01 Feb Ontario’s New Transparency Register
In an effort to enhance corporate transparency to help combat tax evasion, money laundering, and other criminal malfeasance, Ontario has recently amended the Business Corporations Act by requiring private corporations to establish and maintain a register of individuals with significant control over the corporation. This new requirement came into effect on January 1, 2023.
The transparency register is not available to the public, however, must be disclosed upon request to law enforcement, tax officials, and other regulatory bodies including the Ontario Securities Commission, the Financial Services Regulatory Authority of Ontario, and the Financial Transactions and Reports Analysis Centre of Canada.
Significant Control
Significant control refers to individual shareholders, both registered and beneficial, who have significant control over a corporation. The control may be direct or indirect, meaning that the individuals must be traced all the way up to the top of a corporate structure, being the final holding corporation of the corporate group.
An individual will be considered to have significant control if he or she owns or controls or directs shares carrying 25% or more of the voting rights attached to all of the corporation’s outstanding shares, or 25% or more of the corporation’s outstanding shares measured by fair market value.
An individual will also be considered to have significant control if, notwithstanding the number of shares owned by such person, he or she has direct or indirect influence over a corporation which, if exercised would result in “control in fact” of the corporation. This can be challenging to determine in corporate groups with complex inter-company structures.
Note also that, with respect to groups of shareholders, if multiple individuals jointly own shares that reach the 25% threshold, all individuals must be disclosed. Likewise, in the event of voting arrangements such as voting trusts, all individuals in the arrangement must be disclosed. In addition, certain family members such as spouses or children may be considered to have significant control if, on a collective basis, the 25% threshold is met.
Contents of the Register
The transparency register must contain the following information about each individual who is considered to have significant control:
- name, address, and date of birth;
- residential jurisdiction for tax purposes;
- the date the individual acquired significant control;
- if applicable, the date the individual ceased to hold significant control;
- description of the manner in which the individual has significant control.
Each corporation must, at least once during each financial year, take steps to ensure that the information contained in the transparency register is accurate. All new or amended information must be recorded in the transparency register within 15 days of the corporation becoming aware of it.
Failure to comply
Directors and officers of a corporation who knowingly fail to comply with the requirements to maintain a transparency register, or who knowingly submit or allow false or misleading information in the register may be liable for fines and/or imprisonment. In addition, the corporation itself may be liable for fines.
Furthermore, any individuals receiving a request from a corporation for information relevant to the transparency register who fails to respond promptly and to the best of their knowledge, may face fines and/or imprisonment.
If we hold or maintain your corporate records, we will prepare your transparency register and may be in contact with you for additional information.
Editing and research by Karan Chahal
Craig Sandler is a seasoned advisor to businesses in all areas of corporate and commercial law. Acting for large corporations, mid-sized firms, and small start-ups alike, he offers informed, practical advice on business sales and acquisitions, commercial agreements, leasing arrangements, corporate maintenance and filings, and everyday business issues.