Following Quebec and British Columbia, the federal government plans to create a federal register on individuals with significant control searchable by the public.
The federal government has introduced new legislation that – if enacted – will create a federal register on individuals with significant control that will be searchable by the public. Private corporations governed by the Canada Business Corporations Act (the “CBCA”) will have to file the information contained in their registers of individuals with significant control (“ISC Registers”) with Corporations Canada.
Since June 2019, private federal business corporations have been required to create and maintain ISC Registers. By increasing corporate transparency, the purpose of the ISC Registers is to assist with combatting tax evasion, money laundering and terrorist financing (for more information, please see: “Bill C-86 – New record-keeping obligations for all CBCA private companies”). At present, the information in the ISC Registers is only available to tax and police authorities, certain regulatory agencies and shareholders as well as creditors of CBCA corporations.
Bill C-42 – An Act to amend the Canada Business Corporations Act (...) (“Bill C-42”), which is currently being debated in Parliament, will implement a 2022 proposal by the federal government to create a publicly accessible federal register (the “Federal Register”; please see our bulletin: “Transparent to the World – Push for Public National Ownership Registry Unveiled in 2022 Federal Budget”).
The introduction of the Federal Register follows similar developments in Quebec (please see our bulletin, “Bill 78: What Impact will it Have for Enterprises?”) and British Columbia (please see our bulletin, “Deeper Down the Rabbit Hole – British Columbia Corporate Transparency Register Will Become Accessible to the Public”). However, it also comes at a time when certain other jurisdictions are beginning to restrict public access to beneficial ownership information. In late 2022, for example, the Court of Justice of the European Union has struck down public access to beneficial ownership information in Europe on the basis that it interferes with overarching privacy and data protection rights (please click here for the court’s judgment).
The New Federal Register
Presently, every private CBCA corporation must maintain and review at least annually an ISC Register disclosing all individuals with significant control over the corporation. These include:
- Individuals who are registered or beneficial holders of a significant number of shares of the corporation;
- Individuals who have direct or indirect control or direction over a significant number of shares of the corporation; and
- Individuals who have any direct or indirect influence that, if exercised, would result in control in fact of the corporation.
If Bill C-42 is implemented, each private CBCA corporation will be required to file information contained in its ISC Register with Corporations Canada:
- After incorporation, amalgamation or continuance under the CBCA;
- On an annual basis; and
- Within 15 days after each update of a corporation’s ISC Register.
The manner and form of these filings would be determined by Corporations Canada.
Failure to Comply with Federal Register Filings – New Enforcement Tools
Under Bill C-42, a director or officer of a corporation who knowingly authorizes, permits, or acquiesces in the contravention of the corporation’s obligations in respect of its ISC Register information commits an offence. Currently, the obligations to which the offence applies to are the obligation to prepare and maintain a corporation’s ISC Register and the obligation to disclose the information in the ISC Register to an investigative body that has made a request pursuant to the CBCA. Bill C-42 would add an obligation to provide the information in a corporation’s ISC Register to the Director. The punishment for this offence is still a fine of up to $200,000 on summary conviction or a maximum term of imprisonment of six months.
Corporations Canada may also refuse to issue certificates of existence (and presumably certificates of compliance) for CBCA corporations that are not in compliance with their Federal Register filing obligations. As these certificates are often needed to obtain financing or for other commercial transactions, failure to file or to keep the information in the Federal Register up to date could also have substantial economic implications for private CBCA corporations.
Under Bill C-42, Corporations Canada would also be given the authority to make inquiries of any person on compliance with the provisions relating to the disclosure of individuals with significant control or require verification of information in a corporation’s ISC Register by affidavit or statutory declaration.
Further, Corporations Canada may dissolve private CBCA corporations that are in default of their filing obligations for the Federal Register for more than one year.
Federal Register Accessible by the Public
The new Federal Register will be searchable by the public, likely for a fee. For each private CBCA corporation, members of the public will be able to obtain the following information on an individual with significant control:
- Their name;
- Their residential address (unless the individual has provided an address for service to the corporation);
- Their address for service (if provided by the individual);
- Dates when the individual became or ceased to be an individual with significant control; and
- A description of how they are an individual with significant control, including, as applicable, a description of their interests and rights in respect of shares of the corporation.
Individuals with significant control who do not wish for their residential address to become publicly accessible should therefore provide an address for service for inclusion in the ISC Register.
Upon introduction of the Federal Register, access by shareholders and creditors to the ISC Registers of private CBCA corporations would be abolished as it would no longer be needed.
Corporations Canada may also provide all or part of the information in the Federal Register to provincial corporate registries, government departments or agencies responsible for corporate law in each province.
Protections for Individuals with Significant Control
As proposed, Bill C-42 would offer some privacy protections for individuals with significant control, prohibiting public access to the above information in limited circumstances:
- For individuals with significant control under the age of 18 years old.
- If Corporations Canada, on application by an individual with significant control, is satisfied that the individual is incapable.
- If Corporations Canada, on application by an individual with significant control, reasonably believes that making the individual’s information available to the public presents or would present a serious threat to the safety of the individual.
- For public office holders with respect to information confidential under the Conflict of Interest Act or similar provincial legislation.
Corporations Canada is required to publish a notice of any decision granting an application to exempt information from being made available to the public.
Protections for Whistleblowers
Under the proposed amendments, Corporations Canada would also be prohibited from making available any information that could reasonably be expected to reveal the identity of a whistleblower, unless such whistleblower provides consent or it occurs in relation to investigations by the police, Canada Revenue Agency and the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). These protections would include wrongdoings in relation to the ISC Registers and the Federal Register.
New Disclosure and Updating Requirements for ISC Registers
If Bill C-42 is enacted as proposed, private CBCA corporations must take reasonable efforts to obtain additional information about individuals with significant control and must disclose information about individuals in their ISC Register, namely:
- Their residential address;
- Their address for service (at the choice of each individual); and
- Their citizenship.
Moreover, private CBCA corporations would be required to take reasonable steps to ensure that they have identified all individuals with significant control and that the information in its ISC Register is accurate, complete and up-to-date:
- At least annually;
- On request by Corporations Canada; and
- During additional times prescribed in future regulations.
What Comes Next?
Bill C-42 is currently winding its way through the legislative approval process in Parliament. If enacted, it is expected that CBCA corporations will have some transitional period to prepare for the new Federal Register.