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 of the corporation’s outstanding voting shares or (ii) equal to 25% or more of all of 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, as of January 1, 2023, 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 acts. The federal and provincial acts oblige the corporation to keep information pertaining to, amongst other things, the shareholder's name, date of birth, jurisdiction of residence for tax purposes, the date the shareholder became an individual with significant control, etc. 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. It should be mentioned that there is currently a bill before Canada's House of Commons which, if passed, would expand the information required to be kept on a corporation's register to include an individual's date of birth, their address for service, their residential address, and their citizenship. Further, the bill would require that certain information respecting a corporation's register be made available to the public, including each individual with significant control's name, 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. 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 Provinces of Nova Scotia, British Columbia and Alberta. These entities permit flow-through treatment for profits and losses to their shareholders, although tax treaties may limit the ability to take advantage of this favourable taxation. As the Canadian version does not provide limited liability protection, it is common practice to interpose a single purpose holding corporation between the ULC and the ultimate shareholder(s).

ILN Corporate Group – Establishing a Business Entity Series

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