I have to create a new register for my company?
The following three terms mostly mean the same thing and are used throughout the world to identify the people that are important to a company:
UBO – Ultimate Beneficial Owner
BO – Beneficial Owner
SI – Significant Individual
This trend towards transparency of ownership is global. It helps governments and agencies in the recovery of money and assets from illegal activities and helps fight terrorism. The Global Forum on Asset Recovery (GFAR) produced a guide for Switzerland in 2018. The Swedish government now requires a similar register of “beneficial ownership.” The European Union (EU) has been a global leader in fighting money laundering. The EU recently issued the Fifth Anti-Money Laundering Directive (5AMLD) amending the 4AMLD. Part of the reason for the 2019 amendment was the release of the now-infamous Panama Papers and how to close the many loopholes that were exposed in those leaked documents. If you haven’t seen The Panama Papers movie yet, take the time – it’s a decent summary and a pretty good watch.
The Province and Canada want to know who owns what and to know this, the provincial and federal governments need to know: Who are the actual real people that are controlling our corporations that are owning Canadian assets? Canada is one of over 200 members (countries) of an international organization called the Financial Action Task Force (FATF) and a smaller group called the Asia/Pacific Group on Money Laundering which is associated with FATF. The FATF organization reviewed and reported to Canada on its laws and policies as they relate to anti-money laundering and combatting the financing of terrorism. Canada agreed to force companies to make available the natural persons (that is, living breathing people) that are significant to a company. This law came into effect in June 2019 for federal companies. Now, British Columbia and other provinces and territories are following suit by enacting similar laws. Each province has its own laws. There are subtle differences between them, but at the end of the day, a new transparency register will be required and it will list the names of actual people of significance who may or may not also be a shareholder.
A company can be fined up to $100,000.00 for the failure to have this information available. A person who has failed to have this information available, whether intentionally or by omission, can be fined up to $50,000.00. This includes shareholders, directors, and even officers. Officers don’t have to be shareholders or directors of companies, but they can still be fined.
On May 1, 2020, all companies of British Columbia will have to have a transparency register of significant individuals.
The governments of British Columbia and Canada both require this and most other provinces are in the process of changing their laws to also require this. The purpose of the new laws is to flush out money laundering and foreign ownership of Canadian property and to combat the financing of terrorist activities. This trend is global. Over 30 countries already have similar legislation.
Every company has to keep its Constating documents (fancy words for the documents that are the guts of the company) at its records office. Every company has to identify its registered and records office, which is a physical location where the company minute books are located. For the most part, many different types of governments, agencies, people, etc. have the right to look at or inspect the minute book. The minute book usually includes the certificate of incorporation, the articles of incorporation, the register of directors and officers, and a share register, called a Central Security Register, as well as resolutions, agreements and documents that are filed electronically or in hard copy in Victoria at the British Columbia Companies Registrar.
This new register, the Transparency Register, must be maintained or kept at the company’s records office. As of March 2020, the Transparency Register is private and very limited people have access to it. Only the directors of the company and inspecting officials have access to it. Inspecting officials include Canada Revenue Agency, provincial taxing authorities, police and law enforcement, regulators (branches of the government). Companies must make their register available for at least 2 hours per day and only during statutory business days (not after 4 pm on weekdays or at all during the weekends).
Ok, so some specific types of companies do not have to maintain a transparency register of significant individuals, but if you are reading this, your company is probably not on the list below and you probably do have to maintain this new register.
The exceptions are as follows:
- Extra-provincial companies
- Publically traded companies (ie: on the stock exchange, like McDonald’s, and Tim Horton’s, and Shell)
- Reporting issuers or equivalents
- Prescribed companies (such as the BC Ferries Corporation)
Companies have to have a transparency register of Significant Individuals
Significant Individuals are:
- Shareholders with 25% of all shares are Significant Individuals
- Shareholders with 25% of voting shares are Significant Individuals
- Trustees are (probably) Significant Individuals
- Beneficiaries are (possibly) Significant Individuals
Significant Individuals have to provide:
- Full name
- Tax residency status in Canada
- Relationship to other individuals
- Respond to queries from the company about the new register
- Take reasonable steps to gather the information requested
- Promptly reply to the company
- Take reasonable steps to gather information on shareholders
- Cause the company to create the register
- Cause the company to update the register within 30 days of getting new information
- Cause the company to report to significant individuals
- Cause the company to destroy information
Companies have to:
- Try to find out details to determine Significant Individuals
- Create and maintain the register
- Notify when Significant Individual becomes or ceases to become a Significant Individual
- Destroy data
Records Office has to:
- Keep the register
- Avoid false entries
- Make the register available at least 2 hours per statutory working day
- Not allow inspection to unauthorized persons
Call us before your records are inspected.