New laws have come into force effective June 13, 2019 which require for all federally incorporated companies in Canada to maintain a register disclosing the list of individuals who exercise significant control over the corporation.
Similar regulations are in the final stages of being drafted in most provinces for provincially incorporated companies. We expect British Columbia companies will have the same or similar reporting requirements as federal companies and the law will come into force before the end of the calendar 2019 year.
Directors, shareholders and creditors of the corporation may apply to access the register. In effect, this register becomes a matter of public record, but it is only available to a limited number of people. While access to this information seems to be available to a very small number of people, it would appear ANY creditor, even someone owed $1.00, could apply for access to this register.
Action recommended: Please contact your corporate lawyer to ensure you and your company or companies are adequately prepared to meet these new requirements.
TRACKING OF CORPORATE OWNERSHIP INFORMATION – CANADA BUSINESS CORPORATIONS ACT
Bill C-86, the Second 2018 Budget Bill, received Royal Assent on December 13, 2018. This bill included changes to the Canada Business Corporations Act (“CBCA”) which set out a criterion for identifying individuals who have significant control over a corporation. It also sets out a requirement for corporations that meet certain criteria to keep a register of these individuals.
For these purposes an individual may have significant control over a corporation if the individual has any of the following interests or rights, or any combination of them, in respect of a significant number of shares (more than 25% of voting rights or value) of the corporation:
- the individual is the registered holder;
- the individual is the beneficial owner; or
- the individual has direct or indirect control or direction over.
A group of two or more individuals whose joint holdings meet these criteria are considered to be an “individual” with significant control.
Also, an individual who has any direct or indirect influence that, if exercised, would result in control of the corporation would be considered to have significant control. The legislation also provides that other prescribed situations may result in an individual having significant control.
Failure to comply with the requirements to maintain such a registry may result in a $5,000 penalty. A director or corporation who “knowingly authorizes, permits or acquiesces” in not fulfilling this requirement or who provides false or misleading information in the registry may be subject to a fine of up to $200,000 and/or imprisonment of up to six months.
This requirement has come into force six months after Royal Assent, effective June 13, 2019. This is for Federally incorporated companies in Canada.
If you have any questions regarding the above or whether your business is required to take action please contact your Horizon CPA contact and/or your corporate lawyer.
