As of January 1st, 2023, Ontario’s Business Corporations Act (“OBCA”) implemented amendments dedicated to increasing corporate transparency. These amendments require all Ontario corporations to maintain a transparency register, identifying who owns and controls Ontario corporations. It will do this specifically by requesting information on shareholders who hold a significant percentage of the shares.
The transparency register is intended to aid law enforcement agencies in flagging illicit activities including money laundering and tax evasion. While Ontario is the latest provincial government to implement increased security measures via transparency registers and likened efforts, it is not alone in these requirements.
At the federal level, Bill C-86 included amendments to the Canada Business Corporations Act (“CBCA”) to increase corporate transparency, implemented in 2019. Like the OBCA, it is required that private corporations governed by the CBCA, with some exemptions, maintain individuals of significant control (“ISC”) register.
In British Columbia (B.C.) to, again, crack down on illegal activities, the BCBCA requires that B.C. private companies, with some exemptions, maintain a transparency register as of 2020.
Caravel has the innovative and exemplary resources to support corporations in their compliance with these and other entity management requirements, not just in Ontario but for B.C. and federal jurisdictions as well.
In fact, Caravel’s newly offered Entity Management Services guarantee fluidity as your corporation grows, or as legal and governmental requirements shift and expand. We keep your company up to date, so you do not have to worry about compliance.
Who Must Maintain a Transparency Register, and Who Must Have Access to it
Ontario business law now requires that all private corporations, unless they are wholly owned subsidiaries of a public company, have a transparency register. Public companies remain exempt so long as they are offering corporations and/or are listed on a designated Canadian or foreign stock exchange. While there remains room for further exemptions to be implemented in the future, the initial launch of these amendments impacts most private corporations.
The register will not need to be publicly available, however, it should be regularly maintained and updated in the corporation’s minute book and must be disclosed to the following entities:
(a) The Ontario Ministry;
(b) Police forces;
(c) Tax authorities of Ontario and Canada; and
(d) Designated regulators including the Ontario Securities Commission, the Financial Services Regulatory Authority of Ontario, and the Financial Transactions and Reports Analysis Centre of Canada.
While it is not required, it could be an asset to share the transparency register with the corporation’s bank in circumstances where the bank is attempting to validate ownership.
Transparency Register Requirements
The Transparency Register must include the following:
(a) Full legal name of ISC;
(b) Date of birth;
(c) Residential address or address for service;
(d) Country of residence for tax purposes;
(e) Date when the control started (when the ISC obtained 25% or more shares);
(f) Date when the control ended (when the ISC sold or otherwise disposed of shares); and
(g) Description of how the ISC has significant control.
The transparency register must be reviewed each fiscal year. If there is a change in information then the latest information must be recorded in the transparency register within 15 days. The yearly review is the minimum, it is mandatory that an update is completed whenever new and relevant information surfaces, again within 15 days of discovery.
There will be penalties for corporations that fail, without reasonable cause, to meet the requirements of the transparency register, including maintenance, inquiry responses, and OBCA disclosure obligations. Corporations which do not sufficiently meet these standards may be subject to fines of up to $5,000.
Similar fines may be faced by those who, without reasonable cause, fail to promptly respond to enforcement inquiries.
Directors, officers, and shareholders may face increased fines and penalties for illicit behavior relating to the transparency register. This includes knowingly authorizing, permitting, or acquiescing to a corporation’s failure to perform any of its duties in preparing, maintaining, or disclosing the transparency register. Such activities can result in fines of up to $200,000 and/or imprisonment of up to 6 months.
Similar penalties may apply if it is found that false or misleading information was included on or relating to the transparency register.
Entity Management Services
Caravel offers Entity Management Services on top of its traditional legal support, which is dedicated to the management of all your corporate records, as transparency registries are just the tip of the compliance iceberg. Caravel’s Entity Management Services support includes the auto-generation of documents, capitalization table generation, entity organization charts, and a virtual minute book central repository, to name a few. We strive to ensure your corporations are responsibly looked after, monitoring new bills and amendments, issuing notices for any new or required action, and providing a safe database for your most up-to-date corporate documents to reside.
If you’re not sure whether your organization’s compliance is up to date, or if you want to learn more about our Entity Management Services, get in touch with our team today. Caravel is an alternative legal firm with over 85 qualified and experienced lawyers, including those who specialize in corporate law.