Private CBCA Corporations Must Gather Information About Shareholders

Starting in June 2019, Private CBCA Corporations Required to Gather and Record Detailed Information About Their Shareholders

Bill C-86  Implements Changes to CBCA

There have been significant changes that have come into effect on June 13, 2019, to the Canada Business Corporations Act (CBCA) by a new legislation called : Bill C-86 .

Bill C-86 stipulates that all (CBCA) governed corporations, are now required to create and manage a register of individuals with significant control. This however will not affect corporations that are listed on the stock exchange or are already reporting issuers according to the definitions of the Canada Income Tax Act.

In an effort to increase the transparency of corporations throughout Canada, it is expected of other provinces to adopt similar policies in their corporate statutes as part of a combined effort with the Federal Government.

The implementation of this policy is to ultimately reduce corporate fraud, tax evasion, the funding of terrorist organizations, and money laundering. Bill C-86 was created to reflect international efforts to prevent these same issues, for example, the United Kingdom has even implemented a public register of individuals of significant control that also extends to partnerships and trusts.

An individual with significant control can be defined as such:

  • An individual who possesses any combination of the following rights or interests or shares in a given corporation.
  • The individual is the registered share holder of the corporation.
  • The individual has direct or indirect control or direction over the shares or is the beneficial owner of the shares.
  • An individual who can exercise any form of influence and control over a corporation.

Joint ownerships provided for in an agreement or arrangement are also addressed by the following definitions

The definition of a « significant number of shares » as outlined below:

    • Any number of shares that carry 25% or more of the voting rights attached to all of the corporation’s outstanding voting shares; or
      If there are a quantity of shares that consist of a minimum of 25% of the voting rights or more, in relation to all of the outstanding voting shares of the corporation,
    • or any number of shares that is equal to 25% or more of all of the corporation’s outstanding shares measured by fair market value.

The following information listed below would be required for the Register.

Each individual with significant control or any beneficial owner must include their names, date of birth, and latest known addresses, which also includes their jurisdiction for tax purposes.

It is also required that dates in which individuals became « individuals with significant control » with the corporation started, and or when they ceased this function.

The requirements also dictate that a detailed description of the individual’s function, rights, or interests in regards to the shares in the corporation be included in the register.

In order to ensure that the Register is accurate and complete, a description must also contain details of each step that is to be undertaken to update the register at the end of every financial year.

If any new information or activity in regards to changes arise within the corporation, the register will have to be updated within 15 days declaring all new information or changes.

All current shareholders must comply as accurately as they can and provide any necessary information that is requested by the corporation in order to properly complete a register.

If a corporation cannot properly identify an individual or individuals with significant control , there are steps that will have to be followed that is determined by regulations.

Shareholders and creditors of the corporation have the right to review and consult the register and if requested, it may also be subjected for disclosure to the Director of Corporations Canada.

There are stiff penalties for non compliance, in such cases where shareholders intentionally commit offences against the regulation, a penalty of up to $200,000 in fines can be levied or individuals can even face prison terms for up to 6 months.

It is imperative that as of June 13, 2019, that corporations start the register process by gathering all required information to ensure compliance. Other information and new compliance rules on the format of the register will also soon be available.

This article only provides information in a general nature and is only as current as the date in which it is posted. It is not updated and therefore may no longer be current. This document should not be relied upon as it does not claim to, nor provide advice on legal or tax matters.

All tax situations are specific in nature and will likely differ from the situations that are presented in the article. It is advisable that you seek and consult a tax professional if you have any specific legal or tax questions.

This document is intended to provide general information on a particular subject or subjects(s) and this article is not an exhaustive treatment of such subject(s). In accordance, the information in this document is not intended to constitute or replace accounting, tax, legal, investment, consulting, or other professional advice or services.

Before any decision is made, or any action taken which might affect your personal finances or business, you should consult a qualified, professional adviser.

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