Canada: New Transparency Register Requirements For Ontario Private Corporations
Corporate/Commercial Bulletin

As of January 1, 2023, significant amendments to Ontario's Business Corporations Act ("OBCA") will come into force and require many private corporations to maintain a register of individuals with significant control ("ISC") over the corporation (the "Transparency Register"). The amendments are contained in schedule 2 of Bill 43, which having received Royal Assent on December 9, 2021, are intended to support the federal government's efforts to enhance corporate transparency and its plans to implement a national registry. For more information on those plans, please see our bulletin "Proposed National Corporate and Real Property Beneficial Ownership Registries to be Searchable by the Public".

Who Is an Individual With Significant Control?

An ISC is someone who:

• is the registered or beneficial owner of, or has direct or indirect control or direction over, any number of shares that carry 25% or more of the voting rights attached to all of the corporation's outstanding voting shares;
• is the registered or beneficial owner of, or has direct or indirect control or direction over, any number of shares that is equal to 25% or more of all of the corporation's outstanding shares measured by fair market value;
• has any direct or indirect influence that, if exercised, would result in control in fact of the corporation; or
• is an individual to whom circumstances prescribed by regulation apply.

Two or more individuals may be considered an ISC if: (i) an ownership interest or right in respect of shares is held jointly by those individuals; (ii) a right in respect of shares is exercised jointly or in concert by those individuals; or (iii) the individuals holding the ownership interests or rights are "related persons", as defined in the OBCA, which includes spouses and children and possibly other relatives if they live in the same family home.

The legislation does not contain further guidance regarding the identification of an individual with "direct or indirect influence" that could lead to "control in fact" of the corporation. The legislation sets out that all relevant factors are to be taken into consideration; it is noteworthy however, that the ability to effect a change in the board of directors of the corporation need not be a relevant factor.

As a result, in creating and maintaining the Transparency Register corporations must identify individuals who meet the threshold of share ownership but, also, individuals who are in a position to exercise significant influence over the corporation, irrespective of the number of shares they hold.

Information the Transparency Register Must Include

A Transparency Register must include the following for each ISC:

• name, date of birth, and last known address;
• jurisdiction of residence for tax purposes;
• the date on which the individual became (and if applicable, ceased to be) an ISC;
• a description of how the individual meets the definition of "significant control";
• any other information that may be prescribed by regulation in the future; and
• a description of the steps taken to identify each ISC and to ensure that the information in the register is accurate, complete, and up to date.

Corporations will be required, at least once during each financial year of the corporation, to take reasonable steps to ensure that it has identified all ISCs and that the information in the Transparency Register is accurate, complete, and up to date. A corporation must record any new, required information in the Transparency Register within 15 days of becoming aware of it.

Shareholders who receive a request from the corporation for any required information must provide an accurate and complete reply "promptly and to the best of their knowledge" or face penalties, as set out below.

Access to the Register

The amendments establish an access regime for corporations' Transparency Registers. A corporation must, upon request, disclose information in the Transparency Register to the Minister. Additionally, each of the following can submit a request for disclosure of a corporation's Transparency Register and a corporation must respond to the request in accordance with the relevant section in the legislation:

• police forces "for the purpose of conducting an investigation into an offence under a law of Ontario or Canada" or providing information to a law enforcement agency in a jurisdiction outside Ontario for a similar purpose;
• tax authorities strictly "for the purpose of administering or enforcing a law of Ontario or Canada that provides for the imposition or collection of a tax, royalty or duty" or providing information to officials of another jurisdiction for a similar purpose; and
• certain specified regulators, including the Ontario Securities Commission, the Financial Services Regulatory Authority of Ontario and the Financial Transactions and Reports Analysis Centre of Canada (and others as may be designated by regulation) "for the purpose of administering or enforcing a law for which the regulatory body is responsible" or to assist other agencies with similar mandates in Canada and foreign jurisdictions.

Penalties for Failure to Comply

A corporation that, without reasonable cause, fails to comply with any of the requirements to prepare and maintain a Transparency Register, respond to inquiries, or meet disclosure obligations under the OBCA, is liable for a fine of up to $5,000.

Fines up to $200,000 and/or up to six months imprisonment can be imposed upon every director or officer of a corporation who knowingly authorizes, permits or acquiesces in a corporation's failure to prepare and maintain the Transparency Register, respond to inquiries or meet disclosure obligations.

Additionally, directors, officers, and shareholders must ensure they record and provide true and accurate information for the Transparency Register. Failing to comply or reply accurately and completely to a request may result in a fine of up to $200,000, imprisonment for up to six months, or both.