For corporations incorporated under Quebec law or for businesses registered in Quebec, see our article on Ultimate Beneficiaries.
Various governments across Canada have regulations requiring corporations to record, and sometimes report, who actually controls the company. In most cases, a properly organized corporation will already have this information available within its corporate records. This is because it is usually the shareholders, directors, and officers who control the corporation.
However, these regulations also target another category called "Individuals with Significant Control". In British Columbia, this category is called “Significant Individuals”. These are the people who have control or influence over the company, but might not necessarily have a direct role or a formal title.
For example: if "Avengers Solutions Inc." is a Canadian company with one shareholder called "Stark Enterprises Inc.". Avengers Solutions has to go beyond disclosing the name of the company that holds its shares. It must disclose the individual(s) behind Stark Enterprises that will be able to exert control or influence over Avengers Solutions.
What makes someone an Individual with Significant Control can get complicated, and those criteria can change slightly depending on the jurisdiction of incorporation of your company. Below we clarify the two routes to becoming an Individual with Significant Control: (1) Holding a Significant Number of Shares, or (2) Holding Significant Influence.
1. Significant number of shares
The most common way to become an Individual with Significant Control is to own, control, or direct a significant number of shares in the corporation. A significant number of shares is defined as:
A number of share that gives you 25% or more of the corporation's voting rights; or
25% or more of all the shares based on the fair market value of the corporation.
Keep in mind that this does not just apply to the individuals who hold the shares directly, or are beneficial owners of the shares (for example, through a corporation or a trust). It also applies to the individuals who have control over those shares because of an agreement or some other type of arrangement.
For example: if Mary holds 20% of ACME Inc.’s shares through her personal holding corporation and directly holds 5% of ACME’s shares, she is an Individual with Significant Control over ACME.
Another example: if Mary and Mario each hold 15% of ABC Ltd.’s shares and they agree to use their voting rights to control who gets elected as directors of the corporation, they both are Individuals with Significant Control.
2. Significant influence over the corporation
The second and more ambiguous way to become an Individual with Significant Control is through holding influence over the corporation. An individual with Significant Control might not be a shareholder and might not have any real ownership of the corporation whatsoever. What can be considered significant influence also varies depending on the jurisdiction of incorporation of the corporation.
For example, a person who has influence that can affect the economics, operations, and management of a federal corporation could be considered as an individual with Significant Control over this corporation. In British Columbia, an individual who has rights or influence that allow them to elect, appoint, or remove the majority of the directors of a provincial corporation is considered a Significant Individual.
For example: if the shareholders of the company have entered into an agreement with other individuals who will direct how the corporation is managed, how shareholders vote, or how money is paid out, those individuals are likely to be Individuals with Significant Control and their information should be recorded.
What information to record for individuals with significant control
Once you have determined the corporation's Individuals with Significant Control, you have to record certain information respecting these individuals in what is called your company’s “Register of Individuals with Significant Control”, also called “Transparency Register”.
In certain jurisdictions, you even have to report this information to the government.
The information that needs to be recorded varies in each jurisdiction, but it normally includes:
name
date of birth
address
country of residence for tax purposes
country of citizenship
dates when significant control or influence started and ended
description of how the individual holds significant control
steps taken by the corporation to identify it Individuals with Significant Control
Who can see this information?
Depending on the jurisdiction of incorporation of the company, certain information concerning Individuals with Significant Control can be made publicly available by the government. For example, the information concerning Individuals with Significant Control over a federal corporation are made publicly available by Corporations Canada. However, this does not apply to information concerning individuals who are under 18 years of age or who are in certain exceptional situations.
There is no requirement for the company to make this information publicly available directly. It should be stored confidentially with other company information. Certain government agencies and certain people can also request to review this information.
Consequences for non-compliance
Governments have created surprisingly stiff penalties for non-compliance with these regulations. For example, a federal corporation failing to maintain a record of Individuals with Significant Control can lead to a fine of up to $1,000,000 or even five years in prison.
It will likely be a while before the government starts strictly enforcing this requirement, but the potential penalties reinforce the government commitment to these transparency measures.
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