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21 December 20221 minute read

Preparing your Ontario Transparency Register for January 1, 2023‎

Effective January 1, 2023, private Ontario corporations are required to prepare and maintain a ‎register of “individuals with significant control” (“ISCs”) over the corporation (the “Transparency ‎Register”). These new amendments to the Ontario Business Corporations Act  (the “OBCA”) ‎were introduced in November 2021 through Bill 43, Build Ontario Act (Budget Measures), 2021, ‎which received royal assent on December 9, 2021.‎

The Transparency Register requirements reflect Ontario’s push towards enhancing transparency ‎around corporate ownership and control and can assist law enforcement in targeting money ‎laundering, tax evasion and other illicit activities. ‎

The Transparency Register requirements are similar to those enacted for federally incorporated ‎corporations in 2019 and the requirements of the Provinces of British Columbia, Québec, ‎Saskatchewan, Manitoba, Nova Scotia, PEI, and Newfoundland and Labrador.‎

Who must maintain a Transparency Register? ‎

All private Ontario corporations must prepare and maintain a Transparency Register other than a ‎wholly-owned subsidiary of a public corporation.‎

Who is an Individual with Significant Control? ‎

Under section 1.1 of the OBCA, an ISC is: ‎

  • the registered or beneficial owner of, or has direct or indirect control or direction over, ‎any number of shares that carry 25 percent or more of the voting rights attached to all of ‎the corporation’s outstanding voting shares; ‎
  • the registered or beneficial owner of, or has direct or indirect control or direction over, ‎any number of shares that is equal to 25 percent or more of all the corporation’s ‎outstanding shares measured by fair market value; ‎
  • an individual who has direct or indirect influence that, if exercised, would result in “control ‎in fact” of the corporation; or
  • an individual to whom circumstances prescribed by regulation apply.‎

What is “control in fact”?

When considering whether an individual has direct or indirect influence that, if exercised, would ‎result in “control in fact”, one should consider the following: ‎

  • all factors that are relevant in the circumstances; and ‎
  • the relevant factors should not be limited to, and do not need to include, whether the ‎individual has a legally enforceable right or ability to effect a change in the board of ‎directors or its powers, or to exercise influence over the shareholder(s) who have that ‎right or ability.‎

Subsection 1.1(5) further defines “control in fact”, stating that specific or similar arrangements ‎do ‎not single-handily constitute “control in fact”. Specifically, “control in fact” is not established ‎when ‎a corporation and the individual are dealing with each other at arm’s length, and the ‎influence ‎originates from the below arrangements, and the primary purpose of those arrangements ‎is to ‎govern the relationship between the corporation and the individual regarding how a business ‎‎carried on by the corporation is conducted: ‎

  • franchise; ‎
  • license; ‎
  • lease; ‎
  • distribution; ‎
  • supply; ‎
  • management; or ‎
  • similar agreements or arrangements.

What happens when two or more individuals are an ISC?

Subsection 1.1(4) of the OBCA addresses situations where two or more individuals jointly or ‎collectively hold or exercise rights or interests in a corporation. Specifically, two or more ‎individuals are each considered to be an ISC in the following circumstances: ‎

  • they jointly hold rights, interests, or combinations of rights or interests in the corporation, ‎meeting the 25 percent threshold; ‎
  • they are parties to an agreement or arrangement whereby the parties agree to exercise ‎any rights that they hold in the corporation “jointly or in concert”, and those rights and ‎interests meet the 25 percent threshold; or ‎
  • the individual holding the ownership interest, rights, or combinations of rights and ‎interests, meeting the 25 percent threshold, are  “related persons”. This includes spouses, ‎children and possibly relatives if they live in the same home. ‎

What should be included in the Transparency Register? ‎

The Transparency Register must include the following information for each ISC: ‎

  • their name, date of birth, and last known address; ‎
  • their jurisdiction of residence; ‎
  • the day on which each ISC became and ceased to be an ISC; ‎
  • a description of how each ISC is an individual with significant control, including a ‎description of their interests and rights in respect of the shares of the corporation; and ‎
  • any other prescribed information that may be required under regulations.  ‎

The Transparency Register must also include a description of each reasonable step taken (once ‎each financial year of the corporation) to ensure that all ISCs have been identified and that the ‎Transparency Register’s information is accurate, complete and up-to-date.‎

The corporation is responsible for updating the Transparency Register at least once each ‎financial year. The corporation must take reasonable steps in accordance with the regulations to ‎ensure that it has identified all individuals with significant control and that the information in the ‎register is accurate, complete, and up-to-date. If the corporation becomes aware of any new ‎information, it must update the register within 15 days after becoming aware of the new ‎information. ‎

Under subsection 140.3(5), if the corporation requests information from one of its shareholders, ‎the shareholder shall promptly and, to the best of their knowledge, reply accurately and ‎completely.‎

When can a corporation dispose the personal information? ‎

The Corporation must dispose of any personal information of an ISC within one year after the ‎sixth anniversary of the day on which the ISC ceases to have significant control over the ‎corporation.‎

Who can access the Transparency Register?

The Transparency Register must be kept at the corporation’s registered office in Ontario unless ‎the corporation’s directors designate another Ontario location. However, the individuals and ‎bodies below may request a corporation to disclose its Transparency Register for varying ‎purposes.‎

ISC Table 4 

The corporation must respond to the request within the time period specified in the request, and ‎the response must comply with prescribed requirements, conditions or restrictions. ‎

Enforcement

The OBCA sets out the following offences and fines in respect of failure to comply with the ‎Transparency Register requirements:‎

ISC Table 3

Please feel free to contact the authors or any member of the DLA Piper (Canada) ‎Corporate ‎team if you have any questions about Transparency Registers or the OBCA ‎amendments. ‎

 


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