As many business owners already know, recent changes to the BC Business Corporations Act require private companies in BC to create and maintain a Transparency Register containing information about significant individuals of the company.
Originally, the deadline to create Transparency Registers was May 1, 2020; however, that was moved to October 1, 2020 in light of COVID-19.
This article contains general information about Transparency Registers as at the time of writing.
Who Must Make a Transparency Register?
All BC private companies must make and maintain a Transparency Register.
As well, companies must annually confirm that the information contained in their Transparency Register is accurate, complete and up to date, and must periodically update their Transparency Register within 30 days of becoming aware of any changes.
Each time a company adds an individual to its Transparency Register, or indicates in its Transparency Register that an individual has ceased to be a significant individual, the company must notify that individual of this fact within 10 days. Information about all significant individuals must be kept for at least 6 (but not more than 7) years after the date the individual ceased to be a significant individual, after which such information must be deleted and destroyed.
In addition, the new rules impose positive obligations on whoever acts as the records office for a BC private company. In many cases this will be the company’s corporate lawyer. The person maintaining the records office of a company must take reasonable steps to:
- keep the Transparency Register in a complete state;
- avoid loss, mutilation or destruction of the Transparency Register;
- avoid falsification of the entries in the Transparency Register;
- provide authorized inspecting officials and the company’s directors with prompt access to the Transparency Register; and
- ensure that the Transparency Register is maintained in electronic form, on microform or in a bound or loose-leaf form.
Why Transparency Registers?
According to publications by the BC Government, some of the goals of Transparency Registers include helping to end hidden ownership of companies in BC, helping to address illegal activities, and helping companies and authorities identify the actual individuals who own and control BC companies.
Who May Examine a Transparency Register?
Only those authorized by law have a right to inspect a Transparency Register. Presently, the following persons may inspect a company’s Transparency Register:
- the company’s directors; and
- subject to requirements and restrictions in the Act, “inspecting officials”, which at the time of writing includes:
- officials or employees of taxing authorities in BC and Canada;
- police officers and RCMP;
- the BC Securities Commission;
- the BC Financial Services Authority;
- FINTRAC; and
- The Law Society of BC.
What Information Must a Transparency Register Contain?
The Transparency Register must include information about all significant individuals of a company. “Significant individual” is specifically defined in the amendments to the Business Corporations Act. A significant individual includes individuals who: (i) own a significant number of shares; or (ii) have rights to replace a majority of a company’s directors. The term “significant number of shares” is also defined in the amendments. It means either of the following: (i) 25% or more of the issued shares of the company; or (ii) issued shares that carry 25% of the voting control of the company.
The new rules address various circumstances that make it difficult (or theoretically, impossible) to use complex corporate structures to avoid listing individuals as significant individuals. For example, the rules capture individuals with indirect rights to shares and/or votes—for example, those holding such rights through holding companies or trusts—and those with contractual or other legal rights to select or influence the selection of a company’s board of directors (for example, in a shareholders’ agreement).
The rules also consider relationships between shareholders. For example, spouses whose combined interests reach the 25% threshold will both be significant individuals. The same principle applies to parents and children who live at the same address.
A Transparency Register must include the following information for each significant individual:
- full name, date of birth, last known address;
- whether or not the individual is a Canadian citizen or permanent resident of Canada (and if not, a list of every country or state of which the individual is a citizen);
- whether or not the individual is a resident of Canada under the Income Tax Act;
- the date on which the individual became a significant individual;
- and a description of why the person is a significant individual.
The above list may be expanded by regulation of the Lieutenant Governor in Council.
Where Must the Transparency Register be Kept?
In most cases, companies must keep a complete and up to date Transparency Register at their records office. The legislation permits the Transparency Register to be stored elsewhere, provided that the register must be available for inspection and copying at its records office by means of computer or other electronic technology. At this time, there is no requirement to file a copy of the Transparency Register with the BC Registrar of Companies or elsewhere.
What Happens if I Don’t Make or Maintain a Transparency Register?
Failure to comply with the new rules can result in significant penalties: up to $50,000 for individuals and $100,000 for anyone who is not an individual (e.g. companies).
When is the Deadline to Prepare a Transparency Register for BC Private Companies?
October 1, 2020.
It is important that BC private companies and their directors and officers ensure that the Transparency Register requirements are met by October 1, 2020. They must also ensure that the continuous obligations regarding maintenance of Transparency Registers are fulfilled.
This article covers general information only. It does not contain a complete summary of the law on Transparency Registers. If you have questions about this topic, please contact a lawyer.