligation to pay or distribute the personal property arises. A private entity must attempt to notify the owner before declaring the property unclaimed. The entity cannot charge the cost of notice to the owner, unless permitted under its contract with the owner. Notice must be delivered to apparent owner s last address shown in the records of the holder and must: identify the unclaimed property; state the unclaimed property is subject to the legislation; identify the holder and state the holder is holding the unclaimed personal property; contain: the name of the apparent owner; include a statement that failure to communicate with the holder will result in a transfer of the property to the Minister and the date the transfer will take place; when the holder does not know the identity of the owner, no notice is required. 7

8 Reports If the property remains unclaimed after the apparent owner is given notice (or where the holder is not required to give notice to any person), a person who, on December 31 in any year, is the holder of unclaimed property that is presumed to be abandoned must, within 120 days of the end of that year: prepare a report in the form required respecting the unclaimed personal property; identify separately in the report: the unclaimed personal property to which the report refers; any fees imposed in respect of the unclaimed property; all information relevant to the determination of the fair market value of the unclaimed personal property to be transferred to the Minister; a declaration that notice was given to the apparent owner of the unclaimed personal property in accordance with the legislation or the reason why notice was not given (notice is not required to be given if the holder has reasonable grounds to believe that the last known address for the apparent owner shown on the records of the holder is not correct and the correct address cannot be readily ascertained or where the holder does not know the identity of an apparent owner of the personal property); the name of the apparent owner of the personal property, if known to the holder; all information known to the holder regarding the apparent owner that is relevant to identifying and locating the apparent owner; any serial number or other unique identifier number that appears on or is registered in respect of the unclaimed personal property, and all other information relevant to identifying the unclaimed personal property or distinguishing it from other personal property. This report, which must be delivered to the Minister, must also include with respect to each item of unclaimed property, the last known address and the social insurance number of the apparent owner, if known. The reporting holder is required to comply with this reporting requirement to the extent possible, even if they are unable to sufficiently complete the report with the required information because of their records. The reporting holder must remit to the Minister the unclaimed personal property, orserve a written objection on the Minister setting out the basis upon which the reporting holder objects to the transfer of the unclaimed property to the Minister. Transfer of unclaimed property If the transfer of property cannot be effected within the time limits, the entity must pay the equivalent value of the property to the Minister. The Minister may demand copies of records related to the property. Records that are not transferred but may assist in identifying or locating the owner of property must be retained for 10 years. Compliance with reporting and transfer requirements absolves the entity of any liabilities pertaining to the unclaimed property. 8

9 Inspection and Enforcement The Minister can: compel any private entity suspected of having unreported unclaimed property to produce records for inspection make an assessment of property value and demand transfer within 120 days Entities are subject to fines prescribed under the Act if guilty of obstructing an investigation, misrepresentation or omission, or failing to comply with its duties under the Act. Max fine for individuals or directors of corporations: $2500 Max fine for corporations: $25,000 Limitation period: 4 years Due diligence defence Unclaimed Property Laws in Canada: British Columbia Statute: Revised Statutes of British Columbia, Unclaimed Property Act: Unclaimed Property Act (SBC 1999) Chapter 48 Regulation: Unclaimed Property Regulation The BC Unclaimed Property Society as Administrator per The Act Compliance with The Act is compulsory only for certain types of businesses/agencies The UP Administrator distributes surveys to be completed and returned for assessment as to reporting requirements Holders with gross revenues < $250K are exempt from reporting Properties valued at < $50 are exempt from reporting No provision in The Act or Regulation re: prosecution of offences 9

10 Summary of Unclaimed Property Laws in British Columbia Reporting period:period ending December 31 st of any year Due Date: 120 days after December 31 st of any year Due Diligence: Within 6 months of abandonment Thresholds: $200 - Deposits, Securities, insurance (not life) $500 - Money Orders $1,000 - Life Ins., annuities and trust funds Holders must establish and maintain database for public access Reporting and transfer of unclaimed property is mandatory only for proceeds of Court actions, credit unions, debt collection agencies, real estate agencies and companies in liquidation; Other holders maintain funds in their possession Holders may request to transfer unclaimed property to the administrator Negative Reports recommended as a response to survey Summary of Unclaimed Property Laws in British Columbia Record Retention: Property valued at < $1,000 6 years Property valued at < $25, years Property valued at > $25, years Period after which Unclaimed Property may be treated as holder s income: Property valued at < $1,000 6 years Property valued at < $25, years Property valued at > $25, years Overview of Québec Administration 1999: The Public Curator Act amended in 1997 comes into effect. The Financial Assets are now added to the Unclaimed Property Administration in addition to Unclaimed Estates 2006: Transfer of the UP Program from The Public Curator to Revenu Québec 2011: The Unclaimed Property Act is passed and assumes responsibility for previous articles contained in the Public Curator Act In numbers, as of March 18th 2013: 2 Main Types of Unclaimed Properties # of Properties C$ Values Unclaimed Financial Assets C$ 205,321,294 Unclaimed Estates C$ 42,368,854 10

11 Common property types remitted to Québec by U.S. holders: Credit union accounts Securities: stocks, dividends, bond principals and coupons, etc. Funds or securities held in trust Life insurance products Last known address Criteria for U.S. Holders to Report to Québec Last known address of the owner must be in Québec Dormancy period: 3 years Due diligence: 6 months before the end of dormancy period Holders must remit properties within 3 months following the fiscal year-end in which the properties became unclaimed Reporting Process for U.S. Holders 2 ways to report: Paper Report using the BD-81.5-V form available on Revenu Québec website Electronically via the Québec-modified version of the NAUPA format available on RevenuQuébec website The properties can be reported in U.S. Dollars or Canadian Dollars Detailed information is available at the Unclaimed Property section of Revenu Québec website : 11

12 Unclaimed Property Laws in Canada: Applicable legislation: Unclaimed Property Act The Unclaimed Property Act considers the following unclaimed property if the owner or other right-holder is domiciled in : 1. deposits of money with a financial services cooperative, a savings company, a trust company or any other institution authorized by law to receive deposits of money, where no claim or transaction has been made and no instructions have been given by the right-holder in respect of the deposits or the related accounts in the three years following the date on which the money deposited became due or payable; 2. the value of cheques or bills of exchange certified or accepted by a financial institution or of drafts issued by a financial institution, where no request for payment has been made by the right-holder in respect of the instruments in the three years following the date of certification, acceptance or issue; 3. amounts due on the reimbursement or redemption of debt securities, stocks, shares or any other form of participation in a legal person, partnership or trust, and the interest, dividends or other income, including patronage dividends, attaching to the securities or other form of participation, where no claim or transaction has been made and no instructions have been given by the right-holder in respect of the amounts or the income in the three years following the date on which they became due or payable; 4. property to be distributed because of the conversion of a mutual insurance association into a joint-stock company, where no claim or transaction has been made and no instructions have been given by the right-holder in respect of the property in the three years following the date of conversion; 5. funds, securities and other property received in any capacity whatsoever by a securities adviser or broker in the name or on behalf of a third person, where no claim or transaction has been made and no instructions have been given by the right-holder in respect of the property in the three years following the date of the receipt by the adviser or broker; 6. funds, securities and other property held in trust by any person authorized by law to hold property in trust, where no claim or transaction has been made and no instructions have been given by the right-holder in respect of the property in the three years following the date on which they became due or payable; property held in trust includes sums of money required to be accounted for separately and kept in a separate trust account by the holder and sums of money held in a fiduciary capacity under any other designation indicating that they are held for the benefit of a third person; 7. funds, securities and other property deposited in a safety deposit box in a financial institution, where the safety deposit box lease has been expired for three years and, during that period, neither the renewal of the contract nor access to the safety deposit box has been requested by the right-holder; 8. funds, securities and other property held by a financial institution as pledge holder or custodian, where no claim or transaction has been made and no instructions have been given by the right-holder in respect of the property in the three years following the date on which the property became due or payable by reason of the extinction of the secured obligation or otherwise; 12

13 9. insured amounts due under a life insurance contract, where no claim or transaction has been made and no instructions have been given by the right-holder in respect of the amounts in the three years following the date on which they became due or payable; any amount due on the death of the insured person is presumed to be due or payable on or before the date of the person's one 100th birthday; 10. amounts due under a pension or retirement contract or plan, other than benefits under the Act respecting the Québec Pension Plan (chapter R-9) or under a similar plan within the meaning of that Act, where no claim or transaction has been made and no instructions have been given by the right-holder in respect of the amounts in the three years following the date on which they became due or payable; such amounts are presumed to be due or payable on or before the end of the year in which the annuitant or employee reaches 71 years of age; where property to which this section applies is an asset of a retirement savings plan, it may not be considered separately from the amounts due under the plan; 11. interest, dividends and other income produced by property described in any of subparagraphs 1 to 10, insofar as the instrument stipulates or the law provides that the income is payable to the right-holder; and 12. property determined by government regulation, subject to the prescribed conditions. Property described in the first paragraph is also considered to be unclaimed property if it is situated in Québec and the law of the domicile of the right-holder does not provide for provisional administration. Property is generally deemed to become unclaimed property after 3 years. Notice to owners A holder of unclaimed property must, within the 6 month period that precedes the requirement to transfer, give the right-holder at least three months prior written notice. The notice must describe the property and inform the right-holder that the property will be delivered to the Minister if not claimed within the allotted time. Notice is not required where the property value is less than $100 or the holder cannot, by reasonable means, ascertain the right-holder s address. 13

14 Record-keeping All holders of unclaimed property must keep in their establishment an up-to-date list of unclaimed property containing the name and last known address of the owners and, if applicable, the date which property was delivered to the Minister. All entries related to unclaimed property must remain on the list for 10 years. Investigation and Inquiry An entity s books, registers and accounts are subject to inspection by a person authorized by the Minister. The Minister may make a formal demand for statements, returns or other reports, either directly or through a court order. Reporting and transfer An entity must transfer unclaimed property once a year to the Minister if the property remains unclaimed after notice was provided to the owner, and also must transfer any unclaimed property for which no notice was required. The transfer must include a statement containing a description of the property and any information that may assist in identifying the owner, their place of domicile and the nature and source of their rights. This statement must also contain a declaration that the required notice was provided or if such notice was not required, state the reasons why. 14

15 Penal Provisions Failure to deliver property, give notice or keep proper records is an offence subject to a first fine of up to $5000 and a second fine of up to $15,000. Failure to cooperate with an investigation or comply with a formal demand is an offence subject to a fine of $800 -$10,000. The court has discretion to make such an order as it deems appropriate to remedy the failure constituting the offence. Note: The Act also provides special rules for procedure and evidence. Vacant Property Act Manitoba Applies to any personal property, including money or securities for money deposited or held in trustby any person in the province. Property vests and becomes payable to the province if it is unclaimed for 12 years from the time that the property, money or securities were first payable. Prince Edward Island Part IV, Public Trustee Act Repealed in May of

16 Saskatchewan No unclaimed property legislation is currently in force which would impose escheatment obligations. The Public Guardian and Trustee Act allows the Public Guardian and Trustee to accept money from any source where the whereabouts of a person or persons entitled to the money is unknown. There is no positive obligation to attempt to notify the owner or report it unclaimed. Recent Developments: Ontario In 2012, the Ontario government announced its intention to establish an unclaimed intangible property program. Ontario had previously passed the Unclaimed Intangible Property Act in 1989; it was never proclaimed in force and has been repealed. Recent Developments: Ontario No draft legislation in place; the consultation paper, however, highlights some key considerations: Property exclusions: The exclusion of gift certificates, retail business credits, property in trusts (as under the Act). Abandonment periods: appropriate timing for deeming property to be abandoned. Retrospectivity:Whether or not to adopt s.33(2)(b) of the Uniform Act which exempts property that would have become unclaimed more than five years before the coming into force of the Act. Notably, and did not adopt this provision. 16

17 Corporate Property With respect to corporations, most Canadian corporate legislation provides that any property of a dissolved corporation which has not been distributed upon its dissolution vests in the Crown of a particular province or in her Majesty in right of Canada (for CBCA corporations). If desire is to divest of funds there are various agencies that will accept funds depending on the jurisdiction of incorporation/dissolution (for example, Industry Canada (CBCA corporations), Saskatchewan SBCA corporations (Information Services Corporation). QUESTIONS? 17