In response to concerns about money laundering and tax evasion, amendments to the Canada Business Corporations Act (“CBCA”) came into force on June 13, 2019. You can read about the changes and how they apply to federally incorporated private companies here.
As we previously reported, the government of British Columbia is also moving forward with new corporate governance requirements which align with the recent changes to the CBCA.
Effective May 1, 2020, private, non-distributing companies created under the British Columbia Business Corporations Act (“BCBCA”) will be required to create and maintain a “Transparency Register”.
The new legislation
The Business Corporations Amendment Act, 2019 (“Bill 24”) received royal assent on May 16, 2019. On October 24, 2019, the Minister of Finance announced by an Order in Council that the amendments to the BCBA and to the Business Corporations Regulation (“Regulation”) will come into force on May 1, 2020.
Effective May 1, 2020, private, non-distributing BCBCA companies will be required to create and maintain a Transparency Register. The purpose of the Transparency Register is to identify the beneficial owners of a company, including individuals who have direct or indirect control of the company or its shares.
The Transparency Register must be kept at the company’s records office or at an otherwise accessible location. Information within a Transparency Register may be disclosed to the directors of the BCBCA company, government tax agency officials, police and other government regulatory authorities.
The Transparency Register must provide information on all “significant individuals” related to the company, including:
- date of birth;
- last known address;
- citizenship status for tax purposes;
- date on which the individual became or stopped being a “significant individual” within the company; and
- how the individual falls within the definition of “significant individual”.
A “significant individual” who must be listed on the Transparency Register is defined as someone who:
- owns at least 25% of the company’s shares;
- owns shares that equate to at least 25% of the company’s voting rights;
- has rights or an indirect ability to elect, appoint or remove the company’s director(s).
If the “significant individual” is a non-individual entity, such as a company or trust, then the individuals who control that entity must be listed on the Transparency Register.
The amendments to the Regulation define the “control” of different types of non-individual entities as follows:
- a person controls a corporation if the person has a right to elect or appoint a majority of the directors of the corporation;
- a person controls a partnership if the person is a partner in the partnership;
- a person controls an agent if the person is the principal of the agent;
- a person, corporation, partnership or agent controls a trustee if they have the power to direct:
- how the trustee exercises any rights attached to the shares of a private company;
- how the trustee exercises the right to elect, appoint or remove directors of a private company; and
- how the trustee is to exercise control over a non-individual entity;
- a person , corporation, partnership or agent controls a personal or legal representative if they have the power to direct
- how the representative exercises any rights attached to the shares of a private company;
- how the representative exercises the right to elect, appoint or remove directors of a private company; and
- how the representative is to exercise control over a non-individual entity;
If there are no individuals who are “significant individuals”, then the Transparency Register must contain a statement setting this out.
What does this mean for new and existing companies created under the BCBCA?
Private, non-distributing companies must do the following to comply with the BCBCA as of May 1, 2020:
- BCBCA companies must identify and obtain the necessary information on the “significant individuals” in their company for inclusion in the Transparency Register.
- Companies must notify “significant individuals” of their inclusion or removal from the Transparency Register within 10 days of doing so.
- Shareholders must provide the information necessary to fulfil the Transparency Register requirements.
- The Transparency Register must be updated at least once a year to ensure accuracy.
- When new information affecting the Transparency Register becomes known to the BCBCA company, the company’s Transparency Register must be updated within 30 days.
Failing to comply with the proposed requirements to create and maintain a Transparency Register may mean the imposition of fines. The BCBCA company may be liable to a fine up to $100,000, while individuals may be fined up to $50,000.
Please contact one of our lawyers in our Corporate/Commercial Practice Group if you have any questions or wish to discuss the creation and maintenance of Transparency Registers, complying with the new legislation and their implications for your company.