Important Updates on Federal and Ontario Corporate Compliance Requirements
- Effective January 22, 2024, every privately held corporation registered under the CBCA must prepare and maintain a register of individuals with significant control over the corporation (“ISC Register”) and file that information with Corporations Canada. Federal private corporations should begin to review existing corporate records and procedures to prepare for the new information reporting requirements.
- Effective January 1, 2023, every privately held corporation registered under the OBCA must prepare and maintain an ISC Register. Ontario private corporations should begin to review existing corporate records and procedures to prepare for the new information reporting requirements.
- Effective October 19, 2021, Ontario-registered corporations must file their mandatory annual returns using the Ontario Business Registry (“OBR”). They can no longer file their annual returns through the Canada Revenue Agency using their corporate accountant.
- Meeting the New Individuals with Significant Control Disclosure Requirements
The reporting obligations under the CBCA are largely the same as those already required under the OBCA. In both cases, an individual will be deemed to have significant control over a corporation where he or she (either individually or jointly with one or more other individuals) holds interests or rights in respect of either (i) shares that carry 25% or more of the voting rights of the corporation’s shares, or (ii) 25% or more of the corporation’s outstanding shares measured by fair market value. The types of interests or rights held by such an individual can include:
- Registered shareholdings;
- Beneficial ownership;
- Direct or indirect control over shares;
- Direct or indirect influence that, if exercised, would result in control-in-fact of the corporation; and
- Interests or rights prescribed by regulations under the CBCA or OBCA, as applicable.
- The name and date of birth of each individual with significant control;
- The country (or countries) where the individual with significant control of the corporation is considered a resident for income tax purposes;
- The address for service of each individual with significant control of the corporation;
- In the context of federal corporations, due to proposed legislation under Bill C-42 that would make some personal information from the register public, a preferred address for service should be provided. If no address for service is provided, Corporate Canada may make the individual’s residential address public in its place.
- The day on which each individual became or ceased to be an individual with significant control;
- A description of how each individual qualifies as an individual with significant control including, as applicable, a description of their interests and rights in respect of the corporation’s shares; and
- A description of the steps that the corporation has taken during its financial year to ensure that:
- It has identified all individuals with significant control over the corporation; and
- The information in the register is accurate, complete, and current.
Regulations under the CBCA and OBCA may, in the future, add to the information that is required to be set out.
How Often Must You Update Your ISC Register?
In addition to initially preparing and maintaining its ISC Register, both corporations registered under the CBCA and OBCA must take reasonable steps at least once during each of their financial years, and within 15 days of becoming aware of any information that is required to be contained in the ISC Register, and upon incorporation and after amalgamation or continuance, to ensure that they have identified all the individuals with significant control over the corporation and that the information in the ISC Register is accurate, complete and up to date.
How Often Must You File Your ISC Register with Corporations Canada?
CBCA corporations must file their ISC information with Corporations Canada annually (at the same time as filing their annual return) and within 15 days of a change in their ISC register. There is no requirement for OBCA corporations to file their ISC Registers with Corporations Canada.
What are the Repercussions of Non-Compliance?
Both corporations registered under the CBCA and OBCA that, without reasonable cause, contravenes the requirement to maintain an ISC Register is guilty of an offence and liable on summary conviction to a fine not exceeding $5,000. A corporation that, without reasonable cause, contravenes the requirement to respond to a request for disclosure of its ISC Register for law enforcement, tax or regulatory purposes is guilty of an offence and on conviction is liable to a fine of not more than $5,000.
Directors or officers of a corporation who knowingly authorize, permit or acquiesce in a corporation’s failure to maintain an ISC Register, to the recording of false or misleading information in an ISC Register, or provide any person or entity false or misleading information relating to an ISC Register, is considered to have committed an offence. Similarly, shareholders who knowingly contravene their obligation to reply accurately and completely to a request for information from a corporation commit an offence. Upon conviction of such offences, directors, officers and shareholders are liable to a fine not exceeding $200,000 or to imprisonment for a term not exceeding six months, or both.
- Meeting the New Annual Filing Requirements
Stay informed and ensure your company remains in compliance by familiarizing yourself with these developments.Help Along the Way
Proactive measures are necessary to prepare for these changes. Understanding the individuals who have your shareholders are ISCs, maintaining accurate records, and regularly updating the ISC Register are pivotal to avoid compliance penalties.Given the substantial impact of these changes, seeking expert advice can greatly assist in navigating the transition and ensuring adherence to the new regulations. Our team is here to offer our expertise to help you facilitate this process effectively.
Should you have any questions or require assistance in aligning your corporation with these impending changes, please do not hesitate to reach out to our team of experts. Stay informed, stay compliant, and stay ahead in this constantly evolving corporate landscape.
John Yiokaris, Sotos LLP
John Yiokaris is a partner with Sotos LLP in Toronto, Canada’s leading franchise law firm. He has been recognized by Chambers Canada, LEXPERT, Who’s Who Legal, Lexology, and Best Lawyers in Canada as a leading Canadian franchise law practitioner. John can be reached directly at 416.977.3998 or email@example.com.
Lauren Huxtable, Sotos LLP
Lauren Huxtable is an associate with Sotos LLP in Toronto. She practices business law with a focus on franchising, distribution, and licensing. Please contact Lauren at 416.572.7318 or firstname.lastname@example.org.