How Entity Management Software Supports New OBCA Amendments | MinuteBox Cloud Entity Management

How Entity Management Software Supports New OBCA Amendments

White collar crime is a very costly affair in Canada. According to Criminal Intelligence Service Canada, which shares and coordinates criminal intelligence shared between different police agencies, white collar crime costs the country up to $5 billion per year.

Naturally, governments across the country are eager to crack down on these crimes. One of the ways this was done was an amendment to the Canada Business Corporations Act in 2019. The amendments mandate that corporations must provide greater transparency over shareholder equity in their businesses, as well as assist authorities to prosecute financial crimes.

The federal law was adopted by several provinces over the past three years, including British Columbia, Manitoba, and Nova Scotia. As of January 1, 2023, Ontario, the largest province in Canada, will enact its own version of the law.

What the OBCA amendment means for business

The OBCA is the Ontario Business Corporations Act, which has a similar mandate to the CBCA at the federal level. The Ontario government updated the OBCA with rules that enforce similar priorities for corporations to follow as the federal law.

Under the new OBCA legislation, corporations headquartered in Ontario must create and maintain an ISC register with updates reported on an annual basis. An ISC register is a document that lists all of the individuals with significant control (ISC), ensuring all key stakeholders comply with the law. The purpose of the OBCA, and its federal counterpart, is to support a Canada-wide effort to crackdown on white collar crime, particularly tax evasion.

Other provinces have enacted similar legislation of their own, following the lead of the federal example. Quebec has created its own legislation in Bill 78 that’s similar to the CBCA laws, though it has slightly different guidelines for corporations to follow. You can learn more about Quebec’s Bill 78 here.

Who fits the profile of an ISC?

Who exactly is an individual with significant control in a corporate entity? In most situations, an ISC is a registered shareholder with shareholder rights who controls at least 25 percent of the voting rights attached to all outstanding corporate shares. The language in the law also applies the ISC label to any shareholder whose influence, if exercised, could in fact control the decisions made by the corporation.

There are some exemptions to how the ISC classification is applied. For example, if a shareholder is an investor for a purely commercial relationship, reflected in the form of a franchise, license, lease, or some other managerial agreement, their involvement in the corporation’s affairs is considered an “arm’s-length” affiliation. For that reason, that investor would not classify as an ISC.

What needs to be included in an ISC register

Under the OBCA laws, an ISC register must be maintained and updated by a corporation as part of its annual financial statements. However, what exactly needs to be included in an ISC register to comply with the law?

Most of the information in an ISC register is identical to information that most corporations maintain in a standard shareholder ledger. This includes personal information such as names, addresses, dates of birth, and jurisdictions.

There’s one key difference between an ISC register and a standard shareholder register. The difference is that corporations must include the date on which an ISC became an ISC shareholder, and a description of how that individual meets the criteria of an individual with significant control in the corporation.

How to use entity management software to file ISC registers

If your corporation is based in Ontario, you’ll need to create an ISC register to comply with the law. Now, you may be an established corporation with a detailed shareholder ledger, which you can modify with little hassle. But what if you’re a new corporate entity? How do you create a new shareholder ledger without sacrificing laborious hours of your paralegals’ time and energy?

The best approach is to use entity management software to streamline your corporate recordkeeping process. Platforms like MinuteBox have a built-in shareholder register template in our Entity Information Summary that you can use to build out your register, and you can include any required details to highlight investors that fit the ISC profile.

Under the Entity Information Summary is a subsection called the Capital Section. Here, you can input all authorized information about shareholders and corporate transactions in the available open fields.

You might be asking the question: how is this going to save your legal team precious time and manpower? MinuteBox utilizes document automation technology that requires no coding or coding experience to work the platform. It allows your team to work faster but still meet all of the legal criteria necessary to remain in full compliance with both federal and provincial laws. Simply open up the platform and the work can be complete within minutes!

Are you part of an Ontario-based corporation and in need of an efficient solution to complete your transparency register? Join the MinuteBox revolution so that you can comply with updated corporate governance in a fast and efficient manner while maintaining your commitment to accountability and transparency.