As discussed in our previous article, Amendments Affecting All Newfoundland and Labrador Corporations, amendments to the Newfoundland and Labrador Corporations Act come into force on 1 April 2022. These amendments will affect and require action by all corporations incorporated in Newfoundland and Labrador, and have the potential for unexpected changes (particularly requirements for increased disclosure of information). The amendments:
- remove the requirement that directors of NL corporations be Canadian residents;
- require all corporations to create and maintain a registry of individuals who have "significant control" over the corporation (known as a "ISC Registry"); and
- require information from the ISC Registry to be disclosed to certain parties external to the corporation on request, including law enforcement but also shareholders, creditors and in some circumstances subsidiaries.
As a result, we are recommending all Newfoundland and Labrador corporations begin the processes to ensure compliance. This includes reviewing corporate articles and bylaws to see if a Canadian residency requirement has been included for directors, and to consider amendments to remove such a requirement as it is no longer legally required.
With respect to the creation and maintenance of the ISC Registry, the complexity of this process will vary depending upon the complexity of a corporation's shareholdings. For a corporation with a limited number of individual shareholders, the ISC Registry may be very similar to the share registry (but not exactly the same, as the ISC Registry requires recording significant personal information about the individuals involved). Corporations with corporate shareholders, or shares held by trusts, beneficial shareholders, or other more complicated arrangements will have more significant work to do to comply with the requirements for establishing the ISC Registry.
The penalties for non-compliance with these provisions are significant and focus on officers, directors and shareholders of the corporation. A corporation that does not maintain or create the ISC Registry will have committed an offence under the Act, with liability on conviction of a fine of up to $5,000. However, a director and officer who "knowingly authorizes, permits or acquiesces in the contravention" by the corporation of obligations under the Act is personally liable on conviction for an offence for up to $200,000 and / or 6 months in prison. The same sanction applies to shareholders who knowingly provide false information.
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.
