Effective October 1, 2020, as a result of amendments to the Business Corporations Act (British Columbia) (the “BCBCA”), private companies in British Columbia will be required to maintain an up-to-date transparency register that sets out information about “significant individuals” that exercise control over the company. New companies established in British Columbia will be required to implement a transparency register at the time of incorporation.
This new requirement follows similar amendments made to corporate legislation in other jurisdictions across Canada in an attempt to prevent the misuse of BC companies for criminal activity such as money laundering, terrorist financing and tax evasion through greater transparency. Private British Columbia companies will now have to actively search behind registered shareholders to determine which individuals ultimately have true control of the company and include information about them in the transparency register.
The company’s directors, certain law enforcement officials and regulators will have access to the transparency register. The transparency register will not be available to the general public.
There are potentially severe penalties for non-compliance.
Does this requirement apply to you?
The requirement to maintain a transparency register only applies to private companies in British Columbia. Public companies (other than their British Columbia subsidiaries) and extra-provincially registered companies in British Columbia are exempt from the requirement.
Private British Columbia companies are required to take reasonable steps to verify and update the information in the transparency register annually and when they become aware of new information or a change in the information.
Who is a Significant Individual?
A significant individual of a private company in British Columbia is:
Category 1 – an individual who is the registered or beneficial owner, or has indirect control (through an intermediary or a chain of intermediaries) over, 25% of the issued shares of the company or 25% of its voting shares; or
Category 2 – an individual that has the right, or indirectly controls (through an intermediary or a chain of intermediaries) the right, to elect, appoint or remove a majority of the directors of the company. This includes the right to exercise direct and significant influence over an individual with such right or control.
Companies are required to request relevant information from its shareholders and shareholders are required to take reasonable steps to compile the information and provide it to the company promptly.
Here is the link to the Government of British Columbia page covering these new rules: https://www2.gov.bc.ca/gov/content/employment-business/business/bc-companies/bearer-share-certificate-transparency-register/significant-individual
Here is a link to a template questionnaire for shareholders published by the BC Registrar of Companies.
Here is a link to a sample template of a transparency register.
Penalties for Non-Compliance:
There are potentially significant penalties for non-compliance, including:
- misidentifying a significant individual;
- excluding a significant individual from the transparency register;
- entering false information into the transparency register; or
- omitting information about a significant individual.
Individuals face fines of up to $50,000 and companies up to $100,000.
If you have any questions or concerns about this requirement, we will be happy to connect you with our corporate lawyers to assist. Please contact our Director of Client and Lawyer Happiness, Shari Zinman, at firstname.lastname@example.org.
The information provided in this article is not intended to be legal advice. Many factors unknown to us may affect the applicability of this content to your particular circumstances.