B.C.'s new rules parallel federal "significant control" corporate reporting requirements
British Columbia Bill 24, which includes legislation to largely mirror the federal corporate "significant control" reporting requirements, received Royal Assent on May 16, 2019. As a result, affected B.C. private corporations will be required to maintain up-to-date records reporting details about "significant individuals" (individuals who meet the legislated ownership threshold of those corporations). Although the federal requirements take effect on June 13, 2019, British Columbia's parallel rules will come into effect by regulation of B.C.'s Lieutenant Governor in Council. Regulations have not yet been introduced.
The federal "significant control" reporting requirements were enacted in 2018. Under this change, which takes effect on June 13, 2019, private federal corporations incorporated or continued under the Canada Business Corporations Act (CBCA) are required to report details about individuals who have "significant control" over affected corporations.
New B.C. reporting requirements
In line with the federal rules, British Columbia's rules will apply to "significant individuals", which are:
These individuals either hold an interest or right (or a combination thereof) in a "significant number of shares", namely, 25% or more of the corporation's outstanding voting shares, or 25% or more of the corporation's outstanding shares regardless of value (unlike the federal rules which use fair market value to measure whether an individual has a "significant number of shares"). A "significant individual" also includes an individual that has rights or the ability to elect, appoint or remove a majority of the company's directors.
Affected private corporations must maintain a "transparency register" that includes the following information for each significant individual of the corporation:
If the corporation determines that there are no individuals who are significant individuals in respect of the company, the transparency register must contain a statement setting this out. Affected private corporations must update these records on an annual basis and must update their transparency registries within 30 days of becoming aware of any changes to information on their registry. Unlike the federal rules, it is the company's duty to notify individuals if they are a significant individual or have ceased to be one within 10 days after indication in the transparency register. If the corporation fails to comply with these requirements, it will risk penalties of up to $100,000 for non-compliance.
Shareholders of a private corporation must take all reasonable steps to respond to a private corporation's request for information to maintain its transparency register. Individuals that are non-compliant with this Bill 24 requirement may also face penalties of up to $50,000.
Bill 24 also requires a private corporation to replace "bearer share certificates" with ordinary share certificates that include, among other things, the name of person to whom the share certificate is issued, otherwise, the private corporation cannot recognize the rights that are associated with the bearer share certificate. A bearer share certificate does not record the ownership of the underlying shares when they are bought and sold. This change became effective as of May 16, 2019, the date Bill 24 received Royal Assent.
For more information, contact your KPMG adviser.
Information is current to June 11, 2019. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500