Regulatory guidance on CBCA registers of individuals with significant control

A private corporation incorporated or continued under the Canada Business Corporations Act (the CBCA) is required to maintain a register (the ISC Register) of “individuals with significant control” (each an ISC) over the corporation. 

Since the introduction of this requirement in 2019 a number of practical questions have remained outstanding, including:

• what steps must be taken annually to update the register; 
• whether a CBCA corporation that is a wholly owned subsidiary of another CBCA corporation that is exempt from the requirement to maintain an ISC Register (because it is a reporting issuer in Canada or listed on a “designated foreign exchange,” or for some other reason) is also exempt from the requirement; and
• what information must be recorded in the ISC Register when no ISCs are identified by a corporation.

On May 4, 2023, regulations amending the Canada Business Corporations Regulations, 2001 (the Amending Regulations) were registered and came into force. The Amending Regulations are responsive to the questions set out above. It is anticipated they will be published in the Canada Gazette on May 24, 2023. 

The Amending Regulations are summarized below.

Updating of information

Under the CBCA, a corporation is required, at least once during each financial year, to take reasonable steps to ensure it has identified all ISCs and the information contained in its ISC Register is accurate, complete and up to date. The Amending Regulations provide that “reasonable steps” include sending requests for information as set out in the chart below.

The foregoing steps should not be viewed as exhausting the requirement to take “reasonable” steps. For example, in the case of a CBCA corporation with a corporate shareholder, it is still necessary to make inquiries “up the chain” to determine whether any individual has indirect control or control in fact of the CBCA corporation through its corporate shareholder.

Exempt corporations

Under the CBCA, a corporation that is either a reporting issuer (or an «émetteur assujetti») under provincial securities legislation or is listed on a designated stock exchange, as defined in subsection 248(1) of the Income Tax Act (Canada), is exempt from the requirement to create and maintain an ISC Register. The Amending Regulations also exempt the following prescribed classes of CBCA corporation:

• wholly owned subsidiary corporations of either a corporation incorporated or continued under the CBCA or a body corporate, wherever or however incorporated:
  • that is a reporting issuer or an émetteur assujetti under provincial securities legislation, or
  • any of the securities of which are listed and posted for trading on a designated stock exchange, as defined in section 248(1) of the Income Tax Act (Canada) (The definition of a designated stock exchange includes the Canadian exchanges, NYSE and NASDAQ and many European, Asian, and American exchanges);
• federal and provincial Crown corporations and their wholly owned subsidiary corporations; and
• corporations whose shareholders consist solely of either His Majesty in right of more than one province or in right of Canada and of one or more provinces, and their wholly owned subsidiary corporations.

Inability to identify individuals

Pursuant to the Amending Regulations, a corporation that is unable to identify any ISCs must set out the following in its ISC Register:

• a statement to the effect that the corporation has determined that:
  • it is unable to identify any of its ISCs; or
  • there are no ISCs in relation to the corporation; and
• a summary of the steps taken to identify these individuals.

Conclusion

In addition to the clarification provided by the Amending Regulations, CBCA corporations should be aware that proposed amendments to the CBCA will result, among other things, in the creation of a publicly accessible registry containing information on ISCs. We are monitoring the progress of these amendments and their impacts on CBCA corporations.

For further information on CBCA ISC Registers please see our earlier client legal update here.