Skip to content

New reporting requirements for beneficial ownership of federal corporations coming this June

Tauna Staniland, Andrea Shakespeare, Kimberly Bungay and Alycia Novacefski

The federal government has introduced new record keeping requirements for private, federally formed corporations governed by the Canada Business Corporations Act (“CBCA”). The amendments to the CBCA are being made in an effort to meet international obligations to increase corporate transparency and prevent tax-evasion and money laundering and will require corporations to track and report the individuals who are beneficial owners of shares with significant control.

The requirements created by the amendments will apply to all private companies formed under the CBCA, with specific exemptions for reporting issuers and corporations listed under a designated stock exchange. The exempted corporations are already subject to disclosure requirements that pertain to beneficial ownership of shares at certain thresholds.

The new beneficial ownership requirements were passed into law with Bill C-86 in December of 2018 and will come into force on June 13, 2019.

Who is an individual with significant control?

The amendments will require corporations to create and maintain a register of individuals who hold “significant control” in the corporation. Individuals will be deemed to hold significant control if they, either by themselves or “jointly or in concert”, own or control 25% or more of the voting rights attached to a corporation’s shares, or 25% or more of a corporation’s shares by value. For the purposes of the legislation, individuals are considered to hold significant control jointly or in concert if they hold an interest that meets this definition with another individual, or if they have an agreement to exercise their rights with another person (for example, a voting agreement or shareholders agreement). Individuals who do not own shares may also be captured by these amendments if they have significant influence over the corporation.

The broad definition of significant control found in the amendments will require organizations to trace corporate structures (including tracing through shareholder entities such as trusts and partnerships) to determine the individual human being who ultimately holds rights and interests in an affected CBCA corporation. Further consideration will then be required to determine whether such individuals are “significant” for the purposes of the legislation.

Challenges may arise when determining whether a shareholder meets the threshold of holding 25% or more of all of the corporation’s outstanding shares measured by fair market value, as this may fluctuate over time. This will be especially true in the case of corporations with complex share structures. As the fair market value of a corporation changes, so might its beneficial owners, those changes will need to be reflected in the registry.

What will the register include?

The amendments require federal corporations to create and maintain a register of current information of a corporation’s beneficial ownership. Corporations Canada has released an example of what a beneficial ownership register could look like, available through their website. However, at this time, there is no prescribed format for the register, so long as it contains the prescribed information. For each individual who holds significant control the register must include the following information:

  • name, date of birth and 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 over the corporation, including a description of any interests and rights they have in shares of the corporation
  • description of the steps taken by the corporation in each financial year to ensure the register is complete and accurate; and
  • any other prescribed information required by regulation.

Who will be able to access the register?

Information contained on the register will not be publicly available but will be available to directors, shareholders and creditors of a corporation. The Canada Revenue Agency, and other regulatory bodies, may also be able to access the information. In the future, registers of beneficial owners may become more widely accessible. Bill C-97, which is currently before Parliament, proposes giving certain investigative bodies involved in investigating crimes related to those listed in a schedule to the CBCA, the authority to request information from registers without a warrant. It is uncertain if, or when, this will become law.

In the interest of protecting privacy, corporations will be required by law to dispose of personal information collected in the process of maintaining a register of beneficial ownership six years after an individual ceases to be an individual with significant control.

Compliance and penalties

Once the amendments are in effect, corporations will be required to take “reasonable steps” to discern who the individuals with significant control in the corporation are, and to ensure registers are complete and accurate. Timeliness is an important requirement of the amendments. A corporation that becomes aware of information that should be included in the register will have 15 days to update it. Shareholders will also have a duty to respond to inquiries from a corporation pertaining to information required for the register “accurately and completely as soon as feasible”.

Non-compliance with the new requirements could result in significant monetary penalties, imprisonment, or both, for not only corporations themselves, but their directors, officers and shareholders. Corporations may be fined up to $5,000.00 for failure to meet the requirements to maintain a register of individuals with significant control, or for failure to meet a request for information from an investigative body. Directors and officers can be fined up to $200,000.00 or imprisoned for up to six months for failure to meet the requirements to maintain the register, respond to a request from an investigative body or for allowing false or misleading information to be recorded in the register. Shareholders will face the same penalties for failure to meet their obligations to provide information for the register.

As the amendments are part of a larger plan towards national and international corporate transparency, provincial finance ministers have also pledged to strengthen transparency with respect to beneficial ownership. As such, it is likely that these CBCA amendments will be used as a model for provincial legislation. More information on amendments to provincial legislation is expected in the coming months.


This update is intended for general information only. If you have questions about the above, please contact a member of our Corporate Formation/Reorganization team.

 

Click here to subscribe to Stewart McKelvey Thought Leadership.

SHARE

Archive

Search Archive


 
 

Client Update: Make Your List and Check it Twice: IRAC Sends a Holiday Reminder to Municipalities

December 23, 2015

The Island Regulatory and Appeals Commission (the “Commission”) has issued a holiday reminder to municipalities in Prince Edward Island about the importance of preparation, accuracy, and transparency when making decisions related to land use and…

Read More

Nova Scotia Government Introduces Public Services Sustainability (2015) Act

December 16, 2015

By Brian G. Johnston, QC On the same day that the Nova Scotia government announced its projected deficit had ballooned to $241 million, it also introduced Bill 148, the Public Services Sustainability (2015) Act (“Act”). The stated purposes…

Read More

Striking down the Nova Scotia Cyber-safety Act: The 10 most interesting things about Crouch v Snell

December 16, 2015

By Jennifer Taylor – Research Lawyer Nova Scotia’s Cyber-safety Act1 is no more, after a successful Charterchallenge to the legislation. In Crouch v Snell, 2015 NSSC 340, Justice McDougall of the Supreme Court of Nova Scotia found the entire statute—enacted in…

Read More

Forsythe v Westfall: Forum of Necessity & Access to Justice

December 1, 2015

By Jennifer Taylor Introduction: Did Ontario have jurisdiction? Arguments about access to justice are not enough to oust the general principles of jurisdiction, according to a recent Ontario case. In Forsythe v Westfall, 2015 ONCA 810, the…

Read More

Client Update: Nova Scotia Court of Appeal Substantially Reduces Punitive Damages in LTD Case (Plus a Primer on the New Nova Scotia Limitations Act)

November 23, 2015

PART I: THE NSCA DECISION IN BRINE “Disability insurance is a peace of mind contract”: that’s the opening line of the Nova Scotia Court of Appeal’s long-awaited decision in Industrial Alliance Insurance and Financial Services Inc…

Read More

Client Update: Taxation of Trusts, Estates and Charitable Donation Rules Changing January 1, 2016

November 18, 2015

The taxation of estates, testamentary trusts and certain “life interest trusts” such as alter ego, joint partner and spousal trusts, and the rules for charitable donations made on death through an estate are changing significantly…

Read More

Update on New Tax Rules for Charitable Giving

November 18, 2015

Several important changes in the tax rules that apply to charitable gifts will be coming into effect in the near future. Some of the new rules take effect in 2016, and others will apply beginning…

Read More

Atlantic Employers’ Counsel – Fall 2015

October 23, 2015

THE EDITORS’ CORNER Michelle Black and Sean Kelly Trick, Treat or … Taunt? Workplace Bullying and Harassment Fall has arrived! The leaves are changing colours, families are stockpiling Halloween candy (some of which will actually last long…

Read More

The Fair Elections Act and #elxn42: A summary of Council of Canadians v Canada (Attorney General)

October 15, 2015

By Jennifer Taylor – Research Lawyer With the federal election just days away, voting is on Canadians’ minds. This will be the first election conducted in accordance with the Fair Elections Act, SC 2014, c 12 [“FEA”] which…

Read More

In the Three Certainties We Trust: The status of Builders’ Lien Act trust claims in bankruptcy

October 9, 2015

By Jennifer Taylor Introduction There is now a Nova Scotia decision on the interplay between the provincial Builders’ Lien Act and the federal Bankruptcy and Insolvency Act (“BIA”) in the interesting context of trusts. In Re Kel-Greg Homes Inc, Justice Rosinski…

Read More

Search Archive


Scroll To Top