[ESTABLISHING A BUSINESS ENTITY IN CANADA] 79
In recent years, a further potential disadvantage to incorporating federally was the CBCA requirement for private corporations to maintain “a register of individuals with significant control over the corporation” (an “ISC”). This is defined as any individual who, as registered holder or beneficial owner, controls any number of shares (i) carrying 25% or more of the voting rights attached to all the corporation’s outstanding voting shares or (ii) equal to 25% or more of all the corporation’s outstanding shares measured by fair market value. Two or more individuals can each be considered an ISC if they have joint ownership or control of 25% or more of the shares in votes or value. However, in recent years, many Canadian provinces (including British Columbia, Saskatchewan, Manitoba, Nova Scotia, Newfoundland and Labrador, and Ontario) have amended their respective Business Corporations Acts to require corporations incorporated under those acts to maintain registers of individuals with significant control. Therefore, this is no longer a major factor that differentiates the CBCA from those provincial statutes. The federal and provincial statutes oblige the corporation to keep information pertaining to, amongst other things, the shareholder's name, date of birth, jurisdiction of residence for tax purposes, address for service (or residential address, if no address for service has been provided), the day such individual became an individual with significant control over the corporation, as well as a description of how such individual is an individual with significant control over the corporation. One point of distinction between the federal and provincial acts is with respect to who may access the information on the register and for what purpose. For example, both Ontario's corporate legislation and the
CBCA permit certain law enforcement officials, tax investigators and other regulatory bodies/officials to access the register. However, the CBCA permits shareholders and creditors of the corporation to access the register whereas the Ontario statute does not. Under the CBCA, the information sent in the ISC Register must be sent to the Director of Corporations Canada (the “DCC”) on an annual basis, and within 15 days of any change filing, The DCC may provide all or any part of this information with any investigative body, including without limitation the police, the Canada Revenue Agency and the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC - Canada's financial intelligence unit and anti-money laundering and anti-terrorist financing supervisor). The DCC may also exchange this information with any provincial or territorial government department or agency responsible for corporate law matters in that province or territory. Finally, the DCC is not required to keep or produce any information for more than 6 years after it was filed with the DCC. The Quebec Register of Enterprises (REQ), in which all businesses operating in Quebec must disclose their shareholders, directors, officers and ultimate beneficiaries, can now be searched not only by the name of the entity but also by the name of each related individual, both past and current. It should finally be noted that Canada also has statutes governing the formation and operation of non-profit entities at both the federal and provincial/territorial levels. ULCs Unlimited liability companies (ULC’s), which are similar to American limited liability companies (LLC’s), can currently be formed only in the
ILN Corporate Group – Establishing a Business Entity Series
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