The B.C. Business Corporations Act Targets Full Transparency.
If dealing with the current pandemic was not burdensome enough, in May of 2019, the BC Provincial Government made changes to the Business Corporations Act (British Columbia) (“BCBCA”) that will require private companies to maintain a new type of record called a transparency register. The register is intended to help the Provincial and Federal government prevent tax evasion and money laundering.
It’s really not much of a surprise that the BC Provincial Government has made these changes to the BCBCA. If we think back to 2018, Parliament brought into force Bill C-86 where a mandatory register became required for companies created under the Canadian Business Corporations Act. This Bill naturally initiated the start of new legal changes for all provinces which has slowly made its way to the BCBCA.
Some may be wondering the origin these adjustments. The root of the matter goes back to 2016 where the Panama Papers and the Paradise Papers revealed that private companies were being used by fraudsters and criminal organizations to evade taxes and launder money. To combat these issues, the Provincial and Federal Finance Ministers gathered and the result was an agreement amongst the Federal and Provincial Governments to make businesses more transparent. As such, the changes to the acts are in part a result of the 2016 revelations.
So, for 2020, lets break down what this really means for a private company. Every business owner will have to create a Transparency Register which requires them to keep an up to date list of significant individuals who are the owners of the business.
Having a list of significant individuals for your transparency register seems pretty straight forward. However, it is identifying the significant individuals that make this new record keeping a bit more complicated. The BCBCA states that a person must be included in the register if they are a shareholder with control over a significant number of shares. In very basic terms, this means that individuals who are considered registered holders, joint registered or beneficial owners that own 25% or more of the issued shares of a company, are significant individuals that must be included in a registrar. Beneficiaries of family trusts must be listed in most cases. If the person is not a shareholder but has influence, joint or individual direct, indirect or significant influence to control to elect, appoint or remove the majority of a board of directors of a company, that person is also a significant individual. These categorizations are stated in the simplest of terms and should be reviewed by legal counsel, but the general idea is that the BCBCA requires a register of anyone who has some sense of control of any private company.
Once you have established who your significant shareholders are, the Transparency Register must be complete with their full names, date of birth, address, nationality and residency. It must also include the date on which the individual became or ceased to be a significant individual in respect to the company and a description of how the individual is a significant individual.
Once the documents are complete, an up-to-date physical or electronic copy of the Transparency Register must be kept with the records office of the company itself. If another company, such as an accounting or law firm is holding the records on behalf of a company, the Transparency Register must be available in physical format, must be able to be copied and be able to be viewed through an electronic interface.
When it comes to who can view those copies, current directors of the company, law enforcement, tax authorities and regulators have the authority to view those copies.
These changes go into effect October 1st, 2020 and must be updated once a year within two months of a company’s annual filing date. If for whatever reason, significant individuals change or the information contained in the register needs to be adjusted, adjustments must be made within 30 days.
Those are the basics of the new changes to the BCBCA. We recognize that these changes are onerous and time consuming when you are running your own business. If you have any questions with respect to any of these changes, please don’t hesitate to contact Sunny or anyone at Hamilton Duncan for more details.