On October 25, 2019, the Ministry of Finance announced the effective date for the new Business Corporations Amendment Act (the “Act”), otherwise known as Bill 24. 
Effective May 1, 2020, private corporations in British Columbia will be required to prepare and maintain a “Transparency Register” disclosing beneficial owners of the company, including individuals with direct or indirect control over a company. These individuals are deemed “significant individuals.”.
This change arises from a 2017 agreement between Federal and Provincial Finance Ministers to ensure that appropriate safeguards were put in place to stop the misuse of corporate and other legal entities for tax evasion, money laundering, corruption, financing of terrorist activities, and other criminal activities.
To effect such safeguards, the Ministers agreed to pursue legislative amendments to federal and provincial legislation to, among other things, require corporations to create and maintain accurate information on beneficial owners and to make such information available to law enforcement, tax, and other government authorities . The Act, which amends the current B.C. Business Corporations Act (“BCBCA”), is but one of the actions planned by the province to fulfill its mandate and restrict such criminal activities happening in B.C. through beneficial ownership.
In the Act, a “significant individual” goes beyond those individuals that indirectly own shares in a private company, to those that have the ability to control the company. This includes any individual that, individually or jointly with others:
1. directly or indirectly owns or controls:
a. 25% or more of the issued shares of the company; or
b. shares that carry 25% or more of the voting rights of the company; or
2. has the right or ability, directly or indirectly, to elect, appoint, or remove a majority of the directors of the company, or has the ability to “significantly influence” an individual who has the right or ability, directly or indirectly, to elect, appoint or remove a majority of the directors of the company; or
3. has a prescribed interest, right or ability in relation to the company, or is subject to a prescribed criterion or circumstance.
If two or more individuals hold any of the above interests or rights jointly, each one of those individuals meets the criteria and is deemed a “significant individual.”
An individual may also be considered a “significant individual” if his or her interests or rights would meet the above criteria when combined with the interests or rights of another individual with whom they are either:
1. in agreement or arrangement with to exercise their respective interests or rights jointly or in concert; or
2. an “associate” of (as “associate” is defined in section 192(1)(c) or (d), being a spouse, son, daughter, or other relative of the person or their spouse who shares their home).
Under the Act, companies have the obligation to take reasonable steps to create and maintain a Transparency Register with following information for each significant individual (the “Information“):
1. the individual’s full name, date of birth and last known address;
2. whether or not the individual is a Canadian citizen or permanent resident of Canada;
3. if the individual is not a Canadian citizen or permanent resident of Canada, every country or state of which the individual is a citizen;
4. whether or not the individual is resident in Canada for the purposes of the Income Tax Act (Canada);
5. the date on which the individual became or ceased to be a significant individual in respect of the company;
6. a description of how the individual is a significant individual; and
7. prescribed information, if any.
A significant individual that receives a request for such Information has a duty under the Act to promptly send it to the company.
If a company takes reasonable steps to obtain such Information but fails to collect or confirm the complete requirements, the company must set out the following in its Transparency Register:
1. the Information obtained or confirmed;
2. a summary of the steps taken to obtain or confirm information that was not obtained or confirmed; and
3. any prescribed information, if any.
Further, even if a company determines there are no significant individuals, it must still confirm this in a statement in the Transparency Register.
Once the Information is recorded, it must remain on a company’s Transparency Register for a period of 6 years after an individual ceases to be a “significant individual” of the company.
Use of the Transparency Register
A Transparency Registry must be made available at the corporation’s records address for access and inspection by the above-noted individuals during regular business hours.
The Act provides directors of the corporation and “inspecting officials” with rights to access and make copies of the Transparency Registry.
“Inspecting officials” include employees and officials of taxing authorities, police or Royal Canadian Mounted Police officers and officials, and certain employees and officials of certain regulators, including the B.C. Securities Commission, Financial Institutions Commission, and the Law Society of British Columbia.
In order to exercise the right to access a Transparency Registry, an inspecting official must be carrying out one or more of the specific investigations prescribed by the Act or its regulations.
The Act contains significant monetary penalties for companies and shareholders who fail to comply with the above-noted obligations, ranging from up to $50,000 for individuals and $100,000 for persons other than individuals.
Importantly, directors, officers, and shareholders of a corporation may be held personally liable for authorizing an offence by corporation under the Act, or providing false or misleading Information to a company that requests such Information.
While there are some unknowns with respect to the Act and its implications, like: what is “significant influence”; and what will be prescribed by the regulations, one thing is for certain: private companies in B.C. will need to take significant action to create and maintain a Transparency Register starting in May 2020.
Appropriate recording of Information will be key for companies to comply with their obligations under the Act. It is therefore critical that the individuals responsible know what Information to obtain and from whom, and to keep record of how they went about obtaining such Information. Such compliance will enable companies to respond to inspecting officials in a timely way and reduce liability for itself and its officers, directors and shareholders.
Whitelaw Twining will continue to monitor the Act and its upcoming regulations. We will provide updates as more information becomes available.