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Bill C-42 - ISC Register Requirements Updated


New Transparency Reporting Requirements for CBCA Corporations

Legislation was previously passed that required privately-held federal corporations governed under the Canada Business Corporations Act (the “CBCA”) to keep and maintain a register of individuals with significant control over the corporation (the “ISC Register”). This requirement came into force on December 13, 2018.

Recently, Bill C-42, An Act to amend the Canada Business Corporations Act and to make consequential and related amendments to other Acts, received Royal Assent from Parliament on November 2, 2023. Among other changes to the CBCA, Bill C-42 has made it law that the information on a privately-held federal corporation’s ISC Register be filed with Corporations Canada and that certain information be made available to the public on the Corporations Canada website. These requirements came into force on January 22, 2024.

These changes come as part of Parliament’s continuing efforts to provide transparency about who owns and controls a corporation in order to prevent tax evasion and money laundering, and to assist authorities in prosecuting such crimes. Failure to comply with the ISC Register requirements can result in dissolution and the imposition of financial penalties and/or criminal charges.

Who must be listed on the ISC Register?

Bill C-42 does not change the parameters for who must be identified and listed as an individual with significant control (an "ISC"). Per the CBCA, an individual will be considered an ISC if they meet either of the following tests:

  1. Share Ownership Test: The individual is the registered or beneficial owner of, or has direct or indirect control or direction over, any number of shares (A) that carry 25% or more of the voting rights attached to all of the corporation’s outstanding voting shares or (B) that are equal to 25% or more of all of the corporation’s outstanding shares measured by fair market value; OR
  2. Control in Fact Test: The individual has direct or indirect influence that, if exercised, would give them “control in fact” of the corporation, taking into account “all relevant factors”.

Two or more individuals are each considered an ISC in the following scenarios:

  1. a group of individuals jointly hold rights and/or interests that meet the 25% threshold outlined above; or
  2. a group of individuals are parties to an agreement or arrangement to exercise rights “jointly or in concert” in respect of shares that meet the 25% threshold outlined above.

Ensuring ISC Registers are accurate, complete and up-to-date

At least once a year, corporations are responsible for taking reasonable steps to ensure they have identified all ISCs and that the information in their ISC Register is accurate, complete and up-to-date. Bill C-42 expands this responsibility. In addition to ensuring on a yearly basis that the ISC Register is accurate, complete and up-to-date, corporations may now be asked by the Director under the CBCA at any time to ensure that their ISC Register is accurate, complete and up-to-date. In addition, the Director under the CBCA may also pass regulations that prescribe other times and circumstances where corporations must ensure their ISC registers are accurate, complete and up-to-date. At the time of this bulletin’s release, there are no proposed or enacted regulations pertaining to this responsibility.

What information must be included on the ISC Register?

The ISC Register must contain the following information about each ISC over the corporation:

  1. their name, birthdate and latest known address;
  2. their residential jurisdiction for tax purposes;
  3. the date when the individual became or ceased to be an ISC;
  4. a description of how the individual qualifies as an ISC, including, as applicable, a description of their interests and rights in respect of shares;
  5. the residential address for each ISC and their address for service (if provided to the corporation), are to be included. Previously, only the last known address of each ISC was required;
  6. the citizenship of each ISC; and
  7. any other information required by future regulations.

The ISC Register must also describe the reasonable steps taken by the corporation to identify ISCs and to keep the ISC Register accurate, complete and up to date. Notably, items 5 and 6 are new pieces of information required with Bill C-42 coming into force.

What information on the ISC Register will be made public?

Subject to certain exemptions, the following information included on the ISC Register will be made available to the public on Corporation Canada’s website as a result of Bill C-42:

  1. the full legal name of the ISC;
  2. the date the individual became an ISC;
  3. the date the individual ceased to be an ISC, as applicable;
  4. a description of the ISC’s significant control (for example, owns 25% of shares);
  5. an address for service of the ISC, if one is provided; and
  6. the residential address of the ISC, if no address for service is provided.

What information on the ISC Register will not be made public?

The following information included on the ISC Register will not be made available to the public on Corporation Canada’s website:

  1. the date of birth of the ISC;
  2. the ISC’s country (or countries) of citizenship;
  3. the country (or countries) where the ISC is considered a resident for tax purposes.
Exemptions to the public release of information

Bill C-42 offers some exemptions to the public release of information of ISCs in the following limited circumstances:

  1. where the ISC is under the age of 18 years old;
  2. where, on application by an ISC, Corporations Canada is satisfied that the individual is incapable (i.e. is declared incapable either by a court or under provincial or territorial laws);
  3. where, on application by an ISC, Corporations Canada reasonably believes that making the individual’s information available to the public presents or would present a serious threat to the safety of the individual; or
  4. for public office holders with respect to confidential information under the Conflict of Interest Act or similar provincial legislation.

Corporations Canada is required to publish a notice of any decision granting an application to exempt information from being made available to the public.

When must the information be submitted to Corporations Canada?

Prior to the assent of Bill C-42, the ISC Register was not required to be filed with any government body or public registry. However, with the assent of Bill C-42, corporations are now required to proactively submit information on ISCs to Corporations Canada. As of January 22, 2024, corporations are required to submit the information to Corporations Canada:

  1. with their annual return;
  2. within 15 days of any change made in their ISC register;
  3. during incorporation;
  4. after amalgamation; and
  5. after continuance (import) to a federal jurisdiction.

Upon request, we would be happy to assist you with the preparation of the ISC Register for your federal corporation. If you have any questions or concerns regarding the ISC Register or the new public disclosure requirements, please do not hesitate to contact your relationship lawyer at our firm.