Federal Corporations Required to Disclose Information of Select Shareholders, Officers and Directors

As of January 22, 2024, businesses incorporated under the Canada Business Corporations Act (CBCA) will be required to file a registry of individuals with significant control over the corporation. This new reporting requirement, mandated by Corporations Canada, aims to enhance the visibility of those who hold substantial influence within a company and ensure a more comprehensive understanding of its corporate structure.

Who Qualifies as an “Individual with Significant Control”?

Individuals with significant control (ISC) are those who, directly or indirectly, have substantial control over a corporation's operations and decision-making processes. This generally includes individuals who:

1. Directly or indirectly own or control 25% or more of the corporation's shares;
2. Directly or indirectly hold 25% or more of the corporation's voting rights; or
3. Exercise significant influence or control over the corporation in another way (e.g. have the capacity to affect the economics, operations and day-to-day management of the corporation).

Reporting Requirements

Businesses incorporated under the CBCA will soon be obligated to gather and file detailed information about their ISCs with Corporations Canada. This information includes:

1. Personal Information: Full legal name, date of birth, country of residence (for tax purposes), and the residential address or address of service for the ISC;
2. Nature of Control: A description of the nature and extent of the individual’s control or influence over the corporation (e.g., owns 25% of shares); and
3. Dates of Control: The date the individual became and ceased to be an ISC (as applicable).

The following ISC information will be made available to the public on the Corporations Canada website:

• full legal name;
• residential address (will be made public if no address for service is provided);
• address for service (if one is provided);
• date the individual became an ISC and ceased to be an ISC, as applicable; and,
• description of the ISC's significant control.

Of note, law enforcement agencies and the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) will have access to all of the filed ISC information whether or not the information is made public.

Submitting Information

To comply with these new reporting requirements, businesses must submit the information to Corporations Canada through the Online Filing Centre. The filing must be made:

1. During incorporation;
2. As part of the corporation’s annual returns;
3. After amalgamation;
4. After continuance (import) to a federal jurisdiction; and
5. Within 15 days of the corporation making any changes to its ISC registry.

Failure to Comply

Compliance with the new reporting requirements is crucial for businesses to avoid penalties for both the corporation and its directors and officers, and ensure transparency in their corporate governance.

If a director or officer knows that the corporation has contravened the ISC disclosure requirements, they have committed an offence and may be required to pay a fine not exceeding one million dollars, or be imprisoned for a term not exceeding five years, or both.

Speaking with a lawyer is a crucial first-step to ensuring your business avoids these legal pitfalls. Our team at Lerners is well-versed in corporate law and can help identify these individuals, create and maintain the ISC register, and advise on the proper documentation of relevant details.