Insights

Starting from October 1, 2020, all private companies in British Columbia will need to create and maintain a transparency register of "significant individuals."  This new requirement is a result of recent changes to the Canada Business Corporations Act, which aims to increase ownership transparency and prevent criminal activities like money laundering and tax evasion. It is expected that other provinces will implement similar requirements in the future.

A "significant individual" is someone who either individually or jointly meets the following criteria:

• Owns 25% or more of the company's shares or issued shares with 25% or more voting rights at general meetings.

• Can directly or indirectly control the appointment or removal of the majority of the company's directors by exerting significant influence.

Indirect control refers to situations where an individual controls an intermediary registered shareholder or a chain of intermediaries, with the last one being a registered shareholder of the company.

To comply with the new requirements, private companies in British Columbia must maintain a transparency register containing information about every significant individual associated with the company. The register should include details such as the individual's full name, date of birth, address, citizenship, residency status in Canada, and a description of their significance. The companies have a responsibility to update the register regularly and ensure its accuracy.

To establish the transparency register, companies will need to send questionnaires to shareholders to determine if they qualify as significant individuals. The British Columbia government has provided examples of transparency registers and sample questionnaires to assist companies in this process. If a shareholder is a corporation, partnership, trust, agent, or legal representative, the company must trace the ownership chain and contact the individuals controlling those entities.

Companies are required to make reasonable efforts to keep the transparency register accurate and up to date. They must also notify any changes in significant individuals within 10 days. Access to the transparency register is restricted to company directors and authorized officials from various regulatory and law enforcement agencies.

Non-compliance with the new requirements can lead to significant penalties. Violations include misidentifying or excluding significant individuals, providing false information, or omitting information from the transparency register. Directors, officers, and registered shareholders may face penalties for their involvement in these violations. Penalties for individuals can reach up to $50,000, while companies can face fines up to $100,000.

Private companies in British Columbia should review their shareholders and gather the necessary information using government questionnaires.  It is important to maintain an accurate and up-to-date transparency register to ensure compliance and avoid potential liability.