CBCA Register for Individuals With Significant Control: 5 FAQs
Published:
May 21, 2019
Author(s):
We updated this publication on February 17, 2023.
As of June 13, 2019, private companies incorporated under the Canada Business Corporations Act (CBCA) must prepare and maintain a register of individuals who have “significant control” over the corporation (ISC Register). Corporations Canada states the purposes of the register for individuals with significant control are to increase corporate transparency respecting who owns and controls a corporation, and to help law enforcement agencies expose activities such as money laundering and tax evasion. To help companies incorporated under the Canada Business Corporations Act comply, here are the answers to five key frequently asked questions about the CBCA register of individuals with significant control requirement.
1. To what corporations does the ISC Register requirement apply?
The requirement to prepare and maintain a register of individuals with significant control applies to all corporations incorporated under the Canada Business Corporations Act with the exceptions of reporting issuers and publicly listed corporations.
2. Who has “significant control”?
The Canada Business Corporations Act defines an individual with “significant control” as one who has certain interests or rights in respect of a “significant number” of the corporation’s shares. Individuals with significant control can include:
- Registered shareholders.
- Beneficial owners.
- Individuals with direct or indirect control or direction over the shares.
- Individuals who have direct or indirect influence that, if exercised, would result in control in fact of the corporation.
- Individuals to whom “prescribed circumstances” apply (as determined by regulation under the CBCA).
Individuals are deemed to have “significant control” if they have any of these interests or rights in the following amounts:
- Any number of shares that carry 25% or more of the voting rights attached to all of the corporation’s outstanding voting shares, or
- Any number of shares that is equal to 25%or more of all of the corporation’s outstanding shares measured by fair market value.
3. What information must the ISC Register include?
A corporation must record and maintain the register of individuals with significant control.
Information. The ISC register must record all of the following information for each person who has significant control over the corporation:
- Their name, date of birth, and latest known address.
- Their jurisdiction of residence for tax purposes.
- The day on which they became and ceased to be an individual with significant control over the corporation.
- A description of how they fall within the definition of an individual with “significant control” including, as applicable, a description of their interest and rights in respect of shares of the corporation.
- Any other information prescribed by regulation under the CBCA.
- A description of each step taken in accordance with the corporation’s obligation to maintain the ISC Register.
Maintenance. A corporation has an ongoing obligation to maintain the ISC Register by taking reasonable steps, at least once during each financial year of the corporation, to ensure the information in its register of individuals with significant control is accurate, complete and up to date. The corporation must also update the ISC Register within 15 days of becoming aware that any recorded information has changed or there is a new individual with significant control. Within one year after the sixth anniversary of the day on which an individual ceases to be an individual with significant control over the corporation, the corporation must dispose of that individual’s personal information contained in the ISC Register unless another law requires a longer retention period.
4. What are the non-compliance risks?
A corporation that contravenes the ISC Register requirements without reasonable cause is liable for a fine of up to $5,000. Furthermore, a corporation’s director, officer, or shareholder who knowingly authorizes, permits, or acquiesces in the contravention of the requirements or knowingly records or provides false or misleading information in relation to the ISC Register is personally liable for a fine of up to $200,000, to imprisonment for a term of up to six months, or to both.
5. Who can access the ISC Register?
Several groups can access a corporation’s register of individuals with significant control:
Shareholders and Creditors. Shareholders and creditors of the corporation may, on application, have access to the ISC Register provided the information obtained is only used: to influence the voting of the corporation’s shareholders; in connection with an offer to acquire securities of the corporation; or “any other matter relating to the affairs of the corporation”.
Director of Corporations Canada. The corporation must make the information contained in the ISC Register available to the Director of Corporations Canada upon request.
Investigative Bodies. A corporation must provide, upon request, a copy of the ISC Register to police, tax authorities or any other body with investigative authority in relation to offences set out in the Canada Business Corporations Act. However, investigative bodies are only authorized to request the ISC Register if there are reasonable grounds to suspect the corporation, or an individual with significant control over it, has committed or been involved in an offence set out in the schedule to the CBCA and that the register would be relevant to investigating that offence. The list of offences in the schedule is wide-ranging, and includes offences under the Criminal Code of Canada, the Canadian Environmental Protection Act and the Cannabis Act. Corporations asked to provide the ISC Register to an investigative body are wise to immediately seek legal advice.
Please contact your McInnes Cooper lawyer or any member of our Corporate & Business Law Team @ McInnes Cooper to discuss compliance with your Register of Individuals With Significant Control obligations.
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