Introduction
Recent amendments to the Canada Business Corporations Act (CBCA) have brought about significant changes in the disclosure and filing requirements for Individuals with Significant Control (ISC) registers for most federal corporations. This post aims to detail these changes and guide federal corporations through the updated process.
Understanding ISC and ISC Registers
An ISC is an individual who has significant control over a federal corporation. This means that the person:
- owns, controls or directs 25% or more of shares individually, jointly or in concert with one or more individuals
- has control in fact over a corporation without owning any shares or
- has a combination of shares and control in fact
An ISC register is a record of all such individuals for a specific federal corporation.
Current ISC Procedures
Since 2019, all federally incorporated companies in Canada have been required to maintain an ISC register. This register was required to contain basic information about ISCs (such as names and addresses) and was an internal record of the corporation. It was not required to be filed with the government. In most cases, the ISC register was maintained in a corporation’s corporate minute book, often in spreadsheet format. This has been our standard practice.
What’s Changing?
Expanded Information and Filing Requirements
The new regulations require additional information about each ISC to be maintained in the ISC register. They also now require ISC information to be filed with Corporations Canada. The following information about ISCs must now be included in a federal corporation’s ISC register and filed with the government:
- Full legal name
- Date of birth
- Country (or countries) of citizenship
- Country (or countries) where the ISC is considered a resident for tax purposes
- Residential address
- Address for service (to be provided if the ISC does not want their residential address being made public on Corporations Canada’s website)
- The day on which the individual became an ISC (for example, when the ISC purchased 25% or more of the corporation’s shares)
- The day on which the individual ceased to be an ISC (for example, when the ISC sold their shares)
- A description of the ISC’s significant control (including the type of interest or control, whether it is held directly or indirectly, whether it is held individually or with other people, and the percentage of interest held)
Penalties for Non-Compliance
The recent CBCA amendments significantly increase penalties for non-compliance with ISC filing requirements. Corporations can face fines of up to $100,000 for failing to meet these requirements without reasonable cause. Additionally, directors and officers may face severe penalties, including fines of up to $1,000,000 and imprisonment for up to five years, for knowingly allowing the corporation to breach these rules.
When to File
ISC information will need to be filed with Corporations Canada when you incorporate, amalgamate or continue as a federal corporation. For existing federal corporations, ISC information will need to be filed along with any annual returns filed on or after January 22, 2024. If our law firm files your annual returns, this means that we will need additional information from you before completing your next filing.
Public Accessibility of ISC Information
The following information about ISCs will be accessible to the public once it is filed with Corporations Canada:
- Full legal name;
- Residential address (if no address for service is provided);
- Address for service (if no address for service is provided, the residential address will be made public by default);
- When control started (for example, the date on which they purchased 25% or more of the shares);
- When control ended (for example, the date on which they sold their shares);
- A description of how the person has significant control (for example, owns 25% of shares).
Non-Public Information
The following information about ISCs will not be public on Corporations Canada’s website, but may be accessible by the government and government agencies:
- Date of birth;
- Country (or countries) of citizenship;
- Country (or countries) where the ISC is considered a resident for tax purposes;
- Residential address (only if an address for service is provided).
Protecting Privacy by Using an Address for Service
To address the privacy concerns associated with listing a residential address publicly, Corporations Canada will allow ISCs to list an address for service instead of their residential address.
An address for service is a physical address accessible to the public during regular business hours where an ISC can be served with legal notices, such as a statement of claim or notice of investigation from a government entity.
To avoid unwanted disclosure of residential addresses for ISCs, our law firm can act as the address for service for ISCs for an additional fee. If you have questions about this service, please feel free to reach out to us.
Exemptions
While the new ISC requirements under the CBCA apply to most federal corporations, there are limited exemptions, including certain situations regarding publication of ISC information. This can apply in scenarios where the ISC is a minor, lacks decision-making capacity, or in cases where publication could pose a serious safety threat. However, these exemptions are specific and not universally applicable, meaning the majority of federal corporations and ISCs will need to comply with the filing and publication requirements. For clarity on whether any exemptions apply to your situation, we recommend a consultation to ensure compliance.
Our Role as Legal Counsel
Our law firm is fully prepared to assist you with these new ISC requirements. We understand that these changes may seem overwhelming, and we’re here to simplify the process for you. Our firm has a longstanding practice of preparing and maintaining ISC registers for our federal corporate clients. With these new amendments, we will continue to provide comprehensive support, including:
- Updating ISC Registers: We’ll integrate the additional required information into your ISC registers as part of our annual return filing services.
- Annual Review and Filing: Before filing your annual return, we will provide you with a copy of your updated ISC register for review. We’ll also ask you to confirm the additional details that are now required for all ISCs. Once we have your input, we’ll ensure that all necessary information is filed with Corporations Canada.
- Address for Service Option: To protect your privacy, we offer the option to use our law firm’s address as your address for service. This service helps prevent the public disclosure of your residential address.
Need Assistance or Have Questions?
If you have any questions about the new ISC requirements or need assistance with updating your ISC register, please don’t hesitate to reach out to us. Our team is ready to provide the guidance and support you need to navigate these changes.