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Federal Corporations will soon face increased disclosure requirements relating to Individuals with Significant Control

There may soon be a new set of considerations when selecting the jurisdiction to incorporate a company. In particular, the federal government has been incrementally introducing measures to increase transparency and accountability for certain corporations incorporated pursuant to the Canada Business Corporations Act (“CBCA”) and another set of such measures may come into force in the near future.

Once you have determined that incorporating is the right move for your business, the next step is to decide which jurisdiction to incorporate in. In Ontario, there are two options: incorporate federally under the CBCA or provincially under the Business Corporations Act (Ontario) (“OBCA”).

Consideration must be given to the different requirements applicable in each jurisdiction, as compliance with these requirements may lead to different administrative burdens depending on the nature of the business. For example, Ontario corporations must keep a current register of interests in land in Ontario. As a result, a corporation in the business of real estate development may prefer incorporating federally to minimize its formal requirements to keep a register of interests in land as this can be quite onerous if the corporation has a continually changing inventory. 

The requirements applicable to Ontario and Canada corporations have evolved over time with legislative amendments to the CBCA and the OBCA, as well as the regulations thereunder. In some cases, requirements which were once limited to one of these jurisdictions have subsequently been introduced in the other jurisdiction, levelling the playing field. One such example is the requirement for keeping a register of individuals with significant control (the “ISC Register”). 

Since June 2019, non-exempt Canada corporations have been required to keep an ISC Register as part of its private corporate records. As of January 1, 2023, non-exempt Ontario corporations are now also required to keep an ISC Register. In both jurisdictions, “Individuals with significant control” is taken to mean any individual who owns, controls, or directs 25 per cent of a corporation’s voting shares, 25 per cent of a corporation’s outstanding shares by fair market value, or anyone having direct or indirect influence that could, if exercised, result in such person having control of the corporation. The ISC Register must include personal information regarding each individual with significant control, details as to the manner in which they have significant control of the corporation and the timeframe during which the individual possessed significant control. Further, under both the OBCA and the CBCA, corporations are obligated to take reasonable steps at least one per fiscal year to ensure their ISC Register is up to date.

Canada is now making the federal requirements relating to the ISC Register more stringent compared to the Ontario regime in an effort to increase corporate transparency and accountability so as to decrease unlawful behaviours such as money laundering. Legislative amendments to the CBCA introducing reporting requirements in respect of federal corporation’s ISC Register received royal assent in June 2022. When these legislative amendments come into force, Canada corporations will be required to file a copy of its ISC Register with Corporations Canada on an annual basis and within 15 days of any new information or, change to the ISC Register. In addition, the information contained in a corporation’s ISC register will need to be filed on incorporation, amalgamation, or continuance to federal jurisdiction. 

An additional set of proposed amendments to the CBCA was introduced by the federal government on March 22, 2023, as Bill C-42 – An Act to amend the Canada Business Corporations Act and to make consequential and related amendments to other Acts. If passed into law, the information contained in the ISC Register which is disclosed to Corporations Canada may become publicly available through corporation profile reports which provide a snapshot of a corporation’s records with Corporations Canada. A corporation profile report can be obtained by any member of the public for a small fee.

These changes to the ISC Register represent a significant departure from the existing requirements applicable to Canadian corporations which currently do not make shareholder details a matter of public record. Under existing law, disclosure of the ISC Register is only required upon request by the Director responsible for administering the CBCA. If privacy is a concern with respect to the identity or percentage interest of shareholders, then you may want to think twice before incorporating a federal corporation under the CBCA. 

Soloway Wright LLP is a community-based law firm with offices in Ottawa and Kingston. With over 75 years of experience, our team of over 35 specialty lawyers in Ottawa and Kingston offer a dynamic blend of knowledge and experience to clients requiring assistance with Business Law, Commercial Leasing, Commercial Litigation, Condominium Law, Construction Law, Corporate Finance & Securities, Employment, Labour & Public Law, Workplace Investigations, Environmental Law, Estate Planning & Administration, Insurance Law, Medical Malpractice, Personal Injury, Municipal, Land Development & Expropriation, Real Estate & Development, and Tax Law matters. Our goal is to bring your legal issue to an effective, affordable, and successful conclusion.

DISCLAIMER: This article is for general information purposes only and is not (and should not be construed as) legal advice. The information contained herein summarizes only certain aspects of the subject matter and is not a comprehensive review of applicable law. All of the foregoing is subject to legal and accounting advice based on the particular circumstances of each potential client.

Julia is a corporate and real estate lawyer at Soloway Wright LLP. She handles a variety of transactional matters including financings, mergers and acquisitions, commercial real estate acquisitions and corporate reorganizations. She also advises clients regarding how to structure their business enterprise and commercial leasing matters. 

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