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New register of individuals with significant control over Canadian private companies

Tuesday, 11 June, 2019

As of Thursday (June 13, 2019), private corporations incorporated under the Canada Business Corporation Act (CBCA) must maintain a register of their “individuals with significant control” (ISC).

These ISCs are defined as: registered or beneficial shareholders, those with “direct or indirect control or direction” over a significant number of shares, and those with “direct or indirect influence” resulting (if exercised) in control in fact of the corporation. Under the CBCA, a “significant number of shares” is defined as 25 percent or more of the outstanding or voting shares.

The CBCA also notes that ISCs will also extend to individuals to whom “prescribed circumstances apply”; however, these circumstances are yet to be defined, and additional regulations are awaited.

Two or more individuals jointly owning a significant number of shares will be considered as a single ISC if they meet the above criteria.

The CBCA states that from June 13, private corporations are required to record in a register the following details of each ISC:

  • their names, date of birth and last known address;
  • their jurisdiction of residence for tax purposes;
  • the date on which they became (or ceased to be) an ISC; and
  • a description of how each individual qualifies as an ISC, including a description of their interests and rights in respect of shares of the corporation.

Companies are obliged to report any new information regarding ISCs within 15 days of becoming aware of it and, further, review their register of ISCs once per fiscal year.

Failure to either comply with preparation and maintenance of the register or the submission of false or misleading information is an offence under the CBCA, and carries a penalty of up to CAD200,000 and six months’ imprisonment.

Corporations under the CBCA will not be required to publicise the information collected, nor will they need to report it to any government agencies. However, the federal government proposes to grant powers to the police, the Canada Revenue Agency and other bodies to compel disclosure for criminal investigation purposes.

Sources