BC Corporate Beneficial Ownership Registry General Information
The Ministry of Finance has delayed the coming into force of the transparency register requirements under the Business Corporations Act until October 1, 2020. Members are encouraged to subscribe to the Ministry’s website in order to be alerted to any future changes regarding the transparency register. This information sheet provides general information regarding the new transparency registry, members are encouraged to review the Ministry’s website and the legislation for more information.
- What’s New
- Information Required for the Transparency Register
- Definition of “Significant Individuals”
- Creating a Transparency Register
- Difference between Registered vs. Beneficial Ownership
- Access to the Transparency Register
- Companies Excluded from Creating a Register
- Penalties for Noncompliance
- Bearer Share Certificate Elimination Reminder
In 2017, provincial finance ministers and the federal government signed the “Agreement to Strengthen Beneficial Ownership.” The new requirements are part of the provincial and federal efforts to combat money laundering, tax evasion, and terrorist financing.
In BC, the provincial government passed legislation creating land and corporate registries for beneficial owners. The following highlights changes to the disclosure regime for corporate transparency.
In 2019, the provincial government passed amendments to the British Columbia Business Corporations Act (“BCBCA”) that imposed new obligations on private BCBCA companies. These changes included:
- As of October 1, 2020 (per April 6, 2020 Order in Council 169), BCBCA private companies are required to prepare and regularly update a Transparency Register. For each person who is a significant individual the following information must be reported:
- The significant individual’s name, birthdate, address, citizenship, and tax jurisdiction;
- A description of how the individual is a significant individual; and
- The date on which the individual became or ceased to be a significant individual.
- New tests determine who a significant individual is, as well as exemptions.
- Subsidiaries of public companies must also maintain a Transparency Register
- Access to the Transparency Register is restricted.
- Failure to comply with Transparency Register requirements could result in the company being liable for fines up to $100,000, and individuals who fail to comply with the requirements can be liable for fines up to $50,000.
BC companies will be required to maintain a new register containing the following information about significant individuals (the Transparency Register):
- The individual’s full name, date of birth, and last known address;
- Whether or not the individual is a Canadian citizen or permanent resident of Canada;
- If the individual is not a Canadian citizen or permanent resident of Canada, every country or state of which the individual is a citizen;
- Whether or not the individual is resident in Canada for the purposes of the Income Tax Act (Canada);
- The date on which the individual became or ceased to be a significant individual in respect of the company;
- A description of how the individual is a significant individual; and
- Additional information, if any required under regulations.
Even if it has no significant individuals, a company will need to include a statement to that effect on its Transparency Register, and companies are obliged to give notice to a person that has been identified as, or has ceased to be considered, a significant individual.
Information about significant individuals must remain on a company’s Transparency Register for a period of six years after an individual ceases to be a significant individual of the company.
The accuracy of the register must be confirmed each year. The company must take reasonable steps to verify that the Transparency Register is accurate and complete. If the company becomes aware of any new or additional information at any point, the Transparency Register must be updated within 30 days.
Generally, there are two corporate records that will provide the most relevant information for determining who significant individuals for the company are:
- The central securities register, and
- The articles of the company.
Section 119.11 in the amended legislation sets out the rules for who is defined as a significant individual. An individual will be a significant individual if they have:
- A significant number of shares (119.11(2)(a)); or
- A right to replace a majority of the directors (119.11(2)(b)).
The provincial government estimates that 90% of significant individuals will be categorized through the significant number of shares test. A significant number of shares means 25% or more of either: the total shares of the company, or the votes at general meetings. Of note, the test looks as the total number of shares and not the class of shares.
In addition, if the central securities register or the articles state that another corporation, partnership, trust, agent, or personal or other legal representative is the shareholder or rightsholder, they will need to be contacted to determine if it is controlled by an individual.
Once a significant individual has been identified they must be contacted and the information for the register must be obtained. The significant individual is required to provide the information.
More information about significant individuals can be found on the government website.
Please note that the most accurate definition of significant individuals is contained in the legislation. The descriptions and examples provided here are for illustrative purposes only.
Establishing a Transparency Register may be challenging depending on how the company is structured. However, for many private BC companies the process will be eased by their straightforward legal structure, such as owner-managed companies with few (and often just one) shareholders.
Beneficial ownership is not exhaustively defined in the BCBCA. It states that beneficial ownership “includes ownership through any trustee, personal or other legal representative, agent or other intermediary.”
In guiding documents, the provincial government sets out some of the differences between registered and beneficial ownership, including:
- A registered owner holds the shares personally and is listed as a shareholder in the central securities register; and
- A beneficial owner is an individual who is legally entitled to receive benefits of property rights in equity even though legal title of the property belongs to another person (e.g. the trustee of a trust is the registered owner and the beneficiary is the beneficial owner).
A third way in which a person may “own” shares is through indirect control of those shares. This occurs where the individual controls an entity(ies) or person(s) that own shares in the company.
The Transparency Register must be kept at the company’s records office or be accessible from the records office by electronic means. Under the legislation as of October 1, 2020 the Transparency Register may be inspected by:
- Federal and provincial tax authorities (e.g. the CRA), for tax collection and certain other purposes;
- Federal and provincial law enforcement authorities (e.g. RCMP, VPD, etc) as part of an investigation and certain other purposes; and
- Certain federal and provincial regulatory authorities (e.g. the BC Law Society, FINTRAC) to ensure regulatory compliance.
In addition to local authorities, information from the register may be shared with foreign tax, law enforcement, or other regulatory agencies under federal or provincial arrangements with other jurisdictions. At this time, companies are not required to share the Transparency Register with members of the public.
There are currently two companies that are excluded from having to create and maintain a Transparency Register:
- Public companies in BC (companies that can be traded on a stock exchange); and
- Extra-provincial companies that are incorporated outside BC, but are registered to do business in BC.
Companies, directors, and officers risk penalty or fines of up to $50,000 for individuals and $100,000 for companies if reasonable efforts are not made to identify significant individuals and maintain an accurate and current Transparency Register.
Shareholders are required to respond to company requests for Transparency Register information in a timely manner and will be in violation of the BCBCA if they provide false, misleading, or incomplete information.
Companies that are not able to get or confirm information from shareholders (whether it be during the initial creation of the registry or updating the information in years to come) must record all reasonable steps and efforts they have taken to gather the required information.
In addition to the creation of the Transparency Register requirements, the Business Corporations Amendment Act, 2019 (Bill 24), also amended the Business Corporations Act to fully eliminate pre-existing bearer shares in BC companies. As of May 16, 2019, all BC companies are required to convert bearer share certificates before any rights associated with the certificates can be exercised. These rights include (though are not limited to): voting, dividend, share equity, etc. For more information about compliance requirements, please see section 57 of the Business Corporations Act.