New obligations for private federal corporations : a register of individuals with significant control

2019-06-12

ASOFJUNE13TH,2019,IMPORTANTMODIFICATIONSTOTHECANADABUSINESSCORPORATIONSACT(“CBCA”)1WILL
COMEINTOFORCE.THENEWPROVISIONS2WILLREQUIREMOSTPRIVATEFEDERALCORPORATIONSTOPREPAREAND
MAINTAINAREGISTEROFINDIVIDUALSWITHSIGNIFICANTCONTROLOVERTHECORPORATION(THE“ISCREGISTER”).
THESENEWPROVISIONSMAYPOSECHALLENGESINTHEIMPLEMENTATIONOFTHEISCREGISTERANDNON-COMPLI-
ANCEWITHTHOSENEWOBLIGATIONSEXPOSESTHECORPORATION,DIRECTORS,OFFICERSANDSHAREHOLDERS
TOMATERIALPENALTIES.THISNOTICEAIMSTOSUMMARIZETHESENEWPROVISIONSANDRELATEDOBLIGATIONS.
THEISCREGISTERINANUTSHELL
WHOISCONCERNED
ThemajorityofentitiesincorporatedundertheCBCA
3willhavetoprepareandmaintainanISCRegister.TheISC
Registerisinadditiontoallcurrentcorporateregisters.
PURPOSE
TheISCRegisteraimstoincreasecorporatetransparencyinanattempttofighttaxevasion,moneylaundering,corrup-
tionandothercriminalactivities.
WHATIS“ANINDIVIDUALWITHSIGNIFICANTCONTROL”
ForthepurposesofthisnewISCRegister,federalcorporationswillhavetoidentifyallindividualswho,jointlyoralone,
havesignificantcontroloverthecorporation.ThenewprovisionsoftheCBCAdefineanindividualwithsignificantcontrol
overacorporationas(eachan“ISC”):
(a)anindividualwhoistheregisteredholder,beneficialowner,orhasdirectorindirectcontrolover:
i.sharescarrying25%ormoreofthevotingrightsattachedtoallofthecorporation’soutstandingvoting
shares;or
ii.anumberofsharesthatisequalto25%ormoreofallsharesofthecorporationbasedonthefairmarket
valueoftheshares;
(b)anindividualwhohasanydirectorindirectinfluencethat,ifexercised,wouldresultincontrolinfactofthe
corporation;
(c)anindividualtowhomprescribedcircumstancesapply(suchprescribedcircumstancesmay,ormaynot,be
establishedbyfutureregulations);or
(d)anycombinationof(a),(b)or(c).
4
ThecorporationwillhavetoobtainthefollowinginformationforeachidentifiedISC:
•name;
•dateofbirth;
•lastknownaddress;
•jurisdictionofresidencefortaxpurposes;
•datewhichtheindividualbecameorceasedtobeanindividualwithsign
ificantcontrol(asapplicable);and
•descriptionofhowtheindividualmeetsthedefinitionofsignifican
tcontrol.
OBLIGATIONSOFTHECORPORATIONTOMAINTAINANDUPDATETHEISCREGISTER
ConcernedcorporationswillalsohavetoprovideadescriptionofthestepstakentoidentifytheISCandmaintainthe
informationlistedabove.
Thecorporationmustrequestthisinformationfromeachofitsshareholders.
TheinformationobtainedmustberecordedintheISCRegisterandmeasuresmustbetakentoensurethattheinformation
isuptodateatleastonceduringeachfinancialyearofthecorporation.
However,ifthecorporationbecomesawareofanyinformationwhichneedstoberecordedorupdatedontheISCRegister,
itmustdosowithinfifteen(15)days.
OBLIGATIONSOFTHESHAREHOLDERSTOPROVIDEINFORMATION
Theshareholders’obligationunderthelawistoreplyaccuratelyandcompletelyassoonasfeasible.
ACCESSANDDISCLOSURE
TheISCRegisterisnotcurrentlyrequiredtobesubmittedtoCorporationsCanadaoranyotheragency,norbemadeavail-
abletothegeneralpublic.
TheISCRegistermaybekeptattheregisteredofficeofthecorporationoranyotherplaceinCanadadeterminedb
ythe
boardofdirectorsofthecorporation.
However,acorporationmustprovideaccesstotheISCRegistertoshareholdersandcreditorsofthecorporationupon
requestforanymattersrelatingtotheaffairsofthecorporation,suchasvotingoracquiringsecurities.
TheISCRegistershallalsobemadeavailabletoinvestigativebodies,suchasapoliceforceortheCanadaRevenue
Agency,uponrequestandundercertainconditions.
PENALTIES
FailuretoprepareorupdatetheISCRegisterinaccordancewiththelawcouldresultinpenaltiessuchasfinesandeven
imprisonmentforthecorporation,directorsandofficerswhocontravenetocertainobligationsofthesenew
provisions.
Failureforshareholderstoprovidetherequiredinformationtothebestoftheirknowledgecouldalsoresultinpenalties
suchasfinesandimprisonment.
TOOLSANDSERVICES
Thecorporations,theirdirectors,officersandtheirshareholdersareresponsibleforobtainingandprovidingtherequired
informationandforpreparingandmaintaininganISCRegisterandnoformathasbeenprescribedfortheISCRegister.
Toalleviatethesignificantburdenthatthismayimpose,ROBIChasimplementedavarietyoftoolsandservicestofacili-
tatecompliancewiththesenewobligations,whichinclude:
•formsandquestionnaireswhichwillassistthecorporationsinestablishingindividualswithsignificantcontrol
andobtainingtheinformationrequiredfortheISCRegister;
•preparationandannualmaintenanceoftherequiredISCRegisterbasedoninformationreceived;
•preparationandannualmaintenanceofregisterstokeeptrackofthemeasurestakentomaintaintheISCRegister;
•annualreminderstoupdatetheISCRegisteraspartoftheannualmaintenanceof
corporatebooks.
Formoreinformationoranyquestionsregardingthesenewobligations,theISCRegisteroranyoftheaforementionedtools
andservices,pleasecontactusbyemailatC86@robic.comorreachouttoyourcontactatROBIC.
1CanadaBusinessCorporationsAct,RSC1985,cC-44.2BudgetImplementationAct,2018,No.2,S.C.2018,c.27.3Thesenewobligationsdonotapplyto(i)areportingissueroranémetteurassujettiunderanActofthelegislatureofaprovincerelatingtotheregulationof
securities,or(ii)corporationslistedonadesignatedstockexchange,asdefinedinsubsection248(1)oftheIncomeTaxAct.
4CanadaBusinessCorporationsAct,RSC1985,cC-44,s.2.1(1).5PendingroyalassentoftheBudgetImplementationAct,C-97,2019,No.1,secondreadingandreferraltocommitteeintheHouseofCommons,art.99.
NEWOBLIGATIONS
FORPRIVATEFEDERAL
CORPORATIONS:
AREGISTEROF
INDIVIDUALSWITH
SIGNIFICANTCONTROL