Further to our blog post issued on November 8, 2019, found here, all private companies governed by the Business Corporations Act (British Columbia) (the “Act”) will soon be required to prepare and maintain a “transparency register” in which information about the true owners of their shares will be recorded.
On April 6, 2020, however, the Lieutenant Governor postponed the in-force date for the new corporate requirement to prepare and maintain a transparency register from May 1, 2020 to October 1, 2020. The decision to delay the enforcement of transparency registers was made by Order in Council to address issues related to the COVID-19 pandemic.
This postponement will also apply to the regulations approved by the Lieutenant Governor on October 24, 2019 (the “Amendments”), which are discussed in more detail below.
As a reminder, the transparency register will act as a tool to determine which individuals have control over private companies. As a requirement of the register, all individuals with significant direct or indirect control over a private company will be recorded in the transparency register for that particular company. These individuals are deemed to be “significant individuals”.
The Amendments to the Business Corporations Regulations, B.C. Reg. 65/2004 (the “Regulations”) are intended to resolve uncertainties in the Act in relation to the transparency register requirements. For example, the Amendments include a list of the “prescribed classes of companies” referred to in paragraph (d) of the Act’s definition of “private company”, and outline the criteria that exempts a company from having to maintain a transparency register. The Amendments also provide guidelines for assessing both control of an “intermediary” and indirect control of companies for companies with more complex ownership structures to outline the individuals that need to be listed. These Amendments are discussed below.
The Regulations provide the following guidelines for assessing control of an intermediary:
(1) Control of an intermediary that is a corporation, partnership or agent is determined in accordance with the following rules:
(a) a person controls a corporation if the person has the right to elect or appoint a majority of the directors of the corporation;
(b) a person controls a partnership if the person is a partner in the partnership;
(c) a person controls an agent if the person is the principal of the agent.
(2) Control of an intermediary that is a trustee is determined in accordance with the following rules:
(a) a person controls a trustee that is the registered owner of one or more of the shares of a private company if the person has, under the terms of the trust, the power to direct how the trustee is to exercise any of the rights that are attached to the shares;
(b) a person controls a trustee that has the right to elect, appoint or remove one or more of the directors of a private company if the person has, under the terms of the trust, the power to direct how the trustee is to exercise that right;
(c) a person controls a trustee that controls an intermediary if the person has, under the terms of the trust, the power to direct how the trustee is to exercise control over the intermediary;
(d) the rules in subsection (1) apply in determining who controls a corporation, partnership or agent that controls a trustee.
According to the Amendments in the Regulations, an individual has indirect control of one or more of the shares of a private company if the individual (who is not an intermediary)
(a) controls an intermediary that is the registered owner of the shares, or
(b) controls a chain of intermediaries, the last of which is the registered owner of the shares.
Companies have been given an extension of time to prepare their respective transparency registers and until October 1, 2020.
While there remain questions surrounding the interpretation and application of these new requirements, the amended Regulations provide welcome guidance to understanding companies’ obligations to prepare and maintain transparency registers.
We will continue to monitor the Act and Regulations so please check back for more updates.
Please see a copy of the Orders referred to above here: