On December 13, 2018, Bill C-86 received Royal Assent, thereby amending certain provisions of the Canada Business Corporations Act (“CBCA”).
The updated provisions include new record keeping requirements for private companies incorporated under the CBCA. As of June 13, 2019. The updates affect those with “significant control” of a company defined as:
- (a) an individual who has any of the following interests or rights, or any combination of them, in respect of a significant number of shares of the corporation:
- (i) the individual is the registered holder of them,
- (ii) the individual is the beneficial owner of them, or
- (iii) the individual has direct or indirect control or direction over them;
- (b) an individual who has any direct or indirect influence that, if exercised, would result in control in fact of the corporation; or
- (c) an individual to whom prescribed circumstances apply.
A “significant number of shares” is further defined as:
- (a) any number of shares that carry 25% or more of the voting rights attached to all of the corporation’s outstanding voting shares; or
- (b) any number of shares that is equal to 25% or more of all of the corporation’s outstanding shares measured by fair market value.
Private CBCA corporations must now maintain a register of all individuals who fit the above description, and include in the register the names, birth dates, residence (for tax purposes) and other required data.
Shareholders are now obligated to provide true and accurate information when requested by the corporation.
At least once per financial year, the corporation must review and update this information. Once the corporation is aware of any changes, it has 15 days in order to amend the register accordingly. Failure to properly update the information can result in fines of up to $5,000. However, directors or shareholders knowingly providing false information can result in fines of up to $200,000 and/or six months of imprisonment.
The CBCA requirements ensure that corporations (or the law firms that manage the records for those corporations) must undertake a greater number of tasks each year to ensure the corporate records’ compliance.
The process of updating minute book records will be daunting and tedious, especially if the information is stored in physical minute books binders. Document generation tools and clearly organized cloud-based data and databases can make compliance with the new requirements more manageable.
While the new requirements apply only to privately held CBCA corporations, it is certainly possible that the provincial legislatures will debate and perhaps adopt similar requirements.
At MinuteBox, we have already begun internally testing some new features (to be released in 2019) built specifically to support lawyers and clerks through this process.