Bill 43 was introduced in late November 2021 and received royal assent on December 9, 2021, officially becoming a law. Some of the amendments introduced in Bill 43 were changes to the Business Corporations Act (Ontario) (OBCA) to require certain private corporations incorporated under the OBCA to prepare and maintain a register of individuals with “significant control” over the corporation. These new rules are similar to those enacted for federally incorporated corporations in 2019 and have since been introduced in British Columbia, Québec, Saskatchewan, Manitoba, Nova Scotia, PEI, and Newfoundland and Labrador. Other jurisdictions, including the United Kingdom and the European Union, have implemented similar transparency regimes.

This amendment reflects another shift in Canadian law towards enhancing transparency around the ultimate ownership and control of corporations, with the intention of assisting law enforcement agencies in targeting potential money laundering and tax evasion.

The new rules will come into force on January 1, 2023. They will apply only to private Ontario corporations (other than private corporations that are wholly-owned subsidiaries of publicly traded corporations, offering corporations, corporations that offer their securities to the public and are subject to an act of the legislature, and corporations whose shares are listed on a designated stock exchange within the meaning of the Income Tax Act and corporations that are a member of a prescribed class).

Who is an “individual with significant control”?

An individual with significant control is someone who:

  • Is the registered or beneficial owner of, or has direct or indirect control or direction over, any number of shares that carry 25% or more of the voting rights attached to all of the corporation’s outstanding voting shares;
  • Is the registered or beneficial owner of, or has direct or indirect control or direction over, any number of shares that is equal to 25% or more of all of the corporation’s outstanding shares measured by fair market value;
  • Has any direct or indirect influence that, if exercised, would result in control in fact of the corporation; or
  • Is an individual to whom circumstances prescribed by regulation (which have not yet been promulgated) apply.

In addition, two or more individuals are each considered to be an individual with significant control over a corporation if, in respect of ownership of, or rights in, a significant number of shares of the corporation (i.e., the 25% threshold noted above):

  • Such ownership interests or rights are held jointly by those individuals;
  • Pursuant to an agreement, such rights are to be exercised jointly or in concert by those individuals; or
  • The individuals holding the ownership interests or rights are “related persons” to each other, a term defined in the OBCA, which includes spouses and children.

The amendments do not explain what will constitute an individual having “direct or indirect control or direction” over shares that it does not own. Still, they do state that regulations defining those terms may be made.

Whether an individual has influence that could result in “control in fact” of the corporation is a determination that must take into account “all factors that are relevant in the circumstances”. The amendments do not include any detailed guidance regarding what might be considered relevant factors, but the amendments expressly state that the ability to change the board of directors of the corporation need not be a relevant factor. Exemptions are provided in the amendments for arm’s length dealings between the corporation and an individual where the individual’s influence is based on a commercial relationship, such as a franchise, license, lease, distribution, supply, or management agreement.

Creating and maintaining the register will therefore require corporations to consider whether the threshold of share ownership is met and whether there are individuals who, despite not holding a significant number of shares, are in a position to exercise “significant influence” over the corporation. Further guidance on these definitions may be provided in regulations, which are yet to be enacted.

What information must the register include?

For each individual with significant control, the register must include the following information:

  • Name, date of birth, and last known address;
  • Jurisdiction of residence for tax purposes;
  • The date on which the individual became (and if applicable, ceased to be) an individual with significant control;
  • Description of how the individual meets the definition of significant control;
  • Any other information that may be provided for in regulations enacted in the future; and
  • A description of the steps taken to identify all individuals with significant control and to ensure that the information in the register is accurate, complete, and up to date.

At least once during each financial year of the corporation, the corporation must take reasonable steps to ensure that it has identified all individuals with significant control over the corporation and that the information in the register is accurate, complete, and up to date. If the corporation becomes aware of any new information referred to above, the corporation must record that information in the register within 15 days. Shareholders are required to comply with requests from the corporation for the information required to be included in the register promptly and to the best of their knowledge.

Failure to comply

Directors and officers have various obligations under the OBCA. In this case, any director or officer of a corporation who knowingly authorizes, permits, or acquiesces in the corporation’s failure to maintain the register, in the recording of false or misleading information in the register, or provides any person or entity false or misleading information relating to the register, is considered to have committed an offence under the OBCA. Similarly, a shareholder who knowingly contravenes its obligation to reply accurately and completely to a request for information from the corporation commits an offence under the OBCA. Upon conviction of such offence, the director, officer or shareholder, as applicable, is liable to a fine not exceeding CA$200,000, or to imprisonment for a term not exceeding six months, or both.

Who can access the register?

The register must be kept at its registered office or another place in Ontario designated by the directors of the corporation and not generally available to the public. However, law enforcement agencies, taxing authorities, and other regulatory bodies may request disclosure of a corporation’s register for a certain investigatory and enforcement purposes, and OBCA corporations must comply with these requests. When published, new regulations are expected to provide further guidance regarding any conditions or restrictions for a corporation’s response to requests for its register.