On December 13, 2018, Bill C-86, the Budget Implementation Act, 2018, No. 2 received Royal Assent. The Bill amends a wide range of Federal Legislative Acts, one of which is the Canada Business Corporations Act (“CBCA”).
The significant change introduced by the Bill is that the CBCA corporations are now required to prepare and maintain a register of “individuals with significant control” over the corporation. Access to this register will be restricted to the corporation’s shareholders and creditors and to certain government officials. As well, not all beneficial owners must be on the register, only those “individuals with significant control” over the corporation must be registered.
Under the Act, an individual with “significant control” is defined to include any individual who has any of the following interests or rights, or any combination of them, in respect of a “significant number” of shares of the corporation:
- The individual is a registered shareholder;
- The individual is a beneficial owner of the shares;
- The individual has direct or indirect control or direction over the shares;
- The individual who has any direct or indirect influence that, if exercised, would result in control in fact of the corporation; or
- An individual to whom prescribed circumstances apply.
A “significant number of shares” then is defined to include any number of shares that carry 25% or more of the voting rights attached to all of the corporation’s outstanding voting shares or any number of shares that is equal to 25% or more of all of the corporation’s outstanding shares measured by fair market value.
As well, for the purpose of the Act, two or more individuals are each considered to be an “individual with significant control” over a corporation if, interests or rights held in a significant number of shares are held jointly or are subject to an agreement to exercise the rights jointly in respect of those shares.
The contents of this new corporate register are also prescribed by statute. Specifically, the corporation must prepare and maintain a register of “individuals with significant control” over the corporation containing the following information:
- The names, dates of birth and the latest known address of each individual with significant control;
- The jurisdiction or residence for tax purposes of each individual with significant control;
- The day on which each individual became or ceased to be an individual with significant control;
- A description of how each individual is an individual with significant control over the corporation, including a description of their interests and rights in respect of shares of the corporation.
There is also a continuing obligation on corporations to maintain an accurate and up-to-date register. To that end, at least once during each financial year, the corporation must take reasonable steps to ensure that it has identified all individuals with significant control and document its steps for doing so. The amendments also require a corporation to take prescribed steps, set out in the regulations to the Act, where it is unable to identify any individuals with significant control over the corporation.
These new requirements are accompanied by significant penalties for non-compliance. Corporations, directors and officers who fail to comply with the new provisions of the Act face significant fines, while directors or officers who knowingly authorize, permit or acquiesces in the recording of false information are liable on summary conviction to a fine of up to $200,000 or to imprisonment for a term not exceeding six months, or to both.
Despite obtaining Royal Assent on December 13, 2018, CBCA corporations still have until June 13, 2019, before the amendments come into force. If you have any questions or need legal advice, feel free to reach out to our Business Law team here at Mann Lawyers LLP.
This blog post was written by Andre Martin, a Partner in the Business Law team, with the assistance of Mark Fortier-Brynaert, Articling Student. Andre can be reached at 613-369-0370 or at firstname.lastname@example.org.