Binoculars spying on you        As part of adapting its domestic laws to the proposals by the Organization for the Economic Co-operation and Development (OECD), an in particular, to the requirements imposed by the joint agreements known as the Common Standard on Reporting and Due Diligence for Financial Account Information, or CRS, on June 13, 2019, Canada started requiring compliance with the recent changes to the federal corporations statutes known officially as the Canada Business Corporations Act, or CBCA.

A Stockholder Register Must be Created and Maintained

Among the different legislative changes, it is now required that all private corporations organized pursuant to the CBCA create and maintain a detailed register of individuals that, directly or indirectly, own at least 25% of the corporation.

The individuals and corporations affected by these changes are those that have significant control of the stock of the private corporation. These individuals include those registered as stockholders, and those beneficial owners of:

  • stock representing at least 25% of the voting rights of the corporation,
  • any number of shares that equal 25% or more of the issued and outstanding shares which must be measured pursuant to their market value, and
  • as well as the individuals that control or direct, directly or indirectly, those shares.

Minimum Information Required

At a minimum, the register must contain the name, date of birth, address, and tax residency of the individual, as well as other additional and relevant information prescribed by the new rules.

Also, the corporations shall do everything necessary to update the register at least annually. The register must be updated within 15 days of having knowledge of any required information that must be entered in the register.

If the corporation requests any required information from the stockholder pursuant to the new changes to the CBCA, the shareholder must respond accurately to his best knowledge “as soon as it is feasible.” It is important to note that these legislative changes are strange for many because the CBCA, generally, does not impose any special duties on stockholders, except under special circumstances.

While it is true that the information in the register is not public, it is also true that such information shall be given to directors, other stockholders and creditors when requested.

Penalties for Failure to Comply

Any director or officer of the corporation that knowingly authorizes, allows, or accepts that the corporation fails to meet its responsibility pursuant to the new changes, to maintain the register, that false or misleading information is registered, or that it gives false or misleading information to any individual or entity, shall be entitled to a fine of up to $200,000 CAD, up to six months in prison, or both.

Even though everyone is waiting for the regulations to be issued to learn more about the implementation of the new requirements, it is important to point out that in order to avoid these new demands, foreigners can just keep using Canadian Limited Partnerships as part of their legal and investment strategies and structures, without the need to disclose the information now required by the CBCA because this new requirement is only for private corporations created or regulated by the CBCA, although it is expected that the provincial governments will follow suit in the short term.

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