On May 1st, 2020, significant amendments to the British Columbia Business Corporations Act (the "Act") will come into effect. These amendments require every private company incorporated under the Act to maintain a "transparency register" listing all "significant individuals" of the company. The stated purpose of the changes is to end hidden ownership of companies and to help crack down on illegal activities.
The definition of "significant individual" is lengthy and complex, but essentially it means an individual with significant direct or indirect ownership or control of a company. An individual who owns at least 25% of the shares in a company is a significant individual, but there are many other ways that someone can be deemed a significant individual even if they do not meet this threshold (e.g. via an indirect ownership through a holding company, partnership, or trust, via a right under a shareholders' agreement to appoint directors, etc.).
The transparency register of a company must include the following information for each significant individual:
- date of birth
- whether the individual is a resident of Canada for tax purposes
- the date the individual became a significant individual
- a description of how the individual qualifies as a significant individual
The transparency register must be maintained at the company's records office. The only people entitled to inspect the register are directors of the company and certain government officials including representatives of the CRA, the BC Securities Commission, and law enforcement agencies. Members of the public will not be entitled to inspect the register.
A company and its directors are required to take reasonable steps to maintain an accurate transparency register, including conducting an annual review to confirm that the register is complete and up to date. Shareholders are required to comply with the company's requests to provide information for the register.
Individual directors and shareholders may be liable for fines of up to $50,000 for failing to meet these obligations. Additionally, the Income Tax Act provides that the CRA is entitled to inspect the corporate records of any company, including its transparency register.
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.