Barbara Wohl
Associate
Article
8
New law is coming into force in the Province of British Columbia, Canada. Bill 24 requires private companies incorporated under the Business Corporations Act (British Columbia) (the "BCBCA") to disclose information about certain shareholders in a "transparency register", and failure to do so could result in significant financial penalties for not just the company but also its directors, officers and shareholders. The Province has yet to announce when the new law will come into effect, but when it does, it will affect most private companies incorporated in British Columbia.
Bill 24 arrives on the heels of recent Canadian federal corporate law changes (see our MarketCaps for more information) and British Columbia real estate law requiring disclosure of actual ownership and looking behind the scenes to find control. The Government of British Columbia now wants to carry this policy of transparency over to provincial corporate law.
Bill 24 applies to private companies incorporated under the BCBCA. If a company is a reporting issuer or has shares listed on a designated stock exchange, it will not have to comply with the new requirements.
Private companies will have to disclose information about individuals who qualify as "significant individuals" (each an "SI").
An SI of a company is an individual who, either alone or jointly:
So, for example, an SI might be someone who does not necessarily own shares in his or her own name but who has the right to elect a majority of the board of directors, perhaps through a trust arrangement. Also, for example, an SI might be an individual who directly or indirectly controls a corporate shareholder, so companies must search through the corporate shareholder's organization structure to identify the ultimate SI.
Regulations are expected to be issued to define "indirect control" and might clarify some of the other issues raised by the legislation.
Companies incorporated under the BCBCA must keep a transparency register (a "Register") containing the following information for each SI:
If a company determines that it has no SIs, the Register must contain a statement to that effect.
If a company is unable to obtain or confirm any of the required information in respect of an SI, the Register must contain a summary of the steps taken to obtain or confirm the information.
Shareholders must take reasonable steps to compile the information requested by the company for the Register and must promptly send it to the company.
Companies must:
There is no general public access to the Register. The Register can be inspected by directors of the company, as well as the following inspecting officials:
Information obtained by these inspecting officials may also be shared with foreign jurisdictions under arrangements made between British Columbia or Canada and those foreign jurisdictions.
Companies that do not comply with the new requirements will be liable for fines of up to $100,000 and individuals who do not comply will be personally liable for fines of up to $50,000.
A company and any individual directors or officers that fail to identify all SIs, falsely identify an SI, or provide false or misleading information in the Register may be held guilty of committing an offence and be liable for the fines.
Given the strong penalties for non-compliance, private companies incorporated under the BCBCA should act now to ensure that they will comply with the upcoming change in the law by:
If your company is affected by the above, we can help you consider what changes you will need to make in order to comply with Bill 24.
While this article highlights key principles of the legislation it does not purport to cover all scenarios nor how the legislation applies in any specific situation.
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