The Canadian government has passed legislation that will force companies to create and keep a register of individuals who have significant control within a firm.
The Canada Business Corporation Act (CBCA) came into force on 13 June 2019.
Individuals with significant control (ISCs) are defined as someone who is the registered or beneficial owner of shares, or someone who has direct or indirect control over shares, which carry 25% or more of the voting rights.
The Act also describes an ISC as “an individual to whom prescribed circumstances apply”, but such circumstances have not been set out yet.
Complying with the regulation
Under the CBCA, companies will be required to have a register listing all the relevant ISCs. The entry for every individual must include:
- The name, date of birth and last known address;
- The jurisdiction of residence for tax purposes;
- The date when such individual became or ceased to be an ISC; and
- A description of how such individual qualifies as an ISC.
The firm will have 15 days to update its register if information were to change, and it would need to be updated at least once every financial year to make sure that the data about its ISCs is accurate.
However, the information regarding a company’s ISCs will only be submitted to a register, without reporting it to any governmental agency or being made public.
But the data could be be accessed by the police or the Canada Revenue Agency as part of an investigation.
Failure to comply
Companies that do not abide by the CBCA risk being hit with tough sanctions.
Directors can face fines of up to C$200,000 (£118,331, $150,130; €133,180) and a six-month prison sentence, and shareholders face the same penalties if they fail to answer to the ISC register.
