On June 13, 2019, new rules amending the Canadian Business Corporations Act (“CBCA”), regarding the identification of the beneficial ownership will take effect. Thus, federal private corporations will be required to maintain a register identifying the individuals with significant control of the corporation.
The new provisions of the CBCA define an individual with significant control as being:
(a) an individual who has any of the following interests or rights, or any combination of them, in respect of a significant number of shares of the corporation:
- (i) the individual is the registered holder of them,
- (ii) the individual is the beneficial owner of them, or
- (iii) the individual has direct or indirect control or direction over them;
(b) an individual who has any direct or indirect influence that, if exercised, would result in control in fact of the corporation; or
(c) an individual to whom prescribed circumstances apply
For the purpose hereof, a “significant number of shares” means:
- any number of shares that carry 25% or more of the voting rights attached to all of the corporation’s outstanding voting shares; or
- any number of shares that is equal to 25% or more 15 of all of the corporation’s outstanding shares measured by fair market value.
Specifically, the corporation will have to inquire about its shareholders and the shareholders of its corporate shareholders, in order to identify the natural persons holding the control of, or exercising a significant influence over, the private federal corporation, directly and indirectly.
In order to adequately identify individuals with significant control of the corporation, the legislator requests that the following information be entered in the register:
- name, date of birth and latest known address;
- jurisdiction of residence for tax purposes;
- day on which the individual became or ceased to be an individual with significant control;
- a description of how each individual is an individual with significant control over the corporation, including, as applicable, a description of their interests and rights in respect of shares of the corporation;
- any other prescribed information.
- actions taken by the company to identify all individuals with “significant control” and to ensure that the information in the new register is accurate, complete and up to date.
Although the information in this register is private and not disclosed to Corporations Canada, the Director appointed under the CBCA, the creditors of the corporation and its shareholder may consult the registry and obtain an extract upon request, under certain conditions. Private federal corporations who do not update their register within a 15-day time period run the risk of penalties of up to $5,000 for non-compliance. The corporation’s directors, officers and shareholders who are knowingly non-compliant, or who provide false or misleading information, risk penalties of up to $200,000 or imprisonment up to 6 months. As the goal behind this new register is to ensure greater transparency in the ownership and control of a corporation, and to assist law enforcement agencies in countering activities such as money laundering and tax fraud, the provincial governments will follow in the footsteps of the federal government by adopting similar CBCA provisions.
By Me Mélanie Masson, in collaboration with Catherine Demers, articling student