The BC government’s Bill 24 brings significant changes to the way companies recognized under the BC Business Corporations Act (the “BCBCA“) are required to record share ownership. Currently, BC companies are required to maintain a central securities register of their legal or registered shareholders. As of October 1, 2020 (extended from May 1, 2020 due to COVID-19) all BC companies (with limited exceptions) will also be required to maintain a separate transparency register of Significant Individuals (defined below) or a statement stating that there are no individuals who qualify as Significant Individuals.
A. Who is a Significant Individual?
Significant Individuals are individuals who, separately or jointly with others:
- own or control 25% or more of the issued shares of a company or 25% or more of the issued voting shares of a company, whether they hold their interest as registered or beneficial owners or directly or indirectly; or
- either directly or indirectly have the right to elect, appoint or remove the majority of the directors of the company or the ability to exercise direct and significant influence over an individual who has the right to do so.
Note as follows:
- if a registered shareholder is not an individual, the transparency register must disclose any Significant Individual who controls, directly or indirectly, such entity;
- a Significant Individual need not be a shareholder of the company. The foregoing rights or abilities may arise under a financing agreement, purchase agreement, option agreement or shareholders’ agreement; and
- two or more individuals that the BCBCA considers to be “associated” with each other will be presumed to be acting in concert. The BCBCA’s definition of “associate” if used to indicate a relationship with a person includes spouses, children, and other relatives who share a home.
B. Information to be Included in the Transparency Register
The transparency register must contain the following information for each Significant Individual:
- the individual’s full name, date of birth and last known address;
- whether or not the individual is a Canadian citizen or permanent resident of Canada, and if not, every country or state of which such individual is a citizen;
- whether or not the individual is resident in Canada for the purpose of Canadian income taxes;
- the date on which the individual became or ceased to be a Significant Individual; and
- a description of how the individual is a Significant Individual.
If a company is unable to confirm some or all of the required information, the transparency register must contain a statement that the company was not able to obtain or confirm the information and a summary of the steps taken to obtain or confirm the information.
C. Ongoing Obligations
At least once annually, within two months of the anniversary date of its recognition as a company in BC, a company must take reasonable steps to ensure that the transparency register is accurate and complete. The transparency register must be updated by the company within 30 days of the company becoming aware of any change. Reasonable steps may include questioning shareholders and reviewing the company’s key agreements to determine key issues of control and influence.
Shareholders are required to respond accurately and promptly to any request for information from a company. Any individual who is identified as a Significant Individual must be notified within 10 days of such person being added to, or removed from, the transparency register.
A company also has obligations with respect to the disposal of the information that it collects with respect to Significant Individuals. Within one year after the sixth anniversary of the date on which an individual ceases to be a Significant Individual, the company is required to dispose of all information and records about the Significant Individual that were gathered for the purposes of maintaining the transparency register.
D. Access to the Transparency Register
The transparency register may only be reviewed by the company’s directors and such inspecting officials as tax authorities and law enforcement entities during statutory business hours.
Both the company and its directors and officers face penalties for failure to comply with these requirements. A person, other than an individual, may be subject to a fine of up to $100,000 and an individual may be subject to a fine of up to $50,000. Shareholders who provide false or misleading information or fail to provide any material facts to the company will also be subject to such penalties.
F. Steps a Company must take to create a Transparency Register
In order to create your company’s transparency register, you must:
1. Determine the Significant Individuals in respect of your company, if any, in accordance with section A above. Such individuals include but are not limited to:
- registered shareholders in the central securities register who hold 25% or more of the issued shares or voting shares;
- individuals who beneficially own 25% or more of the issued shares or voting shares who are not registered in the central securities register;
- individuals who have direct or indirect control of a registered shareholder that is not an individual and that holds 25% or more of the issued shares or voting shares;
- individuals, whether or not a shareholder, who have “direct and significant influence” over any such registered or beneficial holder; and
- individuals, whether or not a shareholder, who have rights or abilities that, if exercised, would result in the election, appointment or removal of the majority of the directors of the company; and
2. Make reasonable attempts to obtain the additional information set out in section B above for such Significant Individuals.
Once the transparency register has been prepared, it must be kept at the company’s records office (generally alongside the remainder of the company’s records book).
If you have any questions about the transparency register requirements or require assistance in determining your company’s disclosure obligations or preparing the transparency register, we encourage you to reach out to us to discuss.
Magellan Law Corporation
#225 - 20316 56 Avenue
Langley, BC V3A 3Y7