Increased corporate disclosures for privately-held Ontario corporations have come into effect as of January 1, 2023
We want to inform you of a recent change in legislation with respect to privately-held Ontario corporation governed under the Business Corporations Act (Ontario). With Bill 43, Build Ontario Act (Budget Measures), 2021 receiving Royal Assent on December 9, 2021, privately-held Ontario corporations will now be required to keep and maintain a register of individuals with significant control over the corporation (the “ISC Register”). This requirement came into force on January 1, 2023 and brings Ontario in line with similar legislation adopted in other provinces and federally.
Who Must Be Listed on the ISC Register?
All individuals identified as an "individual with significant control" ("ISC") must be included in the ISC Register. An individual will be considered an ISC if they meet either of the following tests:
- 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 is equal to 25% or more of all of the corporation’s outstanding shares measured by fair market value; OR
- 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:
- A group of individuals jointly hold rights and/or interests that meet the 25% threshold outlined above;
- 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; or
- A group of individuals, who are considered related persons, have rights or interests in shares that collectively meet the 25% threshold outlined above.
NOTE: A “related person” with respect to an individual means either:
- Any spouse, son or daughter of that person; OR
- Any relative of the person or of the person’s spouse who has the same home as the person.
What Information Must Be Included on the ISC Register?
The ISC Register must contain the following information about each ISC over the corporation:
- name, address and birthdate;
- residential jurisdiction for tax purposes;
- date when the individual became or ceased to be an ISC;
- description of how the individual qualifies as an ISC, including, as applicable, a description of their interests and rights in respect of shares; and
- 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. The information on the ISC Register must be updated at least once every financial year, as well as on an ad hoc basis within 15 days of the corporation becoming aware of any changes to the information on the ISC Register. The ISC Register must be held at the corporation’s head office or another place designated by the directors. At this time, there is no requirement for the ISC Register to be filed with any government body or public registry.
Penalties for Non-Compliance
The legislation does not require the ISC Register to be made available to the public. However, upon request, corporations will be required to provide law enforcement, tax authorities and regulatory bodies with access to its ISC Register.
Failure to comply with the new ISC Register provisions can result in fines or other penalties.
Though the legislation came into effect on January 1, 2023, the government has yet to enact regulations to deal with interpretive issues over determining ISCs. We expect clear interpretation will not be available for some time but we will continue to monitor the situation as new information becomes available.
The purpose of this new legislation is to counteract tax evasion and money laundering operations by making the individuals in control of corporations more transparent.
Upon request, we would be happy to assist you on the preparation of the ISC Register. If you have any questions or concerns regarding the ISC Register, please do not hesitate to contact your relationship lawyer at our firm.
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