The Advantages to a Multidisciplinary Legal Practice

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:

Section 2.1(1)

• (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:

Section 2.1(3)

• (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.

Summary

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.

The Corporate Transparency Act (CTA) was enacted on January 1, 2024. The authors of the CTA decreed a mandate that requires all qualifying business entities to submit beneficial ownership information (BOI) reports to the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).

Two months later, on March 1, 2024, a US District Judge in Alabama ruled on a case brought before the court by the National Small Business Association (NSBA), an organization representing over 65,000 small business entities across the United States. The judge ruled that the CTA is “unconstitutional” and that lawmakers overstepped their bounds.

What is the purpose of the Corporate Transparency Act?

The CTA is part of a broader government effort to crack down on white-collar crime. US federal agencies and financial institutions annually identify unlawful transferrences of capital through money laundering or corporate sponsorship of international terrorism — actions that, in the government’s opinion, undermine national security.

As a result, the CTA gives FinCEN greater authority and oversight of suspected culprits of these crimes. Qualifying business entities must provide detailed BOI reports to FinCEN, which will store those records in secure databases and use them to monitor suspicious financial activities.

What were the details of the Alabama case?

The NSBA challenged the legal authority of the CTA and took the government to court seeking a summary judgment. Federal District Judge Liles C. Burke in Alabama issued a 53-page opinion about the case, which a Forbes contributing writer dissects in detail.

At the heart of the lawsuit is the fact that legal entities in the United States register with individual states where they choose to operate. The incorporation of those entities is a matter for the states to decide, along with the ability to prosecute those businesses for suspected financial crimes.

The NSBA argued that the CTA gives the federal government’s national security and foreign affairs matters the right to interfere with how individual states regulate businesses. Additionally, they argued that limited liability corporations (LLCs) may engage in interstate commerce, but not all entities pursue these opportunities.

The CTA requires all entities — even those that never cross state jurisdictions — to abide by the federal government’s mandate. Judge Burke ruled these grounds warranted an unconstitutional ruling of the CTA, though the federal government launched an appeal to the Eleventh Circuit.

Who is a beneficial owner under the CTA?

Within the CTA is specific language that defines a beneficial owner. According to the CTA, a beneficial owner is anyone who — directly or indirectly — maintains a 25% ownership interest in a corporate entity. Additionally, a beneficial owner is anyone who — again, directly or indirectly — maintains substantial control over business operations through voting rights.

Shareholders who fit the profile of a beneficial owner must provide their personal information — name, address, and a government-issued identification number — to the entity management department. That data is then processed and submitted to FinCEN as a BOI report.

Are some entities exempt from BOI reporting requirements?

The CTA allows authorities to gather beneficial ownership information from thousands of legal entities. However, FinCEN has detailed 23 types of legal entities that are exempt from the BOI reporting requirements.

Most exemptions revolve around the financial sector in the form of banks, credit unions, venture capital firms, depository institutions, or money services businesses. Government authorities, public utilities, and securities exchanges are also exempt from reporting BOI data to FinCEN.

What does the Alabama case ruling mean for BOI reporting?

So, what does the NSBA case against the Treasury Department mean for the future of BOI reporting requirements? There are two key takeaways from the case.

Firstly, Judge Burke clearly stated in his ruling that the injunction against the CTA only applies to businesses enrolled in the NSBA before March 1, 2024. Businesses that are registered members of the NSBA have a temporary pause on compliance with the CTA while the case is under appeal at the Eleventh Circuit.

For most businesses, the ruling has no impact whatsoever. FinCEN requires BOI reports from entities registered on or after January 1, 2024, within 90 days of receiving their articles of incorporation. Any entities registered before January 1, 2024, have until January 1, 2025, to submit their BOI reports to FinCEN.

How to prepare your BOI reports for FinCEN

While many entities still have several months to submit their BOI reports to remain in compliance with the CTA, it’s best to start gathering that information now. It’s much more effective for your entity management team to have all the information they need well in advance of the deadline to avoid last-minute scrambles and gaps in required data.

Intuitive entity management software can assist your legal and compliance departments with these tasks. Platforms like MinuteBox include pre-built templates and guided widgets that help your teams build detailed reports. The technology saves valuable working time and makes the process of gathering, filing, and securing entity management data quick and painless.

Additionally, you can use the platform’s Corporate Transparency Register to comply with all obligations under the CTA. Here, you can build detailed shareholder ledgers and create a comprehensive list of all beneficial owners with significant controlling interest in the company.

Once the data is in the platform, you can easily create detailed minute book records of all beneficial owners. Since the information is stored in your platform, filing and submitting the BOI reports to FinCEN is a breeze.

Prepare your legal entity for the next step of beneficial ownership reporting. Join the MinuteBox revolution today, and stay ahead of the game while maintaining compliance.

The legal industry is constantly evolving, and the use of technology by paraprofessionals is no exception. The pandemic has brought about new challenges and changes in the way law firms operate, including an increased reliance on remote work and virtual connections. In this interview, Tiffany Pereira, an expert in legal technology, shares her insights on how technology is being used by paraprofessionals and how it is evolving in response to these changes. From the rise of the self-service delivery model to the importance of ease of delivery in technology products, this post explores the ways in which technology is being utilized by paraprofessionals to better serve their clients and improve their workflow.

What we’ll cover in this blog post:

1. The rise of the self-service delivery model
2. The values of ease of delivery in the product
3. The use of recordings and a knowledge base
4. The shift towards a self-service delivery model

The use of technology by paraprofessionals is evolving in response to the changes brought about by the pandemic. As Tiffany Pereira notes, “with some of the lockdowns it forced some law firms, of course, to temporarily close their offices and really rely on those virtual connections, whether through Zoom or through phone. And clients turn to their devices instead of stopping by the firm’s office to read or sign documents or have those connections.”

This shift to remote work has led to an increase in the use of the self-service delivery model. As Pereira explains, “What can we look at if we have a question? What are our options? Are there resources? Is there a knowledge base? Are there webinars like this? Are there articles that we can utilize? How can we learn without sitting in a boardroom together?”

Watch the full interview, Evolving Technology for Paraprofessionals

Additionally, ease of delivery in the product has become more important. Pereira states, “So what we also saw was a lot of cancellations for training sessions, and that wasa bit of a shift from what we were used to. But then relying on recordings, relying on how I can get the most information and having basically a knowledge base or one-stop shop to everything I need to know about this product.”

To adapt to these changes, firms are utilizing recordings and knowledge bases to provide training and resources for paraprofessionals. This allows them to learn and access information at their own pace and convenience, rather than relying on traditional in-person training sessions.

Overall, the pandemic has accelerated the shift towards a self-service delivery model for technology used by paraprofessionals. This allows them to access the resources they need to effectively use the technology and provide service to clients in a more flexible and efficient manner.