On June 13, 2019, Bill C-86, Budget Implementation Act, 2018, No. 2 (Bill C-86), will come into force. Bill C-86 received royal assent on December 13, 2018 and provides for various amendments to the Canada Business Corporations Act (CBCA). A significant amendment to the CBCA included in Bill C-86 is the new requirement that all private corporations establish a register (Register) containing up-to-date information on individuals with significant control (ISC) of such corporation. This information is in addition to the current registers that corporations maintain for directors and shareholders.
An ISC of a corporation is defined as an individual who has any of the following interests or rights (or combination thereof) in respect of a “significant number” of shares of the corporation:
- Registered shareholder
- Beneficial owner
- Individuals with direct or indirect control or direction over the shares
- An individual who has direct or indirect influence, that if exercised, would result in control of fact of the corporation
- An individual to whom prescribed circumstances apply (as may be set out in the regulations to the CBCA).
“Significant control” also includes interests or rights held by two or more individuals jointly or who are subject to an arrangement to exercise rights jointly or in concert, in respect of a significant number of corporate shares.
A “significant number of shares” is defined to mean any number of shares that: carry 25 per cent or more of the voting rights of the corporation’s shares or 25 per cent or more of all the corporation’s outstanding shares measured by fair market value.
The Register must include, among other things, the following information for each individual who qualifies as an ISC:
- Their name, date of birth and latest known address
- Their jurisdiction of residence for tax purposes
- The date on which the individual became and ceased to be an ISC
- A description of how the individual is an ISC
- Other prescribed information to be set forth in the regulations
- A description of each step taken by the corporation to update the information.
A corporation is solely responsible for preparing and maintaining the Register. Moreover, there is an obligation for a corporation to update the Register annually, as well as within 15 days of a corporation becoming aware that any information ought to be recorded or updated.
The information contained in the Register will not be available publicly, however, the Director of Corporations Canada may request the information contained in the Register. Creditors and shareholders of a corporation or their personal representatives may, on application, require that the corporation or its agent allow them access to the Register. As part of this application they must provide an affidavit swearing that any information obtained from the Register will only be used in connection with (a) an effort to influence the voting of shareholders, (b) an offer to acquire securities of the corporation, (c) or any other matter relating to the affairs of the corporation.
Failure to comply with these record-keeping duties can result in a director, officer, or shareholder being held personally liable for a fine of up to C$200,000, imprisonment for a term of up to six months, or both.
The amendments to the CBCA are part of a broader push towards corporate transparency, to help inform investors when they are considering investing in a corporation, and to support law enforcement agencies in money laundering investigations. As such, certain provinces, with more expected to follow, have tabled proposed amendments to their corporate statutes that would introduce corporate transparency provisions similar to those in Bill C-86.
Given the requirement that these records be in place on or before June 13, 2019, corporations are advised to start notifying their shareholders of the new requirements with a view to compiling the necessary information for the implementation of an ISC Register.