Canada imposes stricter shareholder information requirements to companies
Canada has introduced new requirements to private companies that now must maintain a register containing up-to-date information on "individuals with significant control" (ISC), an addition to the current registers that corporations have for directors and shareholders.
Under Bill C-86, that comes into effect this Thursday (13 of June, 2019), all companies that fall under the Canada Business Corporation Act (CBCA) must comply to the stricter requirements.
The changes impose additions to the information that every CBCA corporation is required to record respecting its shareholders, and provides for additional kinds of third party disclosure of that shareholder information in certain circumstances beyond that previously provided under the CBCA.
Canada law defines 'individuals with significant control' as: registered or beneficial shareholders, those with "direct or indirect control or direction" over a significant number of shares, and those with "direct or indirect influence" resulting (if exercised) in control in fact of the corporation. Under the CBCA, a "significant number of shares" is defined as 25% or more of the outstanding or voting shares.
The CBCA also notes that ISCs will also extend to individuals to whom "prescribed circumstances apply".However, these circumstances are yet to be defined, and additional regulations are awaited.
Luke T. Hayden, from Cox & Palmer, explains the added information that now must be kept in a separate corporate register in relation to individuals who meet the criteria of having 'significant control':
- their name, date of birth and latest known address;
- their jurisdiction of residence for tax purposes;
- the date on which the individuals became or ceased to be individuals with significant control;
- a description of how the individuals qualify as individuals with significant control, including their right, title and interest in and to shares of the corporation;
- other prescribed information to be set forth in upcoming regulations; and
- steps taken by the corporation to identify all individuals with significant control and to ensure that information in the new register is accurate, complete and up-to-date.
Companies are obliged to report any new information regarding ISCs within 15 days of becoming aware of it and, further, review their register of ISCs once per fiscal year.
Failure to either comply with preparation and maintenance of the register or the submission of false or misleading information is an offence under the CBCA, and carries a penalty of up to CAD200,000 and six months' imprisonment.
"The new rules apply to so-called 'private companies' as well as to what are defined under the CBCA as 'distributing corporations' that are more commonly referred to as 'public companies', (i.e., corporations which are 'reporting issuers' under securities legislation or the securities of which may be traded on a Canadian or international stock exchange)." Luke T. Hayden said.
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