Important Changes to the BC Business Corporations Act

WHAT ARE THE CHANGES?

Effective May 1, 2020 all private BC corporations must comply with a newly legislated requirement for a "transparency register".

This means that all "significant individuals" of a private company must be disclosed and recorded on a corporate transparency register. This register must be maintained in the company minute book at the company's registered records office. 

WHOSE RESPONSIBILITY IS IT TO COMPLY?

The directors of a private BC company are responsible for taking reasonable steps to verify and update the transparency register recording the significant individuals of the company.

This responsibility is on an ongoing annual basis, and when the directors become aware of new or different information. 

The shareholders of a company must take reasonable steps to compile the information requested from the directors, and promptly provide that information to the company.

We recommend directors request the information needed from the shareholders and significant individuals by sending each a copy of the template that the BC Registrar of Companies has published a TEMPLATE QUESTIONNAIRE FOR SHAREHOLDERS OR SIGNIFICANT INDIVIDUALS  (link to Word document)

WHO IS A  "SIGNIFICANT INDIVIDUAL"?

A significant individual is defined in the legislation in two ways:

1. The first is an individual who controls a significant number of company shares.
This means  the individual has rights or interests in either 25% or more of the shares of the company, OR 25% or more of its voting shares because the individual is 

- the registered owner of such shares
- the beneficial owner of such shares
-indirectly controls such shares; or
- any combination of the above.

OR

2. the second is an individual who has the right or ability to elect, appoint, or remove the majority of directors of the company.

This means the individual has control by any of the following means, alone or in combination:

- the right to elect, appoint, or remove a director
- indirect control of the right to elect, appoint, or remove a director
- the ability to exercise direct and significant influence over an individual who has the right or indirect control to elect, appoint, or remove a director.

WHAT IS MEANT BY "INDIRECT CONTROL"?

Indirect control stems from the ability to control who is on the board of directors of a company. The legislation covers two ways that an individual may have indirect control:

1. an individual has indirect control if they control:
- an intermediary who has the right to elect, appoint or remove one or more directors;
- a chain of intermediaries, in which the last intermediary holds such right.

In addition to the above, individual trustees, personal representatives, and legal representatives in a chain of intermediaries are deemed to have indirect control and must be included in the transparency register.

OR 

2. an individual has indirect control if they control:

an intermediary who is a registered owner of the shares
or a chain of intermediaries, the last of which is the registered owner of shares.

Individuals who are trustees,  personal representatives, or legal representatives in a chain of intermediaries, the last of which holds shares in the company, are presumed to exercise indirect control over those shares and must be listed in the transparency register.

WHICH COMPANIES MUST COMPLY?

Any private company incorporated in British Columbia must comply with the requirement to maintain a transparency register.

The new legislation excludes reporting issuers, public companies, and private companies that are extra-provincially registered in British Columbia.

WHO CAN VIEW THE TRANSPARENCY REGISTER?

The transparency register is not a public record, but rather is a register, similar to the central securities register, that is legally required to be maintained in a company minute book at the registered records office.

As such, the transparency register is not available generally for viewing by the public. Instead viewing is limited to a certain group of people and officials. These are the current directors of the company, law enforcement, tax authorities and regulators.

The following officials are entitled to inspect the transparency register:

Police force in BC

The Royal Canadian Mounted Police 

Tax authority of BC

The Canada Revenue Agency

The British Columbia Securities Commission 

The BC Financial Services Authority (formerly FICOM)

The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), and

The Law Society of British Columbia

Viewing times for the transparency register is required to be open between 9 am to 4 pm Monday through Friday (unless it is a holiday).

It is possible to further restrict the inspection time in the company’s articles, but it must be open for inspection for at least two consecutive hours each day Monday through Friday (unless it is a holiday). 

WHY ARE THESE CHANGES BEING MADE?

The BC government has implemented these changes to increase transparency on the ownership of British Columbia private companies in order to prevent the use of private companies to launder money, evade taxes, and fund terrorism.

WHAT IS THE PENALTY FOR NON-COMPLIANCE?

Non-compliance constitutes an offence that is subject to a maximum fine of:

$50,0000 for individuals and
$100,000 for other persons (ie corporations).

HOW TO COMPLY?

1. Establish a transparency register. We recommend using the BC Registrar of Companies template. The Registrar has provided a few examples of how to complete the register that can be found here.

2. Identify any missing information in the transparency register and summarize the steps taken to attempt to ascertain that information.

3. Send the company transparency register to your company's registered records office for inclusion in your company minute book.

WHEN MUST COMPANIES COMPLY?

The transparency registry requirements come into effect May 1, 2020. In the meantime, the directors of a private BC company should be gathering the required information and providing it to the registered agent for the company. There will be no additional transition periods after May 1, 2020.

It is the company's responsibility to comply with these changes, and not the responsibility of your registered agent.

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