New Regulations for Corporations Governed by the Canada Business Corporations Act
Starting June 13, 2019, private federal corporations governed by the Canada Business Corporations Act (“CBCA”) are required to keep a detailed register of information about individuals who directly or indirectly have an interest in more than 25% of the shares of the corporation.
Specifically, the corporations register must identify individuals with “significant control” over the corporation. An individual has “significant control”:
- if they have as a registered or beneficial owner, or if they have direct or indirect control or direction over any number of shares that:
- carry 25% or more of the voting rights attached to all of the corporation’s outstanding voting shares; or
- is equal to 25% or more of the corporation’s outstanding shares measured by its fair market value.
- any direct or indirect influence that, if exercised, would result in control of the corporation.
- other prescribed circumstances apply to them, with such circumstances as yet to be determined.
The register must contain certain information including the name, date of birth, address, residence for tax purposes, and other prescribed information for each individual.
In regards to ongoing maintenance and updates to the register, corporations must take reasonable steps to update the register on an annual basis. Further, corporations must also update the register within 15 days of becoming aware of any information that is required to be recorded in the register.
Under the amended CBCA, a shareholder will be required to provide the relevant information to the corporation upon request. The shareholder will be obligated to respond to reply accurately and to complete the request as soon as feasible.
Noncompliance with these new provisions will result in potentially substantial consequences, as penalties and fines for noncompliance are potentially substantial. A conviction of an offence may result in directors, officers or shareholders being liable to fine not exceeding $200,000.00, to imprisonment for term of not exceeding six months, or to both.
Commentators of the new amended CBCA have noted that this is likely to be part of a wider push for greater corporate transparency. With that said, in order for a complete picture of the new register system, we will have to wait for the new regulations to be provided.