As of January 1, 2020, additional disclosure requirements are now imposed on private corporations incorporated under the Canada Business Corporations Act^{1Canada Business Corporations Act, RSC 1985, c C-44 [CBCA].} (“CBCA”).

As a result of amendments made to the CBCA last year with Bill C-97^{2Bill C-97: Budget Implementation Act, 2019.}, all private CBCA corporations are now required to maintain a register of individuals with significant control over the corporation (“Disclosure Register”), which Disclosure Register must be available for inspection by investigative bodies upon request.

The primary aim of these CBCA amendments is to further Canada’s efforts, together with the international community, to create greater transparency of the ownership of corporations and to assist with the investigation and prosecution of money laundering and other financial crimes, such as tax evasion.

Every CBCA private corporation must now maintain a Disclosure Register for all individuals who have significant control of the corporation:

• The Disclosure Register must be kept at the corporation’s registered office or another place in Canada designated by the directors, and must be updated at least once each financial year.³CBCA, s. 21.1(2).
• The Disclosure Register must be made available to any investigative body (as defined in the CBCA), which includes any police force, the Canada Revenue Agency, and any prescribed body that has investigative powers in relation to (primarily) criminal offences.^{4CBCA, s. 21.31(2).}
• The corporation is responsible for verifying the currency and accuracy of the Disclosure Register.
• Failure by the corporation to comply with these disclosure requirements is an offence and subject to a fine not to exceed $5000.^{5CBCA, s. 21.1(6).}
• Any director or officer who knowingly records false information, or authorizes, permits or acquiesces in recording false or misleading information pursuant to the requirements for the Disclosure Register is guilty of an offence and is subject to fines of up to $200,000 and up to six months in jail or both.⁶CBCA, s. 21.4(1)-(5).

Under these new disclosure requirements, an individual is considered a natural person for the purposes of determining “significant control” (and thus cannot be a corporation).

“Significant control” is defined as:

1. An individual who is a registered or beneficial shareholder, or an individual who has direct or indirect control or influence over a significant number of shares of the corporation.^{7CBCA, s. 2.1(1)(a).}

“Significant number of shares” means either:

(i) 25% or more of the voting rights in the corporation, or

(ii) 25% or more of the corporation’s shares, as measured by fair market value.^{8CBCA, s. 2.1(3).}

2. An individual who has any direct or indirect influence that, if exercised, would result in “control in fact” of the corporation (which is a legal determination).^{9CBCA. s. 2.1(1)(b).}
3. A group of two or more individuals with joint ownership or control under certain circumstances, such as where shares are jointly held over a significant number of shares of the corporation.^{10CBCA, s. 2.1(3).}

THE DISCLOSURE REGISTER MUST CONTAIN THE FOLLOWING INFORMATION:

• The names, dates of birth and the latest known address of each individual with significant control.
• The jurisdiction of residence for tax purposes of each individual with significant control.
• The day on which each individual became or ceased to be an individual with significant control.
• A description of how each individual is an individual with significant control over the corporation, including a description of their interests and rights in respect of shares of the corporation.
• What reasonable steps the directors have taken, at the beginning of the 2020 calendar year and in each subsequent financial year for the corporation, to identify all individuals with significant control over the corporation and that the information in the register is accurate, complete and up-to-date.^{11CBCA, s. 21.1(1).}

As a result of these requirements, CBCA companies must maintain information in their Disclosure Register beyond simply including the individuals listed in the company’s shareholder register, and should take steps immediately to compile the required information (if they have not already done so).

Whenever the directors become aware of any change to the information in the Disclosure Register, that new information is to be recorded within fifteen (15) days of becoming aware of it.^{12CBCA. s. 21.1(3).}  Information in the Disclosure Register is to be kept for six (6) years following the time when an individual ceases to be an individual with significant control over the corporation.  At the end of the six year period, the directors must dispose of the information.^{13CBCA. s. 21.1(5).}

Carscallen LLP’s Securities and Corporate Finance Expertise

Our team of securities and corporate finance lawyers have extensive experience advising both public and private companies on their legal disclosure obligations, including advising CBCA corporations. We have created a Disclosure Register for CBCA companies to use, and can advise businesses on all aspects of these new disclosure requirements, including how to determine which individuals are considered to have significant control of a corporation for reporting purposes. If you have any questions about creating a Disclosure Register for your private CBCA corporation, or any other corporate disclosure questions, please contact any member of our Securities and Corporate Finance Group for more information.

• 1
  Canada Business Corporations Act, RSC 1985, c C-44 [CBCA].
• 2
  Bill C-97: Budget Implementation Act, 2019.
• 3
  CBCA, s. 21.1(2).
• 4
  CBCA, s. 21.31(2).
• 5
  CBCA, s. 21.1(6).
• 6
  CBCA, s. 21.4(1)-(5).
• 7
  CBCA, s. 2.1(1)(a).
• 8
  CBCA, s. 2.1(3).
• 9
  CBCA. s. 2.1(1)(b).
• 10
  CBCA, s. 2.1(3).
• 11
  CBCA, s. 21.1(1).
• 12
  CBCA. s. 21.1(3).
• 13
  CBCA. s. 21.1(5).