A New Era of Transparency: Is your Federal Company in Good Standing?

What are the new requirements for corporations incorporated under the Canada Business Corporations Act?

Overview of existing measures

With the aim of improving corporate transparency and preventing tax evasion and money laundering, private companies incorporated under the Canada Business Corporations Act (hereinafter "CBCA") have been required, since June 2019, to create and maintain a register of Individuals with Significant Control (hereinafter "ISC"). Until now, access to the contents of a company's ISC register was restricted to certain specific organizations and individuals, given its private nature.

The CBCA defines an ISC as:                                                   

• An individual who controls, beneficially owns and/or is the registered holder of a significant number of shares, individually, jointly or in agreement with one or more individuals; or
• An individual exercising de facto control over the company, whether he or she holds shares in the company's share capital.

A signifiant number of shares is defined as conferring 25% or more of the voting rights attached to all the company's outstanding voting shares, or equivalent to 25% or more of the fair market value of all the company's outstanding shares.

Information request

In addition to the personal information relating to its ISCs (such as name, date of birth, jurisdiction of residence for tax purposes, etc.), each company must include in its ISC register a description of the reasonable measures taken to identify all ISCs. Companies must also ensure that the information consolidated into the register is accurate, complete, and up to date. In May 2023, the Government of Canada clarified and standardized this requirement by demanding the companies send an information request, at least once a year, to any person who is likely to have relevant information concerning an ISC of the company, to ISCs already entered in the register, and to the company's shareholders.

What's new in 2024?

Since January 22^nd, 2024, federal corporations have an additional obligation to provide the information contained in the corporation's ISC register to Corporations Canada. Some of this information will subsequently be made available to the public via the government website.

When should you submit your ISC information to Corporations Canada?

• Annually (at the same time the company's annual report is filed);
• Upon incorporation;
• Following a merger and/or extension under the CBCA (within 30 days);
• Following the registration of a modification in the ISC register (within 15 days).

What information must be provided to Corporations Canada for every ISC, and which will be accessible to the public?

Accessible to the public:

• Full legal name;
• Residential address (if no address for service is provided);
• Date on which the individual became an ISC and, if applicable, the date on which he or she ceased to be one;
• Description of how the individual qualifies as an ISC;
• Address for service (optional).

Inaccessible to the public:

• Date of birth;
• Residential address (if an address for service is provided);
• Residency for tax purposes;
• Country of citizenship.

Among the information listed above that must be provided to Corporations Canada, the following information is newly required by law as of January 22^nd, 2024, and must therefore be added to the ISC register of any federal corporation:

• Residential address[1];
• Country of citizenship;
• Address for service (optional).

Certain exceptions apply to the public availability of this information for protection purposes, particularly regarding minors.

However, please note that certain investigative bodies such as police authorities and the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) may, upon request, have access to all the information contained in a company's ISC register.

Offences, punishments, and other penalties

Corporations that fail to comply with the new requirements to submit their ISC information to Corporations Canada within the required timeframe will be committing an offence and are liable to a fine of up to one hundred thousand dollars ($100,000), or even be subject to administrative dissolution. Any director or officer of the company who knowingly authorizes or permits the company to contravene this new requirement commits an offence and is liable to a monetary penalty of up to one million dollars ($1,000,000) and/or imprisonment for up to five years. Any other breach by a director, officer, or shareholder of the company's obligations with regard to the ISC register will now be sanctioned in the same way.

Conclusion

As a result of these amendments to the CBCA, federal private companies should promptly inform their ISCs of the situation, including the fact that some of their personal information will be filed with Corporations Canada and made available to the public.

The Government of Canada's new corporate transparency requirements are not to be taken lightly, and companies should take the necessary steps now to comply with the law.

If you have any questions, please do not hesitate to contact our Business Law team, who will be pleased to assist you.

** This article was written in collaboration with Abelle Desrosiers, Articling Student. ** 

[1] Before the new legislation came into force in January 2024, the ISCs residential addresses were already required, although no distinction was made between the residential address and the address for service.