We have previously discussed1 the growing trend of federal and provincial governments increasing corporate ownership transparency. For example, in 2019, Bill C-86 made significant amendments to the Canada Business Corporations Act (CBCA)2 by requiring federally incorporated companies to maintain a register of "individuals with significant control" (the "ISC Register").
On June 23rd, 2022, Bill C-193 received Royal Assent. In addition to implementing many of the government's budget4 commitments, this piece of legislation also makes substantial amendments to the CBCA.
Before Bill C-19
Before Bill C-19, corporate owners were required to do the following:
- identify the individuals with significant control over the corporation and confirm their information;
- record their data in the ISC register; and
- update the ISC register regularly.
Also, even though corporate owners were not required to disclose their ISC register to the public, they were required to disclose the same to their shareholders and creditors, investigative bodies, and Corporations Canada upon request.
However, not every federally incorporated entity is required to prepare and maintain an ISC Register. Section 21.1(7) provides a list of entities that are exempted from these reporting requirements:
- that is a reporting issuer or an émetteur assujetti under an Act of the legislature of a province relating to the regulation of securities;
- any of the securities of which are listed and posted for trading on a designated stock exchange, as defined in subsection 248(1) of the Income Tax Act; or
- that is a member of a prescribed class.
The critical difference between the legislative scheme before and after the proposed amendments is that before Bill C-19, corporate owners were only required to maintain an ISC Register. Now, the proposed amendments to the CBCA require non-exempted corporations to send beneficial ownership information to the Director appointed under the CBCA.
Under the proposed section 21.21, corporations must provide the Director with information on its ISC register on (a) an annual basis or (b) within 15 days of any new information or amendment being recorded to its ISC Register. Similarly, according to the proposed section 21.21(2), non-exempted corporations must provide the Director with the information contained in their ISC register "on or after the date shown" on its certificate of incorporation, amalgamation or continuance, as the case may be.
The form in which the information in the ISC Register is to be sent to Corporations Canada and the period within which it is to be sent5 will be prescribed in regulations which have not yet been published.
However, under the proposed section 21.21(3), the Director is not required to keep or produce information pertaining to a corporation's ISC Register after the "end of the six-year period following the day on which it is received."
The most significant amendment to the CBCA is section 21.301, which gives the Director authority to provide all or part of the ISC Register information of a non-exempted corporation to an investigative body, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) or any prescribed entity. We anticipate given the Government's commentary specifically mentions tax evasion, this will allow Corporations Canada to provide this information to the CRA.
Potential Effect on Charter Rights
In compliance with section 4.2 of the Department of Justice Act6, which requires the Minister of Justice to prepare a Charter Statement that sets out the potential effects of a proposed Bill on the rights and freedoms that are guaranteed by the Canadian Charter of Rights and Freedoms (the "Charter"),7 the Minister of Justice has recognized that the powers conferred by the proposed section 21.301 have the potential to interfere with privacy interests and may engage section 8 of the Charter:
What It All Means
The proposed amendments to the CBCA affect all federal private corporations, who will soon have to report regularly to Corporations Canada. While the effective date for these amendments has not been announced, and regulations will likely be released, corporation owners must be aware of these amendments.
While these amendments impose more onerous reporting requirements for business owners, it is consistent with Canada's commitment to increasing corporate ownership transparency.
1. Roseman, Lydia and Singh, Andrew, "Who's the Boss? Requirements to Reveal Beneficial Owners"(2021)
2. Canada Business Corporations Act, RSC 1985, c C-44
3. Bill C-19, An Act to implement certain provisions of the budget tabled in Parliament on April 7, 2022 and other measures, 1st Sess, 44th Parl, 70-71 Elizabeth II, 2021-2022 (assented to 23 June, 2022), SC 2022, c 10.
5. In the case of the proposed section 21.21(2).
6. Department of Justice Act, RSC 1985, c J-2
7. Part I of the Constitution Act, 1982, Schedule B to the Canada Act 1982 (UK), 1982, c 11
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