Certain federal corporations will now have to make specific information regarding their beneficial owners public. The Government of Canada has introduced new rules to create a publicly accessible beneficial ownership registry of privately held federally incorporated companies. Similar to the new trust reporting requirements, the beneficial ownership registry rules aim to improve transparency as part of the government's efforts to combat money laundering, terrorist financing, and tax evasion.
Bill C-42, which includes these changes to the Canada Business Corporation Act (CBCA), received Royal Assent on November 2, 2023.
What are the new reporting requirements?
The new rules under the beneficial ownership registry include changes to:
- require additional information to be kept in a corporation’s beneficial ownership register including the residential address, address of service (if provided), and citizenship of each beneficial owner
- make certain information publicly accessible on beneficial owners who are at least 18 years old via Corporations Canada, with some exceptions
- authorize the Canada Revenue Agency to share certain information with Corporations Canada to help validate and verify beneficial ownership information
Note that the legislation doesn’t specify the effective date of these changes. The rules will come into force on a day to be fixed by the order of the Governor in Council. The federal government has indicated the registry will be free to access but hasn’t yet provided details on how and when the public registry will be launched, as of the date of this article.
Is your business subject to the reporting requirements?
Privately held corporations incorporated or continued under the CBCA are already required to maintain a register of certain information about “beneficial owners” which, in this case, refers to individuals with “significant control” of the corporation.
Significant control generally means owning or controlling (directly or indirectly) shares with at least 25% of the votes or value of all the corporation’s shares, or having significant influence over the corporation, even if no shares are held. It also includes a group of individuals in some circumstances (e.g., a group of individuals with an agreement to vote the same, where the group together owns 25% or more of the votes or value of the shares).
These corporations should be keeping the register with their corporate records and include the following information for each beneficial owner:
- Name, birth date, and the latest known address
- Jurisdiction of their residency for tax reporting
- Date they became an individual with significant control (e.g., acquired 25% shares)
- Date they ceased to be an individual with significant control (e.g., sold their shares)
- Description of how they have significant control, including their interests and rights in respect of shares of the corporation (e.g., if there’s an agreement with other shareholders to vote the same way, etc.)
Corporations that fall under these rules must take reasonable steps at least once a year to ensure the register is accurate and complete. Also, the registry must be updated within 15 days of learning any new information about the beneficial owners at any time.
These corporations must disclose their beneficial ownership register to Corporations Canada upon request, and to certain other parties where the conditions are met.
Furthermore, under Bill C-19, which was enacted on June 23, 2022, beneficial owner information is reportable to Corporations Canada annually, within 15 days of any updates to the register and upon receiving a CBCA certificate of incorporation, amalgamation, or continuance.
What are the non-compliance penalties?
Failure to comply with the beneficial ownership reporting rules could lead to a fine of up to $200,000 and/or up to six months imprisonment.
What about provincially incorporated corporations?
The federal government plans to design their public registry to include beneficial information collected by provinces or territories that choose to participate.
Most provinces (other than Alberta and the territories) have introduced their own beneficial ownership transparency legislation, each with their own rules and requirements. For example, private corporations incorporated or continued under Ontario’s Business Corporations Act generally must maintain a beneficial ownership register containing certain required information in their records, effective January 1, 2023.
If your corporation is incorporated or continued in under a provincial corporations act, we recommend familiarizing yourself with the relevant rules to ensure you are meeting any beneficial ownership obligations.
Takeaway
The federal government continues to take steps to increase transparency with its proposed public beneficial ownership registry for privately held federally incorporated corporations, however details on the public registry and the effective date of the new reporting requirements remain unknown. We’ll continue to make updates to this tax alert as more information becomes available.
If you have questions regarding your obligations under the CBCA or relevant provincial laws, or how the proposals may impact your business, please consult with your legal counsel.
Disclaimer
The information contained herein is general in nature and is based on proposals that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice or an opinion provided by Doane Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, specific circumstances or needs and may require consideration of other factors not described herein.
