Operating a company in Canada comes with many requirements, including adhering to the reporting requirements contained in the Canada Business Corporations Act (also referred to as the “CBCA”). The federal government recently amended this legislation to include new transparency requirements for corporations. This blog will provide a summary of these changes so that business owners can avoid any costly repercussions.

What is the Canada Business Corporations Act?

The Canada Business Corporations Act is the primary legislation governing the establishment and operation of federal corporations in Canada. Enacted in 1975, the Canada Business Corporations Act provides a comprehensive framework for the organization, governance, and dissolution of corporations at the federal level. Its primary objective is to ensure transparency, accountability, and fairness in corporate practices.

The Canada Business Corporations Act is not to be confused with similar provincial legislation, such as the Business Corporations Act of Ontario. The provincial legislation includes its own set of requirements for provincially incorporated corporations.

The Canada Business Corporations Act outlines the process for incorporating a company, specifying requirements for articles of incorporation, bylaws, and directorship. It also mandates corporations to maintain accurate records, hold annual meetings, and disclose pertinent information to shareholders. The Canada Business Corporations Act also addresses issues such as the rights and responsibilities of directors, shareholder remedies, and the process of amalgamation or dissolution. In March 2023, Parliament introduced Bill C-42, An Act to amend the Canada Business Corporations Act and to make consequential and related amendments to other Acts to increase transparency related to corporate ownership.

Individuals with Significant Control

Corporations are currently required to keep a register of individuals with significant control. These are individuals who own or control greater than 25% of the corporation, either individually, jointly, or in concert with others, such as individuals who own 25% of the voting or non-voting shares of the corporation. Individuals with significant control are also individuals who have “control in fact” of the corporation, which is defined as the ability to influence the corporation’s economics, operations, and day-to-day management despite not owning any shares.

The corporation has some autonomy as to how to keep this register, such as in a logbook, database, or spreadsheet, but the register must contain:

• The full legal name of the individual;
• A description (i.e., source) of the individual’s significant control;
• The individual’s date of birth;
• The country of residence of the individual;
• The individual’s residential address;
• The date where the individual gained significant control; or if applicable,
• The date when the individual ceased to have significant control.

Bill C-42 provides new requirements regarding the register of individuals with significant control.

Bill C-42: New Transparency Requirements

The proposed amendment will require Canadian corporations to make certain information in the registers available to the public to increase corporate transparency and accountability for corporations governed under the Canada Business Corporations Act. Specifically, Bill C-42 would allow Corporations Canada to make the name, address, and share ownership of individuals with significant control publicly available. Bill C-42 would also require that an individual’s residential address be included in the register for the purposes of service and confirmation of citizenship.

Further changes proposed include:

• Increasing non-compliance consequences, such as fines, criminal imprisonment, refusal of Corporations Canada to issue a certificate of existence or dissolution;
• Corporations must proactively submit information regarding individuals with significant control to Corporations Canada on an annual basis or when a change of control occurs; and
• Exempting certain corporations from these reporting requirements, such as reporting issuers, wholly-owned subsidiaries of an exempted corporation, and Crown corporations.

Even with the expanded requirements, Bill C-42 allows an exemption from sharing the above information as long as disclosure would present a “serious threat” to that individual’s safety, or as long as the information must be kept confidential under conflict-of-interest legislation.

These new reporting requirements have come into effect as of January 22, 2024. As such, business owners must carefully review the information in their individuals with significant control registers and update it where necessary. Failure to adhere to these changes could result in some of the consequences of non-compliance mentioned above.

Get Help with Corporate Transactions

Corporate transactions involve a variety of legal issues to consider, from employment contracts to real estate matters. If you are a business owner considering a purchase, sale, merger, acquisition, or other transaction, having the right legal team behind you can help you ensure the best outcome.

Contact the Corporate Lawyers at Bader Law for Legal Advice on Corporate Transparency

At Bader Law, our knowledgeable corporate lawyers provide comprehensive business services to address every element of a merger or acquisition. Our business law team has been advising businesses and business owners for over a decade. We have built a reputation for providing tailored and trusted legal guidance to develop strategic legal solutions to fit your needs. We consider the complete picture to identify and mitigate potential risks while protecting your business’ continued growth and success. Contact us online or by phone at (289) 652-9092 to learn how we can assist you.