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Take note of the following important new development for private federal (Canada Business Corporations Act) corporations.

The federal government made changes in December 2018 to the CBCA that will require all private federally incorporated corporations to have by June 13, 2019 an internal register (the "Register") listing the individuals with significant control over the corporation. Having to be listed in the Register, essentially, will be individuals who own or control in fact (including jointly with others), either directly or through other corporations or often through trusts, at least 25% of the voting shares of the corporation or 25% of the shares measured by fair market value, and individuals who otherwise directly or indirectly control the corporation in fact.

Therefore, whether or not there are prête-nom or nominee shareholders of the corporation at any level of shareholdings, the corporation has to take reasonable steps to go through as many levels of information as necessary so as to list in the Register the individuals who are the ultimate owners or controllers of 25% or more of the corporation or the ultimate controllers in fact of the corporation. Shareholders of the corporation have to cooperate if they are asked by the corporation to provide information needed for the Register.

As of now, the Register will not be public, but shareholders and creditors of the corporation can usually ask to see a copy. It is foreseen that the tax department, and financial institutions needing know your client information, will be among those who can request access to the Register. Not establishing and maintaining the Register as required potentially can lead to a fine of $200,000 imposed upon a director, officer or shareholder involved in the non-compliance.

Non-compliance will be underlined by these new rules requiring the Register to state the annual reasonable steps taken by the corporation to keep the Register up-to-date.

Given the potential fines for non-compliance, it appears to be a must for any private CBCA corporation to prepare a proper Register prior to the June 13, 2019 deadline for compliance, and afterwards to review the Register at least once each year and to also update the Register whenever necessary. Preparing the Register is usually straight-forward when clients work with us and provide us with the relevant information. Therefore, it is highly recommended that you contact us as soon as possible if you would like us to help you prepare a complete beneficial ownership Register.

Please do not hesitate to contact me with questions on business or corporate law.

This publication is of a general nature, is as of the date indicated and is not intended to constitute an opinion or legal advice.  The facts and circumstances of your particular situation should be specifically identified and addressed before appropriate legal advice may be given.