The British Columbia Business Corporations Act will soon require private BC companies to create and maintain a “Transparency Register”. A company’s Transparency Register must be kept within that company’s records book and must list information about “significant individuals”.
As a result of COVID-19, the deadline for having a Transparency Register in place has been extended October 1, 2020. Companies that fail to complete the Transparency Register by this deadline may face significant fines.
A “significant individual” is an individual who, alone or jointly:
(a) with respect to 25% or more of the issued shares or voting rights of the corporation has:
(i) an interest as a registered owner of one or more of the company’s shares;
(ii) an interest as a beneficial owner of one or more of the company’s shares, other than an interest that is contingent on the death of another individual; and/or
(iii) indirect control, within the meaning of the regulations, of one or more of the company’s shares;
(b) has any of the following rights or abilities, or any combination of them, that, if exercised, would result in the election, appointment or removal of the majority of the directors:
(i) the right to elect, appoint or remove one or more of the company’s directors;
(ii) indirect control, within the meaning of the regulations, of the right to elect, appoint or remove one or more of the company’s directors;
(iii) the ability to exercise direct and significant influence over an individual who has the right or indirect control described in subparagraph (i) or (ii);
(c) has a prescribed interest, right or ability, or is subject to a prescribed criterion or circumstance.
If an interest or right is held jointly by two or more individuals, each individual is considered a “significant individual”. Similarly, a person would be a significant individual if that individual’s interests, rights, or abilities, meet the above criteria when combined with the interests, rights, or abilities of (a) an associate or (b) another individual or individuals with whom they have an agreement or arrangement to exercise their interests, rights, or abilities jointly or in concert.
For these purposes, an associate is defined as:
(a) a partner, other than a limited partner, of the person;
(b) a trust or estate in which the person has a substantial beneficial interest or for which the person serves as trustee or in a similar capacity;
(c) a spouse, son or daughter of the person; or
(d) a relative of the person or of the person’s spouse, other than a relative referred to in paragraph (c), who has the same home as the person.
Be aware that a private company commits an offence if its transparency register:
(a) identifies an individual as a significant individual in respect of the company who is not a significant individual in respect of the company;
(b) excludes an individual who is a significant individual in respect of the company;
(c) contains information about a significant individual that is false or misleading in respect of any material fact; or
(d) omits information about a significant individual, the omission of which makes the information false or misleading.
A director or officer of a company who authorizes, permits, or acquiesces in the commission of any of the above offences also commits an offence. Liabilities for such offences can be fines as high as $50,000 for individuals and $100,000 for corporations.
If a company requests information from a shareholder for the purposes of completing or updating the company’s Transparency Register, shareholders are required by law to compile and provide the information to the company. A shareholder commits an offence if the shareholder knowingly or recklessly sends information to the company for the purposes of the company’s register that:
(a) is false or misleading in respect of any material fact; or
(b) omits any material fact, the omission of which makes the information false or misleading.
Compiling a company’s Transparency Register will require ongoing disclosure by shareholders and ongoing diligence by corporate directors. If you have questions or would like our assistance with your Transparency Register or other mandated corporate record keeping, you can contact us.
Join us again next month, when we will discuss a similar requirement for federally incorporated companies, the requirement to maintain a “Register of Individuals with Significant Control”.
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