New transparency obligations for enterprises doing business in Quebec

On March 31, 2023, Bill 78, An Act mainly to improve the transparency of enterprises passed by the National Assembly of Québec on June 3, 2021, will come into force. The bill amends the Act respecting the legal publicity of enterprises (ARLPE) to establish new obligations for enterprises doing business in Quebec. In the fall of 2022, the Government of Quebec launched an explanatory website providing details on the new obligations for the transparency of enterprises (available in French only) and some of the information is cited in this update.

The coming into force of the new amendments to the ARLPE is accompanied by legislative and regulatory activity, including the introduction on February 1, 2023, of Bill 7, An Act respecting the implementation of certain provisions of the Budget Speech of 22 March 2022 and amending other legislative provisions, which has not yet been adopted, as well as the publication of two draft regulations on December 21, 2022 (available in French only) and January 18, 2023 (available in French only), both of which will come into force on March 31, 2023. 

In addition to the obligations that come into force this year, as of March 31, 2024, the public will be able to search the enterprise register using the first and last name of a natural person to find out which enterprises are connected to that person.

Persons impacted

The ARLPE and its new amendments apply to all “registrants,” which covers a broad range of entities, including entities governed by laws other than those of Quebec. 
“Registrants” are natural persons, trusts operating an enterprise, business corporations, partnerships, legal persons and groups of persons that have voluntarily registered or that are required to be in the enterprise register.

In general, entities carrying on an activity in Quebec, operating an enterprise in Quebec or possessing real property in Quebec must register with the Enterprise Registrar (REQ). There are, however, a few exceptions as described below. 

Declaration of ultimate beneficiaries

The most significant amendment to the ARLPE is the obligation for certain registrants to declare information about their “ultimate beneficiaries” to the REQ. These registrants must go up the chain of control until they can identify any natural person or, in some cases, any legal person that meets the criteria listed below.

Identification of ultimate beneficiaries

For a registrant, an ultimate beneficiary is a natural person or, in some cases, a legal person that meets any of the following conditions:

• is a holder, directly or indirectly, or beneficiary of 25% or more of voting rights of its securities;
• is a holder, directly or indirectly, or beneficiary of 25% or more of the fair market value of its securities;
• controls, directly or indirectly, a number of securities representing 25% or more of the voting rights or fair market value of its securities;
• has an influence that could result in control in fact (within the meaning of sections 21.25 and 21.25.1 of the Taxation Act);
• is the general partner (in the case of a registrant that is a limited partnership);
• is the trustee (in the case of a registrant that is a trust); and/or
• is a party to an agreement with other natural persons that jointly confers the power to exercise 25% or more of voting rights of its securities.

Registrants must take the “necessary measures” to locate and ascertain the identities of their ultimate beneficiaries. According to the Government of Quebec (available in French only) this means “[translation] all measures necessary to locate and identify their ultimate beneficiaries. Necessary measures are greater than reasonable measures.”

Declaration of information on ultimate beneficiaries

Registrants must provide the REQ with the following information on their ultimate beneficiaries:

• first and last name (or name if the ultimate beneficiary is a legal person) and other names used in Quebec;
• address of their domicile (the declaration of the professional address is optional);
• the date of birth;
• the type of control exercised (including the holding percentage, if applicable); and
• the date on which the person became an ultimate beneficiary and, if applicable, the date on which the person ceased to be an ultimate beneficiary.

The information above will be publicly available through the enterprise register, except for information on minors, dates of birth and the domicile address if the professional address is also declared (the declaration of the domicile of an ultimate beneficiary is mandatory and, if no professional address is declared, the domicile address will be published in the enterprise register).

Exceptions

Except for legal persons acting as trustees,* all entities listed below are exempted from declaring the information regarding their ultimate beneficiaries. In addition, for the purposes of determining ultimate beneficiaries, the following entities are considered to be natural persons, which means that a registrant will not have to go up the corporate chain beyond such an entity:

• reporting issuers within the meaning of sections 68 and following of the Securities Act;
• financial institutions referred to in paragraphs 1 to 3 of section 4 of the Insurers Act;
• trust companies governed by a provincial or federal statute or a statute of another province or territory of Canada;
• banks and authorized foreign banks listed in Schedules I, II and III to the Bank Act;
• associations within the meaning of the Civil Code of Québec;
• non-profit legal persons;
• legal persons established in the public interest; and
• legal persons acting as trustees*.

It should also be noted that the definition of reporting issuer under the Securities Act (Quebec) is limited to entities that are reporting issuers in Quebec and does not include entities that are only reporting issuers in another Canadian province or whose securities are listed on a foreign (i.e. non-Canadian) stock exchange who are not otherwise reporting issuers in Quebec.

Additional information required in respect of directors, officers and key shareholders

Following the coming into force of Bill 78, the date of birth (day, month and year) of all natural persons registered in the enterprise register must be declared to the REQ, with the exception of attorneys and administrators of the property of others. The date of birth will not be published in the enterprise register and will not be publicly available. All registrants must comply with this obligation, including entities exempted from reporting information with respect to their ultimate beneficiaries.

Under the ARLPE, all natural persons whose names appear in the enterprise register must declare the address of their domicile. Pursuant to the amendments to the ARLPE, a professional address may also be declared for a natural person. If both a professional address and a domicile address are declared, only the professional address will be published in the enterprise register.

Identification of directors

Finally, the amendments to the ARLPE provide that all registrants (including entities exempt from reporting information on their ultimate beneficiaries) must declare and provide the REQ with a readable copy of valid identification for each director registered in the enterprise register and for each new director elected.

Each identification must be issued by a government authority and contain the first and last name as well as the date of birth, but a photo is not required. This obligation applies to both Canadian directors and foreign directors. The copy of the identification will be kept by the REQ until the date the enterprise is registered or the date the updated (annual or current) declaration is filed in the enterprise’s file, as the case may be. It will then be destroyed and will not be published on the enterprise register.

Next steps and questions

The date Bill 78 comes into force is quickly approaching. Enterprises operating in Quebec must thoroughly analyze their legal and factual situations to comply with the new ARLPE obligations. Registrants that fail to comply with these obligations may face a fine and have their registration cancelled.

We are closely monitoring the developments surrounding the coming into force of Bill 78 and remain available to assist our clients in understanding how they will be affected by these new obligations and how to bring themselves into compliance.

The authors wish to thank Oana Stratan, articling student, for her help in preparing this legal update.