

Amendments to the Canada Business Corporations Act will require privately held federal corporations to maintain records of individuals with significant control. As a result, many corporations will face additional corporate recordkeeping requirements.
The Amendments will officially come into force on June 13, 2019. One of the stated objectives is to combat money laundering and terrorism financing by identifying beneficial owners of private federal corporations. Under the current rules, the identities of beneficial owners – those individuals who ultimately benefit from the ownership of shares in a corporation – can effectively remain hidden because there is no requirement for corporations to collect or disclose beneficial ownership information. Many beneficial owners hold their interests in corporations indirectly through one or more holding companies, trusts, or other structures that do not give a clear view of ultimate beneficial ownership when viewing a corporation’s Central Securities Register.
Under the new rules, corporations are required to identify and maintain a register of individuals with significant control over the corporation. An individual with significant control is defined as someone who:
A “significant number of shares” is defined as the number of shares of a corporation that:
The rules look for “direct or indirect control or direction” when identifying an individual holding significant control and are designed to pierce intermediate holding companies and trusts to identify the individuals ultimately behind these structures. The rules also seek to identify those whose influence results in control in fact over a corporation who may not otherwise be caught by the numerical shareholding test.
Control in fact is undefined in the CBCA, but the term may be defined in forthcoming regulations. Some guidance can be found in the Income Tax Act and its accompanying guides, as well as the government ownership guidelines for radio-communications, airlines, banks, and other Canadian entities. These sources make it clear that there is no standard definition of control in fact and that its assessment should be made based on the facts of each situation. However, several common factors have been recognized as indicating the existence of control in fact, including:
Upon identifying individuals with significant control, a corporation must record the following information in its register for each individual:
This “New Register” exists in addition to the existing requirement to maintain a “Central Securities Register” detailing legal ownership of a corporation’s outstanding shares. The New Register must be kept current by:
As June 13th approaches, private federal corporations and their counsel will have to move quickly to ensure that they do not run afoul of these rules. Failure to comply with the requirements of the Amendments will potentially expose directors, officers, and shareholders to penalties. Corporations should work diligently to notify their shareholders of these new requirements and begin developing processes and systems to record and update data in the New Register.
EKB is available to assist clients in navigating the Amendments and will continue to monitor new developments with respect to the Amendments and any associated regulations.