Bill C-42: What Business Owners Should Know About New Reporting Requirements

Starting on January 22, 2024, businesses incorporated under the Canada Business Corporations Act (“CBCA”) will be required to file information on individuals with significant control (“ISCs”) with Corporations Canada. These amendments have been proposed in Bill C-42, which also proposes making some of this information available to the public.  

Why are these changes happening?  

The new rules for federal corporations are part of a broader effort by the federal government to combat money laundering, tax evasion, and other illicit activities that may involve the use of anonymous or opaque corporate structures. By requiring corporations to disclose their beneficial owners, the government hopes to enhance the integrity and transparency of the corporate sector and to align Canada with international standards and best practices. 

Who are ISCs and what information do you need to file? 

An ISC is an individual who has direct or indirect control over a significant number of shares or votes of your corporation, or who has the ability to influence the election or appointment of directors or the outcome of shareholder decisions. For example, an individual who owns 25% or more of the shares of your corporation would be considered an ISC.  

The information that you need to file with Corporations Canada on your ISCs includes: 

  • full legal name; 
  • date the individual became an ISC; 
  • date they ceased to be an ISC, as applicable; 
  • description of the ISC’s significant control (for example, owns 25% of shares); 
  • address for service, if one is provided; 
  • residential address, if no address for service is provided; 
  • date of birth; 
  • country (or countries) of citizenship; and 
  • country (or countries) where the ISC is considered a resident for tax purposes.  

Some of this information could be made available to the public on the Corporations Canada website.  This includes name, date of becoming or ceasing to be an ISC, description of significant control, and the address for service or residential address. Other information required for reporting will not be made public, including date of birth, citizenship, and tax-residency.  

Bill C-42 is currently before Parliament, meaning amendments could be made to the current legislative proposals, which may change these requirements. However, if the bill is passed in its current form, ISCs should be made aware that their information will be publicly accessible.  

When do you need to file the information and how? 

As of January 22, 2024, you will need to file the information on your ISCs with Corporations Canada, along with your annual return. Moving forward, information should be filed during the incorporation process, after amalgamation and after continuance to a federal jurisdiction.  

You will also need to maintain a register of your ISCs at your registered office or another location in Canada. The register must be updated within 15 days of any changes.  

You can file the information on your ISCs online through the Corporations Canada website, or by mail or fax using the appropriate forms.  

What are your responsibilities as a corporation? 

As a corporation, you are responsible for identifying your ISCs, collecting their information and filing that information with Corporations Canada when the time comes. You are also responsible for informing your ISCs that their information could be made available to the public.  

What are the risks of these reporting requirements? 

The new rules may pose some challenges and risks for you and your business, such as: 

  • Increased administrative and compliance costs by having to collect, verify, update, and file ISC information on a regular basis; 
  • Potential exposure of sensitive or confidential information to the public or to third parties who may misuse or abuse it; and 
  • Possible liability. Failing to comply with the new reporting requirements could result in fines of up to $200,000, imprisonment of up to six months, or both, for the corporation and its directors, officers, and shareholders.  

Who can help you with the filing process? 

If you are dealing with CBCA requirements for the first time or have a complex corporate structure that you need help navigating, we can support you through the necessary steps of these reporting requirements. A corporate lawyer can: 

  • Review your corporate structure and shareholdings to identify your ISCs; 
  • Draft or update your ISC register and ensure it is accurate and complete; 
  • File the information on your ISCs with Corporations Canada on your behalf; and 
  • Monitor the legislative developments and inform you of any changes that may affect your reporting obligations. 

The new rules for federal corporations are an important development that will affect how you report and disclose information on your corporate ownership and control. You should familiarize yourself with these rules and take the necessary steps to comply with them. 

Caravel has a team of over 90 qualified and experienced lawyers and law clerks, including those specializing in corporate law, who can help you navigate new and existing reporting requirements. Get in touch with our team today to find out more. 

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