Federal Government to Create Public Transparency Register for Private Federal Corporations

Following British Columbia and Quebec, the federal government has introduced new legislation that, if enacted, will create a federal register of individuals with significant control that will be searchable by the public. These proposed amendments to the Canada Business Corporations Act (the “CBCA”) have been proclaimed to come into force on January 22, 2024 requiring private corporations governed by the CBCA to file the information contained in their individuals with significant control (“ISC”) register (the “ISC Register”) with Corporations Canada.

CURRENT ISC REQUIREMENTS

Since June of 2019, private CBCA corporations have been required to create, maintain and review, at least annually, an ISC Register. The purpose of an ISC Register is to increase corporate transparency, and assist with combatting tax evasion, money laundering and terrorist financing. Presently, every CBCA corporation’s ISC Register must disclose all individuals with significant control over the corporation which includes:

• Individuals who are registered or beneficial holders of a significant number of shares of the corporation;
• Individuals who have direct or indirect control or direction over a significant number of shares of the corporation; and
• Individuals who have any direct or indirect influence that, if exercised, would result in control in fact of the corporation.

POTENTIAL IMPLICATIONS OF BILL C-42

Bill C-42, An Act to amend the Canada Business Corporations Act and to make consequential and related amendments to other Acts, is currently being debated in Parliament. If the proposals set out in Bill C-42 are adopted in their current form, some of the ISC Register information will be made available to the public on Corporations Canada’s website.

WHAT ISC INFORMATION COULD BE MADE AVAILABLE TO THE PUBLIC?

If Bill C-42 is implemented in its current form, ISC information that could be made available to the public on Corporations Canada’s website include:

• the full legal name of the ISC;
• the date on which the individual became an ISC;
• the date on which the individual ceased to be an ISC, if applicable;
• a description of the ISC’s significant control (for example, percentage of ownership);
• address for service, if provided; or
• residential address, if an address for service is not provided.

WHAT ISC INFORMATION WILL NOT BE MADE AVAILABLE TO THE PUBLIC?

If Bill C-42 is implemented in its current form, ISC information that will not be made available to the public includes:

• the ISC’s date of birth;
• the country (or countries) of the ISC’s citizenship; and
• the country (or counties) where the ISC is considered a resident for tax purposes.

LIMITED PROTECTION FOR ISC’S

If Bill C-42 is implemented in its current form, the following protections or exemptions would be available in limited circumstances:

• for ISC’s under the age of 18;
• if Corporations Canada is satisfied that an individual is incapable (on the application by an ISC);
• if Corporations Canada reasonably believes that making the individual’s information public would present a serious threat to the safety of the individual (on the application by an ISC); or
• for public office holders with respect to confidential information under the Conflict of Interest Act or similar provincial legislation.

If an exemption is made, Corporations Canada will be required to publish a notice of such decision.

FAILURE TO COMPLY

Under Bill C-42, an officer or director of a corporation who knowingly authorizes, permits, or acquiesces in the contravention of the corporation’s obligations in respect of its ISC Register information commits an offence. Currently, the obligations to which the offence applies to are the obligation to prepare and maintain an ISC Register and the obligation to disclose the information in the ISC Register to an investigative body that has made a request pursuant to the CBCA. Bill C-42 would add an additional obligation to provide the information in a ISC Register to the Director. The punishment for this proposed offence is still a fine of up to $200,000.00 or imprisonment of up to 6 months.

If Bill C-42 is implemented in its current form, Corporations Canada may also refuse to issue certificates of existence, and presumably certificates of compliance, for CBCA corporations that are not in compliance with the proposed filing obligations. As these certificates are often needed to obtain financing or for other corporate and commercial transactions, failure to file or to keep the information in the federal register up to date could have substantial economic implications for private CBCA corporations.

Further, if Bill C-42 is implemented in its current form, Corporations Canada would also be given the authority to make inquiries of any person on compliance with the provisions relating to the disclosure of ISC or require verification of information in a corporation’s ISC Register by affidavit or statutory declaration.

Finally, if Bill C-42 is implemented in its current form, Corporations Canada may dissolve private CBCA corporations that are in default of their filing obligations for the federal register for more than 1 year.

WHEN DOES MY FEDERAL CORPORATION NEED TO FILE ISC INFORMATION?

If Bill C-42 is implemented in its current form, private CBCA corporations will need to file the required ISC information with Corporations Canada:

• with their annual return;
• within 15 days of any changes made to their ISC Register;
• during incorporation of the federal business;
• after amalgamation of the federal business; and
• after continuance (import) of the business to the federal jurisdiction.

WHAT IS MY FEDERAL CORPORATION RESPONSIBLE FOR?

Each CBCA corporation is responsible for identifying and collecting information on their own ISC’s, ensuring that ISC’s are made aware of the potential publicity of their personal information on Corporations Canada’s website, and filing the required ISC information with Corporations Canada at the appropriate time(s).

CONCLUSION

Bill C-42 is currently winding its way through the legislative approval process in Parliament. If enacted, it is expected that CBCA corporations will have some transitional period to prepare for the new federal register.

If you have a CBCA corporation and require assistance with creating or maintaining an ISC Register, or you simply have questions regarding the above, please contact Jill Annett at jill@sorbaralaw.com.