Is there such a thing as a “privately held” corporation anymore?
Effective January 22, 2024, private corporations governed by the Canada Business Corporations Act (“CBCA”) are required to publicly disclose their individuals with “significant control” (“ISCs”); however, the ISC identification rules remain murky in their application to shareholders that are trusts. Government guidance is urgently required to ensure corporations and shareholders can properly meet these new obligations.
Registers of individuals with significant control (more commonly referred to as “transparency registers”) are not a new concept in Canada and neither are the privacy law concerns that have existed since their inception. Private CBCA corporations have been required to maintain transparency registers as part of their corporate records since 2019. British Columbia created similar obligations for its private corporations in 2020. Quebec and Ontario followed in 2023, with Quebec being the first jurisdiction to create a public register of ISCs.
Private CBCA corporations now have two ISC obligations: private record-keeping of extensive ISC details and public disclosure of a limited subset of information.
The public CBCA transparency register will only disclose each ISC’s full legal name, address for service (or residential address), when their status as an ISC started and/or ended, and a description of how they have significant control. Corporations must still compile additional ISC details as part of their ongoing corporate record-keeping, including each ISC’s date of birth, country (or countries) of citizenship, country (or countries) where the ISC is considered a resident for tax purposes, and the ISC’s residential address (even if an alternate address for service is designated publicly).[1]
Corporations must update their transparency registers at least once a year, and within 15 days of becoming informed of any changes affecting the register. Corporations must take “reasonable steps” to identify ISCs and their required details.[2]
The CBCA updates do not provide sufficient guidance for trusts to identify ISCs. This article aims to highlight these ongoing concerns in the hopes that clearer guidelines with be forthcoming.
By way of background, there are two steps to determining ISCs:
(1) Does a shareholder hold a “significant number of shares”?
(2) If yes, who are the individuals in “control” of the shares?
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