New Disclosure Requirements for all British Columbia Companies
As part of a multinational commitment to end hidden ownership of companies, there are new requirements under the Business Corporations Act (British Columbia) (the “Act”) regarding beneficial ownership and control of companies which comes into effect May 1, 2020. These changes are similar to the requirements under the Canada Business Corporations Act concerning beneficial ownership of federal corporations which came into effect June 13, 2019 and which you can read about in my earlier Legal Alert Article here.
As of May 1, all BC companies will be required to prepare and maintain at their records office an additional register called a Transparency Register.
Individuals are considered to be significant individuals and must be shown on the Transparency Register if they meet one or more of the following criteria:
- They own an interest in 25% or more of the shares as a registered owner;
- They own shares as a registered owner that carry 25% or more of the voting rights;
- They own an interest in 25% or more of shares as a beneficial owner;
- They own shares as a beneficial owner that carry 25% or more of the voting rights;
- They have indirect control in 25% or more of the votes or shares, such as, if they indirectly control an intermediate entity or a person that holds 25% or more of the shares or votes of a private company;
- They hold 25% or more of the shares or votes for the benefit of another person; for example, the trustee of a trust;
- They hold a combination of interests that amount to 25% of the votes or shares by way of being a registered owner, trustee, beneficiary or having indirect control;
- They can cause a change in the majority of directors of the company by way of their shareholdings or special rights provided in the articles of the company or shareholders’ agreement;
- They have indirect control of the right to elect, appoint or remove a majority of the directors;
- They have direct and significant influence over an individual with the right or ability to elect, appoint or remove a majority of the directors;
- They have a combination of special rights, indirect control or direct and significant influence to elect, appoint or remove a majority of the directors;
- They have interests or rights jointly with one or more additional individuals which together meet any of the above thresholds; in such case the company must list all joint holders;
- They are a group of individuals who are acting in concert, hold interests, rights or abilities that meet the 25% threshold or have the direct or indirect right to elect, appoint or remove a majority of the directors of a private company. In this case, the company must list every member of the group; or
- They are spouses and/or children regardless of where they live or they are other relatives of the individual or the individual’s spouse who have the same home and together meet the 25% threshold or have the direct or indirect right to elect, appoint or remove a majority of the directors of a private company. In this case, the company must list every member of the group.
Each company’s Transparency Register must include the following information for all significant individuals :
- Full name, date of birth and last known address;
- Whether they are a Canadian citizen or permanent resident of Canada;
- If they are not a Canadian citizen or permanent resident of Canada, every country or state of which they are a citizen;
- Whether they are resident in Canada for the purposes of the Income Tax Act (Canada);
- The date on which they became or ceased to be a significant individual in the company; and
- A description of how they are a significant individual.
The Transparency Register will not be available to the public. The legislation indicates that only the current directors of the company, law enforcement, tax authorities and regulators may request access to the Transparency Register.
Companies will be required to send a notice to an individual within 10 days after recording him or her as a significant individual or removing him or her as a significant individual from the Transparency Register. If there are no individuals who meet the definition of a significant individual, a Transparency Register is still required to be kept but will show that the company has determined that there are no individuals who meet the definition of a significant individual.
If the company does not comply with the new record keeping requirement, it may be found guilty of an offence and subject to a fine of up to $100,000.00. If the directors or shareholders of the company knowingly record or authorize, permit or acquiesce in the recording of false or misleading information in the register, they could be subject to a fine of up to $50,000.00.
Companies will also be required to update the Transparency Register within 30 days of when information changes and to provide a description of the steps taken at least once in every calendar year, within two months of the company’s anniversary date of recognition to identify all significant individuals and ensure the information in the Transparency Register is accurate, complete and up-to-date.
Some companies are choosing to send a Questionnaire out to all shareholders to assist the company in obtaining the information required to confirm that their Transparency Register is complete and accurate.
If you have a BC company and wish to discuss your new Transparency Register requirements, please feel free to contact us.
Paul Tonita is a solicitor practicing in the areas of business law, real estate, estate planning and estate administration. His business experience includes assisting clients right from the beginning by discussing the different business structures, incorporating, buying and selling businesses, assisting with lending or financing needs, drafting and advising on contracts, and providing general advice to business owners.
His real estate practice involves assisting both residential and commercial clients with purchases, sales, financing and leasing.
Paul also helps clients plan for their future with estate and incapacity planning. He guides executors through the legal challenges that are unknown to many when they agree to take on the executor’s role. This may involve determining whether a grant of probate is required and applying for one if necessary, calling in assets, paying out debts, transferring real estate to surviving joint tenants and determining whether additional steps may be required in order to wind up an estate and transfer the balance of assets to the deceased’s beneficiaries.
For more information please contact Paul Tonita at 250-869-1126 (direct line) or email him at email@example.com.