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Introduction of Ontario Limited Liability Legislation for Income Trusts

May-23-2003

Lawyer Allan Goodman, Stephen Pincus
Area Commercial Real Estate, Corporate Finance and Securities, Tax, REITs and Income Securities

Summary

On May 22, 2003, the Ontario Government introduced Bill 41.  Schedule L of Bill 41 is the Trust Beneficiaries’ Liability Act, 2003, which will protect unitholders of publicly traded trusts by affording them the same protection against personal liability as shareholders of a corporation.

Partners of Goodmans LLP worked closely with the Canadian Institute of Public and Private Real Estate Companies (“CIPPREC”) over recent months to spearhead this initiative and assist in drafting this legislation to confirm that unitholders of real estate investment trusts (“REITs”) and other income trusts are not personally liable for the activities or obligations of the trusts or their trustees.

The adoption of this legislation will ensure that the exposure of unitholders to claims against trusts will be limited to the amount of their investment in the trust, removing any uncertainty for business trust investors.  With this concern addressed, it is expected that publicly traded trusts will soon be included in the S&P/TSX Composite Index.  This is expected to enhance demand and liquidity for REITs and other income trust units.

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