Amendments to the BC Business Corporations Act - 5 Key Takeaways

Introduction

In May of 2019, Bill 24, the Business Corporations Amendment Act received royal assent. The amendments to the BC Business Corporations Act (the “BCBCA”) require private companies to prepare and maintain a transparency register (the “Transparency Register”) of information about significant individuals (“Significant Individuals”).

1.    Why the changes?

The amendments follow recent changes made by the federal government to the Canada Business Corporations Act (the “CBCA”) and are reflective of BC’s 2017 commitment to provide law enforcement, tax authorities and certain other regulatory authorities with up-to-date information on beneficial ownership of companies. [1]

2.    Who are “Significant Individuals”?

Individuals are considered Significant Individuals if they fulfill any of the below requirements:

1. they directly or indirectly own, or directly control 25% or more of the issued shares of the company;
2. they directly or indirectly own, or directly control shares that carry 25% or more of the voting rights of the company; or
3. they are able to exercise rights or influence, directly or indirectly, that would result in the election, appointment or removal of the majority of the company’s directors.

3.    What are the obligations of private companies and shareholders?

First, private companies will be required to take reasonable steps to maintain a Transparency Register containing accurate, complete and up-to-date information about Significant Individuals, including:

• full name, date of birth, and address;
• whether or not the individual is a Canadian citizen or permanent resident of Canada or, if not, a list of every country of which the individual is a citizen;
• whether or not the individual is a resident of Canada for tax purposes;
• the date on which the individual became or ceased to be a significant individual; and
• a description of how the individual meets the definition of a “significant individual.”

Second, private companies are required to review the Transparency Register annually and update the register throughout the year as new information becomes available, within 30 days after becoming aware of such new information. On request from a company, shareholders must take reasonable steps to compile and promptly provide the requested information.

Failure to comply with the above requirements constitutes an offence under the new legislation with a fine of up to $50,000 for individuals and $100,000 for other persons. Directors, officers, and shareholders may be held personally liable for authorizing an offence by a private company or providing false or misleading information to a private company.

4.    Who will have access to the transparency register?

The only persons entitled to inspect the Transparency Register at the company’s registered and records office are: (i) directors, and (ii) officials conducting tax, regulatory or law enforcement investigations. This is unlike the CBCA amendments, which will allow shareholders and creditors the right to inspect beneficial ownership information.

5.    When do the changes come into effect?

The key operative provisions of the amending legislation will come into force by regulation. While the exact timeframe for implementation is not clear, it is expected there will be a transition period to allow companies to contact shareholders and develop compliance procedures.

KZEL LLP will continue to monitor developments with respect to the BCBCA amendments.

For your reference, a copy of the current version of Bill 24 can be viewed here. 

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[1] 2017 Agreement to Strengthen Beneficial Ownership Transparency (https://www.fin.gc.ca/n17/data/17-122_4-eng.asp)

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