Federal Corporations Must Soon File Information About Individuals with Significant Control

Starting January 22, 2024, federal companies will need to file with Corporations Canada certain information about the individuals that have “significant control” over them

Since 2019, each federal corporation has been required to create and maintain a register of individuals with significant control, and to verify that it is up to date at least annually. Up until now, however, the register has not been publicized, and there has been no requirement to submit that information to a governmental authority except upon request.

Starting on January 22, 2024, each federal corporation will need to file information on the individuals with significant control with Corporations Canada, some of which will become publicly available.

Current Requirements

A federal corporation must maintain a register with a variety of personal information about individuals with “significant control” over the corporation. “Significant control” includes registered or beneficial ownership of, or control over, at least 25% of the corporation’s shares on a votes or value basis, either individually or jointly with others.

At least once every financial year, a corporation must take reasonable steps to ensure that the register is accurate and complete. A corporation has 15 days to update the register upon becoming aware of any change.

A federal company’s register is not currently public, but shareholders and creditors of the company can file an affidavit with the company to obtain a copy in connection with certain prescribed purposes, such as in connection with efforts to influence the voting of the corporation’s shareholders, when offering to acquire the corporation’s securities, or for other matters relating to the affairs of the corporation.

Corporations Canada can also request to review the register at any time, and certain investigative bodies can also request the register, but only if they have reasonable grounds to suspect, among other things, that the register contains information relevant to investigating one of a selection of offences listed in a schedule to the Canada Business Corporations Act (the “CBCA”).

For more information about the obligations of both federal and Ontario corporations when it comes to creating and maintaining their registers of individuals with significant control, see our prior blog.

Upcoming Changes

Who will need to file

Beginning January 22, 2024, any corporation created or continued under the CBCA (except for reporting issuers, Crown corporations, and their respective subsidiaries) will be required to file information regarding individuals with significant control with Corporations Canada through its Online Filing Centre.

You can check if your corporation is federally incorporated by searching the database here.

When to file

A federal corporation will need to file information about its individuals with significant control at the following times:

• Upon incorporation, and within 30 days of any amalgamation, and continuance;
• Within 15 days of any change; and
• Annually, concurrently with filing its annual return.

What information will be made public

Certain information from each register will be made public on Corporations Canada’s website. This information includes:

• An individual’s full legal name;
• The date the individual became or ceased to be an individual with significant control;
• A description of the individual’s significant control; and
• The individual’s address for service (or, if one is not provided, their residential address).

Information included in the register that will not be made public includes:

• The individual’s date of birth and country of citizenship;
• The country or countries where the individual is considered resident for tax purposes; and
• The individual’s residential address (so long as an address for service has been provided).

The publication requirements do not apply to individuals under 18 years of age, or who are subject to certain circumstances to be set out in the regulations (not yet available).

Enforcement

The penalties for wilful non‑compliance are some of the strongest of any country when it comes to corporate transparency: up to $100,000 fines for corporations, up to $1 million of personal fines for directors and officers and up to five years in prison for those who knowingly provide or allow or permit false or misleading information to be filed.

Bill C-42 and the Public Database

The requirement to publicize certain information about individuals with significant control is set out in Bill C-42, which received royal assent on November 2, 2023.

The publication requirement does not come as a surprise. In recent years, Canada has scored progressively lower on Transparency International’s annual Corruption Perceptions Index. In response, the Canadian federal government has indicated in several of its recent annual budgets that it plans to create a public and searchable registry of beneficial ownership of federal companies.

Beneficial ownership registries, which are increasingly being made available in jurisdictions around the world, can help limit the extent to which bad actors can use corporate vehicles to shield their identity and activities, such as fraud, money laundering, and tax evasion. In an ever more connected world, corporate transparency helps Canada to participate in international efforts to track and enforce sanctions and other initiatives. The government hopes that this will also help build trust in Canada as a safe and secure place to do business, where laws are enforced fairly and equally.

Key Take-Aways

If yours is a federal corporation, consider taking the following steps ahead of the key date of January 22, 2024:

• Ensure that your corporation has a register of individuals with significant control.
• Individuals listed on a register should consider arranging for an address for service to ensure that their residential address does not become publicly available.
• Keep an eye out for updates, including any regulations made to accompany Bill C-42.