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Federal (CBCA) Registers of Individuals with Significant Control (“ISC”): (1) Beneficial Ownership Information to be submitted to the Government and may become Public in 2024; (2) A Brief Comparison of the Federal and Quebec Registers.

The Federal government has announced that recent amendments to the Canada Business Corporation Act (the “CBCA”) will come into force on January 22, 2024. On that date, private CBCA corporations (i.e. private corporations incorporated federally) will have to begin filing the information concerning their individuals with significant control (“ISCs”) with Corporations Canada. Most of that information may in the future be posted on the federal government’s freely accessible Strategis website. (That public posting can come into force at any time on government proclamation and may come into force as early as January 22, 2024, but the actual in-force date for the public posting of ISC information is still not confirmed at present. Some professional groups continue to oppose public posting as an unreasonable invasion of privacy that does not add much to the filing of the information with the government).

One result of this is that for private CBCA corporations with activity in Quebec, they will now be filing with the federal government what is effectively beneficial ownership information concerning physical persons (after looking through all nominee agreements, holding corporations and trusts) with regard to their shareholders and controllers, in addition to the filing they have already been making since March 31, 2023, on the public Quebec Enterprise Register of their “ultimate beneficiaries” (Quebec’s rough equivalent of the ISC).

The federal government has been talking about having their public register for private CBCA corporations since at least the April 2022 Federal budget (see this article reviewing some of the history concerning these provisions).

Corporations Canada has briefly summarized as follows the ISC information required (as of January 22, 2024) to be filed with Corporations Canada for each private CBCA corporation:

Information that must be submitted to Corporations Canada (but could be given by Corporations Canada to FINTRAC, Canada Revenue Agency, Revenu Quebec, or police forces, especially in the context of a serious investigation), and will be made public on the Corporations Canada website when public posting comes into force:

• Full name
• Date the individual became an ISC, and ceased to be an ISC as applicable
• Description of the ISC’s significant control
• Residential address (would be made public if no address for service is provided)
• Address for service (if one is provided)

Information that would not be public (but could be given by Corporations Canada to FINTRAC, Canada Revenue Agency, Revenu Quebec or police forces, especially in the context of a serious investigation):

• Date of birth
• Country (or countries) of citizenship (this information, though not posted publicly, apparently will only have to be filed with Corporations Canada once public posting comes into force)
• Country (or possibly countries) where the ISC is considered a resident for tax purposes
• Residential address (if an address for service is provided)

The proposed publicly posted ISC information is broadly similar to the publicly posted Quebec ultimate beneficiary information, but there are some differences between them, and our office can assist you in this regard. For example, and briefly stated:

• The Quebec register applies to private corporations, partnerships and certain other entities, if they are formed in Quebec or if they are formed anywhere in the world but have activity in Quebec. The Federal register applies only to provide federally incorporated corporations. For example, a federal private corporation with activity in Quebec will have to register its ultimate beneficiaries on the Quebec register and its ISCs on the Federal register. As touched on below, there are differences as between the definitions of the Quebec ultimate beneficiary and the Federal ISC;
• Under both the Quebec and federal legislation, essentially information is to be provided regarding individuals with at least 25% of the votes or value, or control in fact of; the corporation. However, although the federal legislation is less likely to include indirect shareholders, there can be situations where additional individuals would be reported under the federal legislation (for example, federally under some current interpretations, it appears directors of holding companies that have the requisite 25% interest in the underlying corporation in question);
• Regarding trust shareholders that have the requisite 25% interest, the Quebec register names those among the trust’s beneficiaries who have previously received an income or capital distribution; the federal register, when naming beneficiaries of such a trust, appears to name perhaps fixed interest beneficiaries and seems not to name discretionary beneficiaries;
• When providing to Corporations Canada the country where the ISC is a resident for tax purposes, our view at this time is that Canada’s tax treaties point to one tax residence, such that for example with regard to a Canadian resident who is also a U.S. person, the answer to CBCA ISC register purposes is that the individual’s tax residence is simply Canada;
• The Quebec register requires the corporation or other registrant to take all “necessary” steps to establish its ultimate beneficiaries. The federal register requires the corporation to take “reasonable” steps to maintain its register, which may be a lesser standard than on the Quebec register. On the other hand, a regulation under the CBCA requires that the CBCA corporation send at least once per year to its registered ISCs, to its shareholders and to any other person who may reasonably have ISC-related knowledge with regard to the corporation, a request for ISC-related information;
• Both the Quebec and Federal rules provide fines and possible striking off from the register and/or dissolution, in the event of inaccuracies and/or other non-compliance;
• Both the Federal and Quebec registers allow individuals to apply to have their information kept private and not put on the public register, but first indications are that there is a high bar to having this application granted (i.e. likely the safety threat must be real and substantiated by perhaps affidavit evidence, and not merely speculative).

In the U.S., and in many parts of Europe, similar beneficial ownership registers are not public, but rather the information is submitted to the government, and entities with sufficient interest (for example, tax departments, anti-money laundering agencies, police departments, financial institutions and in some European jurisdictions, members of the media showing sufficient interest on application). Privacy concerns including the protection of privacy under human rights legislation are often cited in such jurisdictions to support the private aspect of such registers. Such jurisdictions take the view that the submission of information to the government helps control tax evasion, unreasonable tax avoidance, money laundering and terrorist financing.

Our Federal and Quebec registers have a similar stated aim, and additionally appear to support the public aspect of their registers by indicating that public information tends to support private business by providing knowledge of counterparties, and by also noting that the general public may be able to spot errors and omissions on the public register and therefore help to maintain accurate registers.

Time will tell if the public aspect of our Quebec and Federal registers have been a justified invasion of privacy. Rest assured that our office is here to help you interpret the rules and comply with them.

Please contact me if you require further information on this or other matters.