New Requirements for BC Private Companies

Effective May 1, 2020, private companies in British Columbia will be legally required to keep and maintain a transparency register containing information about “Significant Individuals”. In summary, Significant Individuals are individuals who have direct or indirect control of a private company or a significant number of its shares. Significant Individuals of a company are not necessarily direct shareholders of that company. The purpose of the transparency register is to increase beneficial ownership transparency by requiring companies to keep accurate and up to date records regarding the beneficial owners of the Company and by making those records available for inspection by law enforcement and certain government authorities.

Separate transparency obligations apply to federal companies. There are some important differences between the federal and British Columbia laws. You can find out more about the federal obligations here.

Transparency Register

Each private company in British Columbia will need to take reasonable steps to maintain a transparency register that contains the following information regarding each Significant Individual:

  1. full name, date of birth and last known address;
  2. whether or not they are a Canadian citizen or permanent resident of Canada;
  3. if they are not a Canadian citizen or permanent resident of Canada, every country or state of which they are a citizen;
  4. whether or not they are a resident in Canada for the purposes of the Income Tax Act (Canada);
  5. the date when they became or ceased to be a Significant Individual in the company;
  6. a description of how they are a significant individual; and
  7. any other information that may be required by regulations.

If a private company determines there are no Significant Individuals, that conclusion must be stated in the transparency register. Similarly, if the private company is only able to confirm some of the required information, that information must be recorded in the transparency register and the company must provide a summary of steps it took to obtain or confirm the missing information.

Significant Individual

Only Significant Individuals need be included in the transparency register. A Significant Individual of a company is any individual who, jointly or individually:

  1. directly or indirectly owns or controls a significant number of shares (25% or more of the shares or 25% or more of the voting rights in the company); or
  2. has the right, ability, or influence (directly or indirectly) to elect, appoint, or remove a majority of the directors of the company.

An individual is also a Significant Individual if: (a) their rights, interests, or abilities combined meet the definition of a Significant Individual; or (b) if they act in concert with one or more other individuals and when added together those individuals’ rights, interests, or abilities meet the definition of Significant Individual. For example, individuals may be acting in concert if they have entered into a voting agreement.  Close family members are deemed acting in concert even in the absence of any written agreement between them.

Obligation to Provide Information

Private companies may at any time send their shareholders a request to provide the information necessary to maintain the transparency register. Upon receipt of that request, shareholders must take reasonable steps to compile and promptly provide the requested information.

Ongoing Maintenance Obligation

Private companies must keep the transparency register up-to-date. The transparency register must be: (a) reviewed annually within two months of the anniversary date of a company’s recognition (in most circumstances, this will be the incorporation date) to ensure the transparency register is accurate, complete, and up-to-date; and (b) updated within 30 days of receiving new or different information concerning Significant Individuals.

After an individual ceases to be a Significant Individual, their required information must be kept in the transparency register for a period of six years. Within one year after that period expires, that individual’s information must be removed from the transparency register and any records containing their information as a Significant Individual must be destroyed.

Notification Requirement

Within 10 days after recording in a company’s transparency register that an individual is a Significant Individual or that an individual has ceased to be a Significant Individual, the company must notify the individual of this fact.

Access Rights

The transparency register is not a public document. Only current directors, law enforcement, and specific “inspecting officials” will be permitted to access the transparency register, and then only in accordance with specific rules.

Liability for Non-Compliance

Failure to comply with the transparency register obligations can expose companies to fines of up to $100,000.00 and directors, officers, and shareholders to fines of up to $50,000.00.

Take-Away

Depending on your company’s organizational structure, identifying all Significant Individuals, collecting their information, and notifying all affected parties may be a complicated and time-intensive task. This work should not be left until the last moment. Once the transparency register is compiled, processes should be implemented for maintaining its accuracy and currency. Doing so will reduce the risk of exposure to liability.

While doing business in BC if you need assistance with identifying Significant Individuals or compiling and maintaining its transparency register, we would be happy to help.

For more information, or to connect with one of our lawyers, please contact us at: [email protected] or 604-629-5400.

Disclaimer

The above blog post is provided for informational purposes only and has not been tailored to your specific circumstances.  This blog post does not constitute legal advice or other professional advice and may not be relied upon as such.