New Compliance Requirement Effective January 1, 2023
Private corporations governed by the
Business Corporations Act (Ontario) (OBCA) must now establish and maintain a
Transparency Register. This register contains detailed personal information about individuals with significant control (“ISC”) over the corporation. This legislation aims to enhance corporate transparency and prevent misconduct, aligning with similar provisions under the
Canada Business Corporations Act (CBCA).
Publicly traded corporations are exempt.
Who Must Comply?
If you are a
director or officer of a private Ontario corporation, compliance with this legislation is mandatory. Shareholders are
not responsible for maintaining the register; this duty falls on the corporation’s directors and officers.
Failure to comply may result in substantial penalties.
Who Qualifies as an Individual with Significant Control (ISC)?
- Ownership or Control of Shares: Owns, controls, or directs 25% or more of the voting shares.
- Fair Market Value: Owns, controls, or directs shares worth 25% or more of the corporation’s fair market value.
- Influence Over the Corporation: Has direct or indirect influence that results in control in fact, as determined by the OBCA.
- Joint Ownership: Owns or controls shares jointly with others, meeting the 25% threshold collectively (all members of the group are considered ISCs).
What Must Be Included in the Transparency Register?
- Full name, date of birth, and last known address
- Jurisdiction of residence
- Date they became or ceased to be an ISC
- Details of significant control, including rights or shares held
- Process for keeping the information current
- Any other prescribed information under the OBCA
Updating the Transparency Register
- Annual Review: Must be reviewed and updated at least once per year.
- Within 15 Days: Any changes must be recorded within 15 days.
Penalties for Non-Compliance
The Transparency Register is
not publicly filed, but authorities such as the Ministry, Canada Revenue Agency, and law enforcement may request it.
- Corporations: Fines up to $5,000 for failure to maintain or disclose the register.
- Directors, Officers, and Shareholders: Fines up to $200,000 and/or imprisonment for up to six months.
CBCA Transparency Register Requirements
Additional obligations take effect January 22, 2024, for private corporations under the CBCA:
- Submit ISC details when incorporating, amalgamating, or continuing under the CBCA.
- Submit ISC details annually as part of the corporation’s annual return.
- Update the register within 15 days of any changes.
Public Access to the Federal ISC Register
- Full legal name
- Date the individual became or ceased to be an ISC
- Description of significant control (rights, title, and interests in shares)
- Residential address (if no address for service is provided)
- Address for service (if available)
To protect their residential address, ISCs can provide an address for service. Certain information, such as details of ISCs under 18, will remain private.
Key Takeaways
- Private corporations must maintain a Transparency Register under both the OBCA and CBCA.
- Annual reviews and timely updates are required.
- Non-compliance may lead to fines up to $200,000 and/or imprisonment.
- CBCA corporations must report certain ISC details to the Federal Public Register.
How We Can Help
Our team of
business lawyers can assist you with:
- Setting up and maintaining your Transparency Register
- Identifying individuals with significant control
- Ensuring compliance with regulatory requirements
- Protecting your business from legal risks
Contact us today to ensure your corporation remains compliant and avoids penalties.
