Corporate transparency has become more of a focus for the Ontario legislature, as a means of imposing greater accountability among companies and business leaders. While anonymous actors can hide behind a corporate name or number, the ability to identify those in charge can reduce the incidence of fraud, or other financial misdeeds. To aid in this goal, the province recently passed Bill 43, Build Ontario (Budget Measures) Act, 2021 (“Bill 43”). The Bill will make amendments to several Acts, with the overall goal of helping the Ontario government “deliver on our plan to build a stronger, more self-reliant province, ready to face the challenges of a dynamically changing world”, according to Finance Minister Peter Bethlenfalvy.
One of the Acts that will be amended when Bill 43 comes into force is the provincial Business Corporations Act. In an attempt to increase corporate transparency, the Bill will implement changes that will require more disclosure from individuals who hold ‘significant control’ of a corporation. This amendment is similar to the transparency register requirements added to the British Columbia Business Corporations Act in 2020, which similarly require corporations to create and maintain an ongoing registry identifying “significant individuals”. Below, we’ll outline the incoming changes so our corporate clients can ensure they are in compliance when the amendments take effect on January 1, 2023.
How is “Significant Control” Over a Corporation Defined Under Bill 43?
Significant control over a corporation is defined in Schedule A of Bill 43 as representing:
- at least twenty-five percent of the voting rights attached to all of a corporation’s outstanding voting shares, or
- any number of shares equal to at least twenty-five percent of all of a corporation’s outstanding shares measured by fair market value.
The person is deemed to have significant control if they have one of the following interests in a significant number of shares as described above:
- They are the registered holder of the shares;
- They are the beneficial owner of the shares; or
- They have direct or indirect control or direction over the shares.
Two or more individuals may be considered to have significant control if they hold joint interests in shares as described above. Further, an individual may be deemed to have significant control if, despite not fitting into any of the requirements above, they are in a position to exercise direct or indirect influence that would result in control of the corporation.
Corporations Will be Required to Create and Maintain a Register
Every affected corporation will be required to create and maintain a registry of those with significant control, located at the corporate office or another location within the province as designated by the company’s directors. The registry must include the following information for each individual:
- Their name, date of birth, and last known address
- Their jurisdiction of residence, for tax purposes
- The date on which they became a person with significant control, and/or ceased to be a person with significant control, as applicable
- A description of the individual’s interests and/or rights in shares of the corporation, or otherwise, explaining how they are a person with significant control
- Any other prescribed information
- A description of steps taken to keep the register updated concerning the individual’s information, as required under s. 140.2 (3)
Corporations will be required to review the registry at least once per financial year and update the information on the registry, if applicable. An individual’s information should be purged from the register within one year of the sixth anniversary of the date they ceased to be a person with significant control.
Only certain individuals and agencies will be permitted to request access to the information in the registry, as follows:
- A member of a police force, the Royal Canadian Mounted Police, or a First Nations Constable may request access to the registry if the information is required as part of an investigation of an offence in Canada, or a law enforcement agency outside of Ontario if authorized under an agreement, treaty, or law.
- An Ontario or federal tax authority, for the purpose of administering or enforcing a law providing for the imposition or collection of tax or providing information to officials in another jurisdiction for the purposes of imposing or collecting tax when authorized under an agreement, treaty, or law.
- One of the following regulatory bodies, for the purposes of administering, enforcing a law, or assisting another jurisdiction with the administration or enforcement of a law:
- The Commission;
- The Financial Services Regulatory Authority of Ontario;
- The Financial Transactions and Reports Analysis Centre of Canada; or
- A public officer, corporation, agency, or entity authorized to regulate based on a law of Ontario or Canada.
Enforcement of the Registry
A corporation that fails to create and/or maintain an accurate registry could face a fine not exceeding $5,000. Individual directors, shareholders, and officers of a corporation who knowingly record, provide, or permit the recording or provision of inaccurate or misleading information concerning the registry may be held personally liable. Individuals found to have committed such an offence could face a fine not exceeding $200,000 and/or a jail term of no more than six months.
For Exceptional Representation in Complex Corporate Commercial Litigation, Contact Milosevic & Associates in Toronto
The Toronto corporate lawyers at Milosevic & Associates have many years of experience defending the rights of business owners, directors, officers, and shareholders in litigation. We also regularly advise our corporate clients on changes to the law to ensure they adapt as necessary to maintain the continued success of their ventures. Call us at 416-916-1387 or contact us online for a consultation.