Few amendments have been made to the Canada Business Corporations Act ("CBCA") since it was originally adopted in 1975. The CBCA has undergone some amendments in 2018 and, more recently, Bill C-86 proposed amendments the CBCA in respect to the keeping of corporate records of private corporations. This bill received Royal Assent on December 13, 2018 and the amendments will finally come into force on June 13, 2019 .

These new provisions were inspired by the noble purpose of preventing "the misuse of corporations and other legal entities for tax evasion and other criminal purposes, such as money laundering, corruption and the financing of terrorist activities" .

A new concept is therefore added to the CBCA, that is, the notion of "individual with significant control" ("IWSC"). It is actually a person (or group of people) with a significant control of a company, whether it be legal or factual control over a significant number of shares. A significant number of shares is defined as 25% or more of the outstanding voting shares of the Corporation, or 25% or more of the fair market value of all outstanding shares of the Corporation.

Private companies will henceforth be required to keep a record of IWSC. This register must include, for each IWSC, the following information:

1. name, date of birth and last known address;
2. jurisdiction of residence, for tax purposes;
3. the date on which a IWSC acquired that qualification, or ceased to have it;
4. a description of how the significant control over the corporation applies, including, where applicable, a description of the rights or interests in the shares of the corporation;
5. any other prescribed information; and
6. a description of each step taken in order to keep the information in the register accurate, complete and up-to-date.

At least once in each fiscal year, the company must take the necessary steps to keep the register up-to-date.

Another interesting feature is that the company will have to withdraw the information contained in the register no later than one year after the sixth anniversary of the date on which an IWSC lost this qualification, but subject to any other time limit applicable under another federal or provincial law.

Shareholders and creditors of the Company and their personal representatives may, upon request, consult the IWSC register, provided, however, that an affidavit stating that the information will not be used for prohibited purposes, in particular for solicitations beyond the scope of the company's internal affairs.

The company that violates this new record keeping obligation commits an offense and can incur a maximum fine of $ 5,000. The director or officer of a corporation that knowingly authorizes or permits a contravention, or transmits false or misleading information, whether or not the corporation is prosecuted or convicted, will be subject to a monetary penalty of $ 200,000 or to a 6-month prison sentence; the same applies to shareholders who submit false or misleading information.

In short, this new measure aims to enhance the transparency of beneficial ownership of the shares of a private company under federal jurisdiction.

An implementing regulation should clarify some of the new provisions. It is also expected that provincial laws will be updated in the near future, similar to the CBCA.

Many companies will want to revise their ways to comply with these new provisions; LJT's commercial law team is there to assist you in these steps. Please contact Ms. Julie-Anne Archambault for more information at julie-anne.archambault@ljt.ca or 514 370-2438.

References

1. These include the election of directors, electronic communications and diversity on the board of directors.
2. View Bill online
3. Agreement to Strengthen Beneficial Ownership Transparency Between Federal and Provincial Finance Ministers in December 2017, online.
4. In the sense of paragraph 2(1) of the Personal Information Protection and Electronic Documents Act (S.C. 2000, c. 5).