New Legislation In BC That Will Impact Private Companies
/The Business Corporations Amendment Act, 2019 (the “Act”) received royal assent on May 16, 2019 and when in force private companies incorporated under BC’s Business Corporations Act will be required to, among other things, create and maintain a "transparency register."
This register is intended to mitigate financial crimes, including tax evasion, money laundering and terrorist financing, as it requires subject companies to create and maintain information about the true owners of their shares.
The Act will implement changes similar to those under the Budget Implementation Act, 2018, No. 2 (the Federal Amending Act), a federal enactment amending the Canada Business Corporations Act (Canada), which came into force in June 2019.
BC has also enacted the Land Owner Transparency Act, which is the first legislation of its kind in Canada. This act will require corporations, partnerships and trusts that hold land in BC to disclose the true owner(s) of that land or face significant fines if they fail to comply.
Disclosure Requirements
Once the applicable provisions of the Act come into force, private BC companies will be required to create a document known as a “transparency register” that will identify and describe all significant individuals in respect of the company.
The transparency register must include disclosure of information in respect of each significant individual of a company, including, the individual’s full name, date of birth and last known address, whether the individual is a Canadian citizen, whether the individual is resident in Canada for purposes of the Income Tax Act (Canada), a description of how the individual is a significant individual, and if the company is unable to obtain some or all of the required information, a summary of the steps taken by the company to obtain this information.
If a company does not have significant individuals, the company must still maintain a transparency register, but the register is only required to contain a statement to that effect.
Penalties for Non-Compliance by Company, Directors and Officers
A company and any of its directors or officers could be subject to significant penalties for failing to identify all of the significant individuals or providing false or misleading information about significant individuals.
However, no company, director or officer will be liable for non-compliance with the Act if they did not know, and could not have known with the exercise of reasonable diligence, that the identification or exclusion of the significant individual was incorrect.
Shareholders’ Duty to Disclose and Non-Compliance
Upon receiving a request from the company to provide information in respect of the transparency register, shareholders are required to provide that information to the company promptly.
Shareholders who either fail to provide the requested information or knowingly provide false information to the company could be liable for penalties.
Access to Information
Aside from the company’s directors, “inspecting officials” are the only class of persons authorized to inspect and obtain copies of the transparency register and may only do so for the purposes set out in the Amending Act. An “inspecting official” is defined broadly and includes, provincial and federal law enforcement authorities, tax authorities and certain regulatory authorities, including the B.C. Securities Commission, FINTRAC and the Law Society of British Columbia.
The Act does not grant access to the transparency register to shareholders or creditors of the company, or to the B.C. Registrar of Companies.
Commentary
The transparency register will impose significant new obligations on private BC companies and, given the need for further regulations to clarify aspects of the Act, there is significant uncertainty regarding application and compliance matters under the Act. Accordingly, we anticipate further developments.
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