With the granting of Royal Assent to Bill C-86 Budget Implementation Act, 2018, No. 2 (Bill C-86) on December 13th, 2018 changes are in store for how corporations maintain their records under the Canada Business Corporations Act (CBCA).
Division 6 of Part 4 of Bill C-86 (the Division) amends the CBCA to set out criteria for identifying individuals with significant control over a corporation. The Division also sets out a requirement for a corporation that meets certain criteria to keep a register of individuals with significant control and requirements respecting the information to be recorded in it. Finally, the Division includes applicable offences and punishments.
Bill C-86 details new CBCA record-keeping requirements. These new provisions are not applicable to “distributing corporations” – those issuers and corporations who typically file documents with a securities commission and do not sell shares on a stock exchanges.
Non-distributing corporations governed by the CBCA will be required to maintain a register of all individuals with “significant control” over a “significant number” of share corporation. An individual is deemed to have “significant control” of a corporation if he or she individually or jointly with another is the registered holder of shares, the beneficial owner of shares, has direct or indirect control or direction over shares; or direct or indirect influence that, if exercised, would result in control in fact of the corporation;
A significant number of shares of a corporation is any number of shares that carry 25% or more of the voting rights attached to all of the corporation’s outstanding voting shares; or any number of shares that is equal to 25% or more of all of the corporation’s outstanding shares measured by fair market value.
All non-distributing CBCA Corporations will be required to prepare and maintain, at their registered office or at any other place in Canada designated by the directors, a register of individuals with significant control over the corporation that contains:
(a) the names, the dates of birth and the latest known address of each individual with significant control;
(b) the jurisdiction of residence for tax purposes of each individual with significant control;
(c) the day on which each individual became or ceased to be an individual with significant control, as the case may be;
(d) a description of how each individual is an individual with significant control over the corporation, including, as applicable, a description of their interests and rights in respect of shares of the corporation;
(e) any other prescribed information; and,
(f) a description of each step taken in accordance with subsection (2), meaning the corporation should prepare and maintain meeting records, minutes and resolutions of the directors and of any committee and should also maintain adequate accounting records.
At least once during its financial year, the corporation must take reasonable steps to ensure that it has identified all individuals with significant control over the corporation and that the information in the register is accurate, complete, and up-to-date. All non-distributing CBCA corporations must otherwise update this information within 15 days of becoming aware of it.
The information must be retained for 6 years (or such longer period required by applicable law) after the day on which an individual ceases to be an individual with significant control over the corporation.
Access to corporate records must be provided to shareholders and creditors of a corporation, their personal representatives and the corporation’s director during the corporation’s usual business hours. These individuals may take extracts from the records, free of charge, and, if the corporation is a distributing corporation, any other person may do so on payment of a reasonable fee. A shareholder of a corporation is also entitled on request and without charge to one copy of the articles and by-laws and of any unanimous shareholder agreement.
Anyone wishing to examine the securities register of a corporation must first make a request to the corporation or its agent or mandatary, accompanied by an affidavit. On receipt of the affidavit, the corporation or its agent or mandatary must allow the applicant access to the securities register during the corporation’s usual business hours, and, on payment of a reasonable fee, provide the applicant with an extract from the securities register.
Corporations Canada is expected to provide additional information on the creation and maintenance of registers before June 2019. The new record-keeping requirements will come into effect on June 13th, 2019.
More information on Bill C-86 can be found on the Corporations Canada website.
For more information, please call Barbara Hendrickson at BAX Securities Law (416) 601 -1004.
This publication is not intended to constitute legal advice. No one should act on it or refrain from acting on it without consulting with a lawyer. BAX does not warrant or guarantee the accuracy or currency or completeness of the publication. No part of this publication may be reproduced without the prior written permission of BAX Securities Law.