Corporations Canada Requires CBCA Corporations to File Information on Individuals with Significant Control

As of 22 January 2024, the Government of Canada has mandated corporations under the Canada Business Corporation Act to report information on Individuals with Significant Control (ISC) unless an exemption applies. Some of the information will be made available to the public, as per a press release by the Government of Canada.

Since June 2019, most corporations under CBCA have been obligated to maintain an ISC register. This register enhances the transparency about the ownership and control of Canadian businesses and assists law enforcement in tackling global challenges like money laundering & tax evasion.

Key Criteria for Individuals with Significant Control

An ISC is an individual who has ownership or control of a corporation. The individual may;

• Individually or jointly owns, controls, or directs 25% or more of the corporation’s voting shares or fair market value
• Holds influence over the corporation without owning shares
• Fulfills a combination of any of the aspects

What Information Does an ISC Register Contain?

The ISC register serves as a document like a logbook, database, or spreadsheet the corporation maintains. It contains the following information about the ISC;

• Full legal name
• Date of birth
• Country of citizenship
• Tax Residency Country
• Residential address/ Address for service
• Procurement date
• Control termination date

The register must also contain the measures taken by the corporation to update ISC information.

Guide to Manage ISC Information

The businesses are advised to identify ISCs in their companies and verify their details. Some individuals are the sole ISC of their business as they own 100% of the shares. For large businesses having multiple shareholders and owners, the corporations need to communicate with share & non-share holding influencers and verify the ownership. In the case of joint ownership having many shareholders, it is mandatory to list every shareholder in the register.

The corporations must create the registers, add the relevant information provided by the ISC in the register, and regularly update the information, at least once in year or within 15 days of alterations in the ISC register.

Corporations Canada mandates corporations to file ISC information once in year, at the same time as submitting annual reports or within 15 days of any changes to ISC information.

Exemptions from the ISC Register

Most corporations are obligated to establish and manage the ISC register, while a few corporations where ISC information is accessible to relevant securities laws or the owner is the government of Canada, are not required to maintain the register. The exempted corporations may include;

• A company sharing financial information under provincial securities laws or a fully owned subsidiary of that corporation.
• A corporation trading its stock on the stock exchange specified in the Income Tax Act or a fully owned subsidiary of that corporation
• A Crown corporation or a fully owned subsidiary of that corporation

What is ‘Control in Fact’?

An individual having significant control to influence the corporation is referred to as ‘control in fact’ also known as ‘de facto control’. The individual has the power to influence the finance, operations, and daily management of the corporation. Furthermore, it is crucial to include the individual on the ISC’s register.

The upcoming changes in CBCA are probably to enhance transparency and accountability in the businesses. It’s crucial for businesses to comply with the updated requirements.

Also read: What is Ultimate Beneficial Ownership in KYC?