Starting June 13th, 2019, all incorporated businesses who are registered under the Canada Business Corporations Act (CBCA) are required to create and maintain records of “individuals who have significant control” (ISC) within the business.
This new regulation is meant to provide greater transparency over who owns and controls a corporation and to assist law enforcement bodies in exposing illegal activities, like money laundering and tax evasion.
Not sure you’re federally incorporated? Find out here, by searching for your business!
What is an individual who has significant control (ISC)?
According to Corporations Canada, an individual has significant control if he or she meets any of the following criteria:
- The owner (registered or beneficial) who has significant number of shares (see below)
- An individual who controls or directs a significant number of shares
- An individual with significant influence over the corporation, even if they don’t own any shares
- An individual who directly or indirectly owns at least 25% of voting shares
- Two or more individuals who jointly hold a significant number of shares or who have an agreement to exercise those rights jointly
Note: A “significant number” of shares is 25% of the voting shares, or 25% of all the shares based on the fair market value of the shares.
What does the register need to include?
The ISC Register (which can be a logbook, database or spreadsheet) must include the following information about each individual:
- date of birth
- last known address
- jurisdiction for tax purposes (e.g., city / province)
- date on which the individual acquired significant ownership or control
- date on which the individual ceased to have significant ownership or control
- description of how the individual meets the definition of significant control (see above)
How do I create and maintain an ISC Register?
- Corporations should start by contacting all their registered shareholders and asking for the information above, so that they can determine who’s an ISC.
- Corporations will need to determine if there are other individuals who may need to be contacted for information.
- After determining who qualifies as an ISC, the corporation must record the information by creating an ISC Register, which is to be kept with corporate records.
Once a year, corporations must take reasonable steps to update the information in the ISC Register. You’ll want to contact ISCs to verify whether any of their information collected has changed.
Note: It is your responsibility to continuously maintain the ISC Register. If you find out about any changes made to the information in your register, it must be updated within 15 days of when you become aware of a change.
Who can request access to the ISC Register?
- Under the budget implementation Act 2019 (Bill C-97), investigative bodies (such as CRA or the police), as well as Corporations Canada can request access to ISC register information without a warrant.
- If you get a request, you must respond and provide the information as soon as feasible. Non-compliance could result in the business receiving a fine of up to $5,000.
- Directors, officers, and shareholders must also meet their obligations regarding the ISC and respond to requests from an investigative body.
- Failure to do so could lead to penalties of up to $200,000 and up to six months in prison.
- Shareholders and creditors can access the information with an affidavit and restrictions on the use of the information.
- The public does not have access to the information
The federal government is the first to implement this new requirement, and provincial governments have also agreed to establish something similar. We’ll be on the lookout for updates on the provincial regulations!
Have questions? Call (1-888-234-2232) or email ([email protected]) your Business Counsellors if you’re looking for more information