by Sahar Sayyad, Laura Porter and Shannon Reid
All corporations governed by the Canada Business Corporations Act (“CBCA“) will soon be required to comply with more stringent record-keeping requirements as part of the government’s commitment to implementing an accessible public registry for greater corporate transparency. Bill C-19, passed as the Budget Implementation Act, 2022, received Royal Assent on June 23, 2022. This act creates substantial changes to the CBCA, among other statutes.
Since 2019, private CBCA corporations have been required to maintain a register of shareholders with significant control of the corporation (“ISC Register“). Significant control, as defined in section 2.1(1) of the CBCA, refers to an individual who owns, controls, or directs a significant number of shares; has significant influence over the corporation without owning any shares; or has a combination of any of these factors. A significant number of shares is defined as 25% of the voting shares of the corporation, or 25% of all the shares based on the fair market value of the shares. The ISC Register must be stored at the corporation’s place of business and be made accessible to certain regulatory authorities when requested. With the pending amendments to the CBCA, corporations will be required to file their ISC Register with the Director (as defined in the CBCA) annually and to notify the Director of any new changes within 15 days.
Amendments Introduced by Bill C-19
The new provisions added to section 21 read as follows:
21.21 (1) A corporation to which section 21.1 applies shall
(a) on an annual basis, send to the Director the information in its register of individuals with significant control over the corporation, in the form and within the period that the Director fixes; and (b) within 15 days after the day on which it records information under subsection 21.1(3), send the information to the Director, in the form that the Director fixes.
Sending of information — certificates issued
(2) On or after the date shown on a certificate referred to in section 8, subsection 185(4) or 187(4), a corporation to which section 21.1 applies shall send to the Director the information referred to in paragraphs 21.1(1)(a) to (f) in relation to individuals with significant control over the corporation, in the form and within the period that the Director fixes.
Provision of information by Director
21.301 The Director may provide all or part of the information received under section 21.21 to an investigative body referred to in subsection 21.31(2), the Financial Transactions and Reports Analysis Centre of Canada or any prescribed entity.
Effect of the Amendments
The newly amended provisions will require non-exempt corporations to submit their ISC Register to the Director annually and within 15 days of any new information1 recorded by the corporation. Non-exempt corporations must also submit their ISC Register to the Director upon the issuance of a certificate of incorporation, amalgamation, or continuance. The addition of section 21.30 will grant the Director authority to share any information from the ISC Register with the Financial Transactions and Reports Analysis Centre of Canada or any future entity referred to in subsection 21.31(2).
Per section 21.1(7) of the CBCA, the following corporations are exempt from the above requirements: corporations that are (a) a reporting issuer or an émetteur assujetti under an Act of the legislature of a province relating to the regulation of securities; (b) listed on a designated stock exchange, as defined in subsection 248(1) of the Income Tax Act; or (c) a member of a prescribed class.
These amendments to the CBCA, part of the government’s push for greater corporate transparency and a strengthened anti-money laundering regime, will affect all private CBCA corporations. Similar transparency rules exist or are expected to come into force in British Columbia, Ontario, Québec, Manitoba, Saskatchewan, Prince Edward Island, and Newfoundland and Labrador, as well as in many OECD member states. At this time, however, it is unknown when exactly these provisions will come into force and what compliance period will be granted to existing corporations.
Corporations Canada has previously prepared a prescribed form for documenting the required information and a guideline on maintaining an ISC Register. Corporations may wish to use and review these tools in the interim as a guide for compliance while we determine how this new framework will be implemented.
Please feel free to contact your lawyers at Foglers to discuss how these amendments to the CBCA will affect your private corporation. We would be pleased to review your corporation’s articles, by-laws, shareholder agreements and other constating documents in light of these changes.
Per section 21.1(3), if the corporation becomes aware of any information that must be kept under section 21.1(1) as a result of the “reasonable steps” taken, this must be added to the database. This information includes:
(a) the names, the dates of birth and the latest known address of each individual with significant control;
(b) the jurisdiction of residence for tax purposes of each individual with significant control;
(c) the day on which each individual became or ceased to be an individual with significant control, as the case may be;
(d) a description of how each individual is an individual with significant control over the corporation, including, as applicable, a description of their interests and rights in respect of shares of the corporation;
(e) any other prescribed information; and
(f) a description of each step taken in accordance with subsection (2).
This publication is intended for general information purposes only and should not be relied upon as legal advice.