Canadian Primer on Unclaimed Property Legislation

Like many jurisdictions, Canada has laws that aim to connect unclaimed property with their rightful owners, and where those efforts are unsuccessful, to deliver the property to a government authority. Given the broad reach of provincial unclaimed property laws in Canada, businesses operating nationally need to ensure their compliance and accounting practices are aligned with the requirements of these laws.

Unclaimed property laws are set out in provincial unclaimed property legislation of general application and in both federal and provincial legislation governing deposit-taking institutions. To date, only Alberta, British Columbia, Manitoba, Quebec, and, most recently, New Brunswick have enacted unclaimed property legislation of general application.

While the specific requirements vary from jurisdiction to jurisdiction, unclaimed property laws in Canada focus on four key issues:

• Does a business hold property that belongs to, or is owed to, someone else?

• If so, has the property remained unclaimed by its owner for the dormancy period specified in the legislation?

• If so, the legislation imposes notice obligations on the business holding the property to attempt to contact the apparent owner of the unclaimed property.

• If these efforts are unsuccessful, the unclaimed property must be reported on and delivered to the custody of a government authority, subject to some exceptions. Once the property is in the hands of the government authority, that authority is generally required to preserve the property on behalf of the owners for a specified period of time and facilitate claims by owners to their property through open-source databases and other means. Currently, the Bank of Canada and the provincial authorities administering unclaimed property laws collectively hold over a billion dollars in unclaimed funds.

In this Canadian primer, we examine the Canadian federal and provincial laws governing unclaimed property and outline the key considerations for businesses operating in Canada. We begin by looking first at provincial unclaimed property laws of general application, followed by a discussion of the special rules applicable to federal and provincial deposit-taking institutions, including a recent announcement on the 2020 Fall Economic Statement to modernize the federal unclaimed property framework.

PROVINCIAL LEGISLATION

As noted above, only Alberta, British Columbia, Manitoba, Quebec and New Brunswick have, so far, enacted unclaimed property legislation of general application.

Alberta

Introduced in 2008, Alberta’s Unclaimed Personal Property and Vested Property Act is one of the more comprehensive unclaimed property regimes implemented in Canada. It is based on the Uniform Unclaimed Intangible Property Act developed by the Uniform Law Conference of Canada (ULCC Uniform Act), which is in turn modelled after the U.S. Uniform Unclaimed Property Act of 1995.

Scope of Application. The requirements of the Alberta legislation apply if the entity holding the unclaimed property exercises its central management in Alberta or otherwise carries on business in Alberta (this would generally capture any entity that holds an extraprovincial registration in the province). In both cases, the Alberta legislation applies if the last known address of the owner of the unclaimed property is in Alberta. Where the entity holding the unclaimed property exercises its central management in Alberta, the Alberta legislation also applies if the address or identity of the owner are unknown.

Property Covered. The Alberta legislation applies to tangible personal property of C$1,000 or more in Alberta and intangible personal property of C$250 or more. Intangible personal property is defined broadly and includes, among other things, money, credit balances, uncashed cheques, interest and dividend payments, security deposits, unpaid wages, securities and security entitlements, and amounts payable under an insurance policy. The regulations provide certain exclusions, including for loyalty program points, gift certificates and store credits.

Notice Requirements. If the application requirements set out above are met, the Alberta legislation requires the holder of the unclaimed property to inform the owner about the property in accordance with the applicable form, timing and content requirements. The notice requirement is triggered after the property remains abandoned for a prescribed period that varies depending on the type of property and can range between one to 15 years. Abandonment is generally established based on lack of communication from, or other specified indication of interest by, the owner in respect of the property. Certain exceptions to this notice requirement may apply.

Reporting and Remittance. The Alberta legislation also imposes an annual requirement to remit any unclaimed property to the Alberta Tax and Revenue Administration (ATRA). The remittance must be accompanied by a report respecting the property. There are detailed form, timing and content requirements governing the reporting and remittance requirements that can be accessed on ATRA’s website. Certain threshold and other exceptions exist.

British Columbia

British Columbia’s Unclaimed Property Act, introduced in 1999, is somewhat different and, unlike other provincial legislation, it does not mandate that property holders remit unclaimed property to a government-appointed administrator, except for B.C. credit unions and certain other entities.

Scope of Application. The requirements of the B.C. legislation apply in respect of any unclaimed property where the last known address of the owner of that property is in B.C., based on the records of the entity holding it. The B.C. legislation will also apply to unclaimed property with no known address of its apparent owner if certain actions described in the legislation in respect of each category of property took place in the province.

Property Covered. The B.C. legislation applies to categories of property that are exhaustively listed in the legislation. They include, among other things, certain deposits and money orders, securities, security entitlements and distributions, amounts due under an insurance policy, and amounts under certain benefit plans.

Due Diligence and Notice Requirements. In B.C., the property holder must make reasonable efforts to locate and notify the owner of the property within six months of a specified date of abandonment, depending on the type of property. Property valued below a certain threshold amount, depending on the type of property, may be exempt from these due diligence and notice requirements. Unlike other provinces, property holders subject to the B.C. legislation are required to establish written policies and procedures describing these reasonable efforts and ensure information on the policies and procedures is made public. In addition, property holders are required to collect certain information, including identifying information on the property owner to allow the holder to comply with these due diligence and notice requirements.

Voluntary Remittance. As noted above, the B.C. legislation does not require mandatory remittance of unclaimed property (except for B.C. credit unions and certain other entities). However, a property holder may voluntarily transfer property to British Columbia Unclaimed Property Society (BCUPS), a non-profit organization, if the unclaimed property is money, the property holder provides BCUPS with any information about the property that it reasonably requests and BCUPS consents to the transfer.

Maintaining a Database. If a holder of property chooses not to deliver unclaimed property to BCUPS voluntarily, the B.C. legislation requires the holder to maintain a publicly accessible database of all unclaimed property it has identified. The database must include the name of the owner, the date the property became unclaimed and the property identification number, if any. The property holder must comply with the privacy restrictions set out in the legislation by ensuring that no other information is made publicly available by search of the database and the database is searchable by name only. If the BCUPS consents, a property holder may comply with the requirement to maintain this database by providing BCUPS with the required information that will then be included in BCUPS’s own unclaimed property database. The legislation also requires a holder of unclaimed property to provide information to the public about how to make a claim for unclaimed property. In that sense, the property holder must maintain a point of contact for owners to inquire about unclaimed property and must make relevant contact information available to the public. The property holder must have established procedures for reviewing and processing the claims it receives that contemplate the ability to appeal a decision.

Quebec

Quebec has had unclaimed property legislation in place since 1999. The current Unclaimed Property Act was introduced in 2011 and sets out the rules for unclaimed property in the province.

Scope of Application. The requirements of the Quebec legislation apply in two respects. First, the legislation applies in respect of unclaimed property whose owner is domiciled in Quebec. An owner is deemed to be domiciled in Quebec if the owner’s last known address is in Quebec or, if the address is unknown, the instrument giving right to the owner’s claim to the property was made in Quebec. Second, the Quebec legislation applies to property that is situated in Quebec if the law where the owner is domiciled does not provide for unclaimed property regulation.

Property Covered. The Quebec legislation applies to categories of property that are exhaustively listed in the legislation. They include, among other things, deposits with a deposit institution authorized in Quebec, certified cheques, amounts due on the reimbursement or redemption of debt securities, shares or any other ownership interests and distributions made on such instruments, funds, securities and other property received by a securities adviser or broker, insured amounts due under a life insurance contract, and amounts due under a pension or retirement contract or plan. Certain minimum thresholds apply depending on the category of the property.

Notice Requirements. If the application requirements set out above are met, the Quebec legislation requires the holder of the unclaimed property to inform the owner about the property in accordance with the applicable form, timing and content requirements. The notice requirement is triggered after the property remains abandoned for a prescribed period (generally three years) if no action has been taken by the owner during that timeframe. The date from which the abandonment period is calculated, along with the actions that must be taken by the owner within that period, is determined with reference to the type of property involved. Certain threshold and other exceptions exist.

Reporting and Remittance. The Quebec legislation also imposes an annual requirement to remit any unclaimed property to Revenu Québec. The remittance must be accompanied by a report respecting the property. There are detailed form, timing and content requirements governing the reporting and remittance requirements that can be accessed on Revenu Québec’s website. In addition, holders of unclaimed property are required to keep an up-to-date list of unclaimed property that contains the name and last known address of the owner, as well as the date when the property was delivered to Revenu Québec, if applicable.

New Brunswick

New Brunswick enacted the Unclaimed Property Act in March 2020. It is not yet in effect and expected to come into force once its proposed implementing rules are finalized. These proposed rules, UP-001 and UP-002, were released for comment in September 2020. The comment period closed on November 23, 2020. Like the Alberta legislation, the New Brunswick Unclaimed Property Act is largely based on the ULCC Uniform Act.

Scope of Application. The New Brunswick legislation will apply substantially in the same manner as the Alberta legislation (please see above).

Property Covered. The New Brunswick legislation will apply to intangible personal property with a minimum value of C$1. Intangible personal property is defined broadly and includes, among other things, money, credit balances, customer’s overpayment, uncashed cheques, interest and dividend payments, security deposits, unpaid wages, shares or other evidence of ownership in a business corporation, derivatives, unused tickets, amounts payable under an insurance policy, and all income earned on such property. The rules provide certain exclusions, including for loyalty program points and gift cards.

Notice Requirements. If the application requirements set out above are met, the New Brunswick legislation requires the holder of the unclaimed property to inform the owner about the property in accordance with the applicable form, timing and content requirements. The notice requirement is triggered after the property remains abandoned for a prescribed period (generally three years), subject to some exceptions. Like in Alberta, abandonment is generally established based on lack of communication from, or other specified indication of interest by, the owner in respect of the property. Certain exceptions to this notice requirement may apply.

Reporting and Remittance. The New Brunswick legislation also imposes an annual requirement to remit any unclaimed property to the Financial and Consumer Services Commission that must be accompanied by a report respecting the property. There are detailed form, timing and content requirements governing the reporting and remittance requirements that can be accessed on the Commission’s website. Certain threshold exceptions exist.

Manitoba

In addition to the four provinces discussed above, Manitoba has enacted The Vacant Property Act, which includes only one operative provision. It provides that “all personal property, including money or securities for money, deposited with or held in trust by any person in the province, which remains unclaimed by the person entitled thereto for 12 years from the time when that property, money or securities were first payable, notwithstanding that the depositee or trustee has delivered or paid or transferred that personal property … vests in, and is payable to” the Manitoba government.

In October 2019, the Manitoba Law Reform Commission issued a consultation report that considered whether Manitoba should adopt a more comprehensive process for unclaimed intangible personal property. No draft legislation has resulted from this consultation as of the date of this primer.

Ontario

In Ontario, the Escheats Act, 2015 sets out a procedure by which the Public Guardian and Trustee in Ontario may take possession of unclaimed property that has become the property of the Crown by virtue of another law or statute. However, this legislation does not impose notification or remittance obligations on property holders. In 2012, the Government of Ontario released a consultation on a new proposed Unclaimed Intangible Property Program. However, no legislation was introduced following the consultation. Prior to the consultation, Ontario had enacted an Unclaimed Intangible Property Act in 1989, but that legislation was never proclaimed into law and was ultimately repealed.

DEPOSIT-TAKING LEGISLATION

Legislation governing financial institutions imposes unclaimed property notice and remittance requirements on deposit-taking institutions.

Federal Deposit-Taking Institutions

Federally, the Bank Act requires banks and Canadian branches of authorized foreign banks to comply with notice and remittance obligations on (1) unclaimed deposits that are made and payable in Canada in Canadian currency and (2) unclaimed cheques, drafts or bills of exchange payable in Canada in Canadian currency. The Bank Act provisions apply after an abandonment period of 10 years and require the bank to remit to the Bank of Canada the principal amount of the deposit or instrument, plus applicable interest, together with required information about the amount. The Bank Act also requires banks to notify the owner, at set intervals before the delivery to the Bank of Canada, that the deposit or instrument remains unpaid. The Bank of Canada provides additional information on the unclaimed property that it administers. The federal Trust and Loan Companies Act (TLCA) imposes similar requirements on federal trust and loan companies.

Whether other categories of unclaimed property held by federal deposit-taking institutions (such as deposits in non-Canadian currency) are subject to the provincial unclaimed property legislation requires careful consideration of constitutional principles of division of power between the federal and provincial governments in Canada.

2020 Fall Economic Statement

On November 30, 2020, Canada’s Fall Economic Statement announced that the federal government intends to implement amendments aimed at improving the current framework managed by the Bank of Canada and expanding its scope to include unclaimed balances from bank accounts denominated in foreign currency and from terminated federally regulated pension plans.

Provincial Deposit-Taking Institutions

Provincial deposit-taking institutions, such as credit unions, are often subject to unclaimed property regimes in their own governing provincial legislation that is similar to the federal framework administered by the Bank of Canada. These provincial regimes are outside the scope of this primer.

OTHER CONSIDERATIONS

A broad range of businesses, including financial institutions, securities dealers, custodians, money-services businesses, other payment service providers and businesses operating outside the financial services sector need to ensure their practices comply with the unclaimed property legislation that is in effect in Canada. Although not all jurisdictions in Canada have unclaimed property laws, those provinces that have enacted such laws determine the application of unclaimed property laws principally based on the address of the owner of the unclaimed property, rather than the entity that holds such property. A due diligence on compliance with unclaimed property laws is also essential in the context of major transactions.

In addition, the following issues often arise in the context of unclaimed property legislation:

• Fees: It is often possible to reduce the amount of unclaimed property by subjecting it to abandonment or dormancy fees. However, the provincial unclaimed property laws generally regulate the types of fees that may be charged in respect of unclaimed property, including by imposing monetary or reasonableness limits on such fees. Federal financial institutions, while generally not subject to such restrictions under the Bank Act and TLCA, must nonetheless ensure any such fees comply with the fee disclosure requirements under that legislation. In addition, businesses need to ensure any abandonment or dormancy fees are set out in the applicable contracts with their customers.

• Treating property as income: The B.C. legislation specifically sets out rules governing the circumstances in which property may be treated as income by the property holder. Among other things, the legislation requires the passage of a minimum wait period before unclaimed property can be treated as income. The wait period is six years for property with a value under C$1,000, 10 years for property with a value under C$25,000 and 30 years for more valuable property.

• Limitation periods: Treatment of property as income (to the extent it is not subject to a remittance obligation) may also require consideration of provincial statutes of limitations.

• Interest: In some provinces, the amount that a property holder must remit to a government authority collects interest from the date the amount is due. Accordingly, a failure to remit unclaimed property may result in in fees and penalties.

• Policies and procedures: Given the complexity of the unclaimed property legislation in Canada, it is often advisable for businesses to establish internal policies and controls to ensure ongoing compliance with the unclaimed property requirements and minimize the risk of enforcement actions and other adverse consequences.

For further information, please contact:

Vladimir Shatiryan                    +1-416-863-4154
Katie Patterson                         +1-416-863-2659

or any other member of our Financial Services Regulatory group.