In brief
In June 2019, the Canada Business Corporations Act (CBCA) was amended to require private CBCA corporations to prepare and maintain a register of “individuals with significant control” (the “ISC Register“).
There have been two key changes since this requirement was first introduced:
1. In May 2023, regulations (the “Regulations“) were published to exempt additional corporations from having to prepare and maintain an ISC Register and to provide further compliance guidance.
2. Amendments to the CBCA (the “Amendments“) have been enacted imposing, amongst other things, the requirement to publicly file certain information contained in the ISC Register with Corporations Canada and to increase penalties for non compliance.
2023 Regulations
- Exemptions. Under the CBCA, reporting issuers or corporations listed on a designated stock exchange (as defined by s.248 of the Income Tax Act (Canada) [e.g., TSX, TSX Venture Exchange or NYSE]) are exempt from the requirement to prepare and maintain an ISC Register. The Regulations expand the list of exempted corporations to include wholly owned subsidiaries of such entities. In addition, Crown corporations (and wholly owned subsidiaries thereof) are also exempt.
- Reasonable steps. The Regulations clarify what “reasonable steps” should be taken by non-exempt corporations to identify ISCs. They include sending a request for information at least once during each financial year to: (i) any ISCs currently listed on the ISC Register; (ii) all shareholders of the corporation; and (iii) any other person that the corporation has reasonable grounds to believe may have relevant knowledge.
- Unable to identify. The CBCA was previously silent on what corporations should do if they are unable to identify any ISCs. The Regulations confirm that an ISC Register should still be prepared, containing a statement to the effect that the corporation is unable to identify any ISCs over the corporation or there are no ISCs over the corporation, along with a summary of the steps taken to identify these individuals.
2024 Amendments
- New disclosure. ISCs must also disclose their residential address as well as their citizenship on the ISC Register.
- Reporting requirements. Effective 22 January 2024, corporations will be required to report the following information to Corporations Canada for each ISC:
- Full Name.
- Address for service (or residential address if no address for service has been provided).
- Date on which the individual became or ceased to be an ISC.
- Description of the individual’s significant control.
Made public. The information above will become publicly available and there are limited exceptions to disclosure (e.g., for ISCs under the age of 18 years or on application to the Director appointed under the CBCA). Corporations that are exempt from the requirement to prepare an ISC Register must still file to confirm that the corporation is exempt.
Timing. For new corporations, this information must be submitted with the articles of incorporation. For existing corporations, the information must be filed with the corporation’s annual return, which is typically due 60 days after the anniversary of the corporation’s incorporation, continuance or amalgamation.
Where there are changes to the information submitted, a notice of change will also need to be filed within 15 days of the corporation becoming aware of same.
- Increased penalties:
- Maximum penalties for offences relating to directors and officers who knowingly authorize, permit or acquiesce in the contravention of the ISC Register and reporting requirements are increased from the maximum of CAD 200,000 or six months in prison to CAD 1,000,000 and five years in prison, respectively.
- If a corporation fails to comply with the reporting requirements, it can be liable on summary conviction to a maximum fine of CAD 100,000, it could be subject to dissolution or Corporations Canada may refuse to issue a certificate of existence.
| What is the ISC Register? | Who is an “individual with significant control”? | What does a CBCA corporation need to do? |
| The ISC register is a document such as a logbook, database or spreadsheet containing the following information about each individual with significant control (ISC):Full legal name.Date of birth.Residential address (and an address for service, if provided).Jurisdiction of residence for tax purposes.Citizenship.Date that the individual became or ceased to be an ISC.Description of the ISC’s significant control (e.g., owns 25% of the shares) and steps taken to ensure accuracy.The ISC Register must be kept at the registered office of the Corporation. | An individual who is a registered holder of, beneficial owner of, or has direct or indirect control over, interests or rights in respect of a significant number of shares of the corporation.An individual who has any direct or indirect influence that if exercised would result in control of the corporation.A “significant number of shares” means any number of shares that either carry 25% or more of the voting rights attached to all of the corporation’s outstanding voting shares or that is equal to 25% or more of all of the corporation’s outstanding shares measured by fair market value.Where interests or rights over a significant number of shares are jointly held, all joint holders will generally be considered ISCs. Likewise, where such rights are subject to any agreement or arrangement under which they are to be exercised “jointly or in concert”, all individuals who are party thereto will generally be considered ISCs. | 1. Confirm if the corporation is exempt from the requirement to prepare and maintain an ISC Register under the CBCA and the Regulations.2. For non-exempt corporations, take “reasonable steps” to identify the ISCs of the corporation. This should include sending an information request to all existing ISCs, all shareholders of the corporation and any other applicable persons.3. Collect and confirm the requisite personal information for each ISC identified. This can be made part of the information request. Shareholders have an obligation to provide accurate and complete information in response to any request from the corporation about the ISC Register.4. Record the information provided by shareholders in the ISC register as applicable as well as the steps the corporation took to identify its ISCs.5. Keep the ISC Register up to date. Corporations should review and update the ISC Register at least once every financial year. If a corporation becomes aware of a change affecting the ISC Register, the update should be recorded within 15 days.6. Confirm your annual return filing deadline with your corporate services provider and be ready to report the specified information on your ISCs to Corporations Canada. |
We want to thank Mario Lofranco, who is an articling student at Baker McKenzie, for his assistance with preparing this article.
For more information on the ISC Register and other amendments that have been made to the CBCA or if you have any questions or concerns, please do not hesitate to contact us.
Contact Information
Baker & McKenzie LLP
Toronto Corporate Services
+1 416 863 1221
toronto.corporateservices@bakermckenzie.com
