Bill C-86 institutes a long list of amendments to several Federal statutes, including the Canada Business Corporations Act ("CBCA"), and officially comes into force on June 13th, 2019. What does this mean for your corporation?
Prior to these amendments, the CBCA required only federally-registered corporations to maintain a general securities register under s. 50(1). As of June 13th, however, all privately controlled corporations governed by the CBCA will be required to maintain a detailed securities register of individuals with "significant control" over the corporation.
An individual with "significant control" is someone who is the registered/beneficial owner of, or someone who has direct or indirect control over, a "significant number of shares" of the corporation, being either ownership of 25% or more of the corporation's outstanding voting shares, or ownership of any number of shares equal to 25% or more of the corporation's outstanding shares measured by fair market value. "Significant control" also includes an individual who has any direct or indirect influence that, if exercised, would result in control in fact of the corporation, and anyone to whom "prescribed circumstances" (to be defined by future regulations) apply. Two or more individuals who jointly own a "significant number of shares" can be considered jointly an individual with "significant control over the corporation."
The register of individuals with "significant control" must provide the following information with respect to each such individual:
(a) the individual's names, date of birth and the last known address;
(b) the individual's jurisdiction of residence for tax purposes;
(c) the day on which the individual became or ceased to be an individual with significant control;
(d) a description of how each individual has significant control over the corporation; and
(e) any other prescribed information [to be explained in future regulations]
The Bill also includes several other requirements regarding the proper maintenance of the "significant control" register. Improper maintenance of this register is an offence punishable on summary conviction and may result in a fine of up to $5000. Any director or officer of a corporation who knowingly records, provides, authorizes or acquiesces in the provision of false or misleading information in this register is liable on summary conviction to a fine of up to $200,000 or imprisonment of up to 6 months, or both.
The corporation's shareholders or creditors, as well as the Canadian government, may request access to the information contained in the significant control register which, if provided, may be used only for matters relating directly to the affairs of the corporation.
Finally, it is also likely Ontario legislation, at some point in the future, will mirror these new Federal amendments, as the Finance Minister of each province has agreed to "pursue legislative amendments" that strengthen the transparency of corporate ownership.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
