As of June 13, 2019, private corporations incorporated under the Canada Business Corporations Act (CBCA) must maintain a register regarding individuals who have “significant control” over the corporation through direct or indirect influence. This requirement was one of several new initiatives included in Bill C-86, the Budget Implementation Act, 2018, No. 2 which received Royal Assent on December 13, 2018.
Individuals will fall within the category of having significant control if the following triggers are present:
- ability to control the corporation through indirect or direct influence; or
- being the beneficial or registered owner of, or having the control or direction over, either indirectly or directly, a “significant number of shares” of the corporation (the threshold for such control is being 1) the owner of 25% or more of the outstanding shares of the corporation or 2) owning 25% or more of the outstanding number of voting shares of the corporation.
The punishment for intentionally disregarding the new requirements will consist of six months imprisonment and/or a fine up to $200,000. Parties potentially impacted by these consequences include shareholders, corporations, directors and officers.
The register for individuals with significant control of the corporation must contain the information below:
- name, birthdate and latest address;
- jurisdiction of residence for tax purposes;
- date when individual obtained significant control and ceased to hold significant control of the corporation;
- description of how the individual has significant control of the company;
- description of the reasonable steps taken by the corporation in each financial year to ensure the register is complete and accurate; and
- any other prescribed information as set forth in any regulations.
After the register has been created the corporation must be diligent as it pertains to keeping it up to date through at least one check during the fiscal year to see if additional individuals satisfy the significant control category.
The exact mechanics concerning the preparation and maintenance of the register will be shared through upcoming registration requirements.
Despite the new registration requirements currently applying only to private corporations formed under the CBCA, this move is a part of a potentially growing trend. Recent Recommendations in the House of Commons Standing Committee on Finance’s report on the Proceeds of Crime (Money Laundering) and Terrorist Financing Act highlight a potential transition to a universal registry to be applied both federally and to the respective provinces and territories.