On December 9, 2021, Bill 43, Build Ontario Act (Budget Measures), 2021 (the "Bill") received Royal Assent. Scheduled to come into force on January 1, 2023, the Business Corporations Act (Ontario) (the "OBCA") will require private corporations to prepare and maintain a register of individuals with "significant control" of the corporation.
In practice, these changes will enable Ontario's financial regulators to understand where ultimate control of a corporation lies and where money is being allocated-a further step toward making private corporations more transparent.
Individuals with Significant Control
The Bill identifies three instances in which an individual holds "significant control" over a corporation:
- Control via Shareholdings;
- Control in Fact; and
- Control by an individual to whom prescribed circumstances apply (which have yet been published).
Control via Shareholdings
The Bill defines an individual who has "significant control" over a corporation as an individual who is the registered or beneficial owner of, or has direct or indirect control of:
- any number of shares that carry 25% or more of the voting rights attached to all of the corporation's outstanding shares; or
- has any number of shares that equal 25% or more of the corporation's outstanding shares measured by fair market value.
Two or more individuals may be considered to hold "significant control" of a corporation if, together, ownership rights and interests in the corporation equaling or surpassing the thresholds above are held jointly by those individuals. Similarly, if those thresholds are equaled or surpassed by the cumulative shareholdings of individuals that are "related persons", as defined in the OBCA, such individuals will be considered to have "significant control" as well.
Control in Fact
A determination of those with direct or indirect control of a corporation is a consideration of contextual factors not yet identified-it is likely synonymous with asking whether an individual has control in fact of the corporation. Determining whether an individual has control in fact of a corporation shall take into consideration all factors relevant in the circumstances; for example, the ability of an individual to effect change to the corporation's corporate governance, i.e. its directors or officers, would be considered an exercise of one's significant control.
What is Required of Private Corporations?
Assuming a corporation can identify those that exercise control over it, the corporation will be required to maintain a register of those individuals. This register will list items pertaining to each individual, such as:
- name, date of birth and address;
- jurisdiction of residence for tax purposes;
- the day on which the individual became (and ceased to become) an individual with significant control;
- a description of how the individual is an individual with "significant control";
- any other prescribed information (this information will be set out at a later date); and
- a description of the steps taken to identify all such individuals.
A register will be required to be updated at least once every fiscal year, or fifteen (15) days from the date of being made aware of any information that ought to be included or changed in the register.
Failure to Comply
Every director or officer of a corporation who knowingly authorizes, permits or acquiesces in the corporation's failure to comply with the new register requirements will be guilty of an offence under the OBCA. Whether or not the corporation has been prosecuted or found guilty, such individuals may be subject to a fine of not more than $200,000 or to imprisonment for a term of not more than six months, or both.
Will a Company's "Significant Control" Register be Available to the Public?
Corporations will not be required to publicly disclose these registers. However, the Bill does give power under certain contexts to law enforcement individuals (i.e. with respect to investigations conducted by police officials), tax officials and financial regulators.
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