In November 2018, the Standing Committee on Finance released a report to address the issue of money laundering and terrorist financing in Canada. The Committee's first recommendation emanated from the corporate registry regime in the United Kingdom ("UK"). In an attempt to emulate the UK's system, the Committee recommended that the Canadian government work with the provinces and territories to maintain a register for all legal persons and entities with significant control over a corporation.
Requirements for share registers
On June 13, 2019, previous amendments to the Canada Business Corporations Act ("CBCA") came into force. These amendments, introduced in Bill C-86, require private CBCA companies to maintain a register of individuals who have significant control over the corporation. An individual with "significant control" over the corporation holds:
- Shares that carry 25% or more of the company's voting rights, or
- Any number of shares equal to 25% or more of all the corporation's outstanding shares measured by fair market value.
- Furthermore, these registers must now include information such as the name, date of birth, address, residence and other prescribed information for each shareholder who has significant control.
Access to share registers
After the implementation of share register requirements, clarification on access to these registers was necessary. As a result, the federal government introduced Bill C-97 in 2019. Although these provisions are not in force as of yet, these amendments to the CBCA are intended to delineate the parties with access to the shareholder register.
In particular, Bill C-97 requires private corporations to provide a copy of the shareholder register and any information contained in the register to investigative bodies, including any police force or the Canada Revenue Agency. These investigative bodies are authorized to request this information when they have reasonable grounds to suspect that the information would be relevant in investigating an offence committed by, and/or facilitated by, the corporation or an individual with significant control over the corporation.
Consequences of non-compliance
As of June 13, 2019, directors or officers who knowingly authorize the corporation to maintain a false register, or provide false information, are guilty of an offence. Similarly, shareholders who knowingly provide false or misleading information to the corporation are also guilty of an offence. The maximum penalty that can be imposed on directors, officers and shareholders is a fine of $200,000 and/or imprisonment for a term not exceeding six months. Once Bill C-97 comes into force, if corporations fail to comply with the investigative bodies' request, they may be found liable on summary conviction to a fine of up to $5,000.
A push for corporate transparency
These amendments to the CBCA reflect federal and international trends to help combat tax evasion, money laundering and corporate corruption. These safeguards provide effective mechanisms to ensure that law enforcement, tax and other investigative agencies have access to up-to-date information on significant corporate shareholders so they can accurately respond to criminal activities. With the clarifications provided in Bill C-97, it is expected that provinces and territories will mimic this federal legislative reform to be a part of the nationwide commitment to ensure greater transparency in corporate ownership.
The author would like to thank Nareesa Nathoo, summer student, for her assistance in preparing this legal update.
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