Author: Todd W. Devitt, Lawyer at Chinneck Law
Commencing on June 13, 2019, all private corporations governed by the Canada Business Corporations Act (the “Act”) will be required to maintain a register of each “individual with significant control” over the corporation.
The Act sets out the following individuals as an individual with significant control over a corporation:
(a) an 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:
(i) the individual is the registered holder of them,
(ii) the individual is the beneficial owner of them, or
(iii) the individual has direct or indirect control or direction over them;
(b) an individual who has any direct or indirect influence that, if exercised, would result in control in fact of the corporation; or
(c) an individual to whom prescribed circumstances apply.
Additionally, two or more individuals shall each be considered to be an individual with significant control over a corporation if, in respect of a significant number of shares of the corporation,
(a) an interest or right, or a combination of interests or rights, referred to in the above paragraph (a) is held jointly by those individuals; or
(b) a right, or combination of rights, referred to in the above paragraph (a) is subject to any agreement or arrangement under which the right or rights are to be exercised jointly or in concert by those individuals.
A “significant number of shares” is considered to be either (a) shares that carry 25% or more of the corporation’s voting rights, or (b) shares that are worth 25% or more of the corporation’s fair market value.
Private federal corporations will, as of June 13, 2019, be required to create and maintain a register with the following information, for each “individual with significant control” over the corporation:
(i) the names, the dates of birth and the latest known address of each individual with significant control;
(ii) the jurisdiction of residence for tax purposes of each individual with significant control;
(iii) the day on which each individual became or ceased to be an individual with significant control, as the case may be;
(iv) 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;
(v) any other prescribed information; and
(vi) a description of each step taken, at least once per year, to fulfill the corporation’s requirements for maintaining and updating the register.
Non-compliance with the new requirements could result in a director, officer or shareholder being fined up to $200,000.00, six months imprisonment, or both.
The full text of the new law can be found in Division 6 of Bill C-86 at https://www.parl.ca/DocumentViewer/en/42-1/bill/C-86/third-reading.
Depending on your corporation’s structure, these new changes could mean significant disclosure is now required to be prepared by June 13, 2019, and properly maintained going forward.
We recommend that all private federal corporations seek independent legal advice, well in advance of June 13, 2019, to ensure proper compliance.
Disclaimer: While every effort has been made to ensure the accuracy of this article, it is not intended to provide legal advice. Individual situations will differ and should be discussed with a lawyer. For specific technical and/or legal advice, please contact Chinneck Law.