In November 2021, Ontario’s Minister of Finance, Peter Bethlenfalvy introduced Bill 43, the Build Ontario Act (Budget Measures), 2021, which received Royal Assent on December 9, 2021. Among many legislative changes, Bill 43 will introduce important changes to the Ontario Business Corporations Act (the “OBCA”). Specifically, Bill 43 will require private corporations to prepare and maintain a register of individuals with significant control over the corporation (an “ISC Register”).
Who is an individual with significant control?
An “Individual with significant control over a corporation” includes a person who is the registered or beneficial owner of, or who directly or indirectly controls:
- 25 per cent or more voting shares of the corporation; or
- shares worth 25 per cent or more of the fair market value of all the corporation’s outstanding shares.
A person will also be considered to have significant control if they have direct or indirect influence that, if exercised, would result in control in fact of the corporation. In addition, two or more individuals are each considered to have significant control if they jointly own or control a significant number of shares or if they are related persons that collectively control a significant number of shares. A related person includes a spouse, child, and any relative living in the same house.
What information is required?
A corporation’s ISC Register must contain the following information for each individual:
- name, date of birth, and last known address;
- jurisdiction of residence for tax purposes;
- the date on which they obtained or ceased having significant control;
- a description of how they have significant control, including a description of any interests and rights in the corporation’s shares; and
- a description of the steps the corporation has taken to keep the above information current each year.
A corporation must update this information at least once every financial year, and within 15 days of becoming aware of any change to such information.
Disclosure and enforcement
A corporation will be required to disclose the information in its ISC Register for law enforcement, tax, and regulatory purposes. A request for disclosure may be made by a police force, tax authority or regulatory body.
The OBCA amendments also include enforcement provisions. A person that contravenes these new requirements could face heavy fines and even imprisonment. For example, a director or officer that knowingly records false information in the register could face a fine of up to $200,000 and imprisonment of up to six months. A shareholder that knowingly provides false information to a corporation also faces the same potential penalties.
Ontario has introduced these changes to the OBCA to increase transparency in corporate ownership and control in an effort to prevent and detect the use of corporations for tax evasion, money laundering, and other illicit financial activities. By requiring Ontario businesses to keep a register of individuals with significant control, the province will be adopting similar requirements to what has already been implemented under the Canada Business Corporations Act, and in other provincial jurisdictions.
These changes will come into force on January 1, 2023, so Ontario businesses have plenty of lead time to prepare.
If you are interested in discussing the implications of Bill 43 to your business, please reach out to Ben Hopkins, email@example.com, or one of the business lawyers at Perley-Robertson, Hill & McDougall LLP.