New Provincial Law Gets Tough on Tax Evasion with Increased Disclosure of OwnershipOct 25 2019
In early April this year, the provincial government introduced Bill 24, the Business Corporations Amendment Act. This Bill was one of several actions that the government has taken in its ongoing battle to address tax evasion and money laundering – two significant issues here in BC. The new legislation will require private companies to “…hold accurate and up-to-date information about the true owners of their shares.”
Similar to recent changes made to federal legislation – the Canada Business Corporations Act which governs federal corporations – the Bill will require all BC companies to maintain what is called a “Transparency Register”. The registry will record the ownership of “significant individuals” – those who hold or control a significant number of shares of the company. This is defined to be more than 25 percent.
How The Transparency Register Differs
The current requirements for records for share ownership of the company are called the Central Securities Register (CSR). But the Transparency Register is different from the CSR in a number of ways:
- In addition to the record of ownership of controlling shares, the Transparency Register will also record the names of those individuals who hold only a beneficial interest – a person or company that otherwise controls the shares but might not be recorded as the legal owners in the CSR.
- The Transparency Register must contain personal information about the significant individuals, including their full name, date of birth and last known address.
- Citizenship information is also mandated by the Transparency Register. Significant individuals must disclose if they are a Canadian citizen, a permanent resident, a citizen from another country and a resident under the Income Tax Act. Also required, among other things, is a description of how the person has been deemed to be a significant individual.
Duties Imposed On A Company
There are several duties that will be imposed on companies under the Bill and the Transparency Register. A company will have to confirm its information annually. When there are changes in the information, the Transparency Register will need to be updated. In addition, a company will be required to notify individuals when their status changes and it must also keep its Transparency Register at its records office. There is also a corresponding duty on shareholders to respond to requests from the company for information for its Transparency Register.
Accessibility & Failure To Comply
Despite its name, it is interesting to note that the Transparency Register will not be open to viewing by just anyone. Rather, it is only open and available to certain individuals such as an inspecting official for a taxing authority, regulators, law enforcement and the directors of the company. Under the proposed amendments of the Bill, whoever maintains the Transparency Register will not be permitted to disclose it to anyone else.
Directors and companies that fail to create and maintain a Transparency Register can face fines up to a maximum of $50,000 (for an individual) or $100,000 for a person other than an individual (such as another company which is a fictional legal “person”). But unlike the recently proposed changes for federal corporations under the Canada Business Corporations Act, penalties for BC companies do not include imprisonment. For example, if a director provided or recorded false or misleading information for the Transparency Register, he or she would not face any jail time for doing so.
Although the requirements under Bill 24 may change as it progresses through the provincial legislature, RDM Lawyers LLP is taking steps to ensure that existing corporate clients will be in compliance with the new law. If you have any questions about this pending legislation or other corporate matters, please contact a member from RDM’s team of business lawyers.