By: Lee Abraham - Business Law
As of January 1, 2023, amendments to the Ontario Business Corporations Act (OBCA) now require corporations to maintain a register of individuals with significant control (ISC) over the corporation. This is part of a broader effort to enhance transparency and accountability within the corporate sector. It is important for businesses operating in Ontario to be aware of these changes and take the necessary steps to ensure compliance.
Under the newly amended OBCA, private corporations are required to maintain a register of individuals with significant control. An individual is an ISC if:
(a) they are the registered or beneficial owner of, or have direct or indirect control or direction over: i. any number of shares that carry 25% or more of the voting rights attached to all of the corporation’s outstanding voting shares; or ii. any number of shares equal to 25% or more of all of the corporation’s outstanding shares measured by fair market value,
(b) has any direct or indirect influence that, if exercised, would result in control in fact of the corporation; or
(c) is an individual to whom prescribed circumstances apply.
Two individuals may also be considered an ISC under the Act if:
(a) their shares are held jointly; or
(b) if they are a party to an agreement under which the right or rights are to be exercised jointly or in concert by those individuals.
The register must be held at the corporation’s head office and contain the following information with respect to each ISC:
- Name, date of birth, and latest known address;
- Jurisdiction of residence, for tax purposes;
- The date on which the individual became or ceased to be an ISC; and,
- A description of how each individual is an ISC, including, as applicable, a description of their interests and rights in respect of shares of the corporation;
The register must also contain a description of each step taken to identify all ISCs and confirm the information in the register is accurate, complete and up-to-date. Corporations must also update their ISC register on a regular basis, and it must be made available for inspection by certain law enforcement and/or regulatory bodies following a request pursuant to the OBCA.
Businesses operating in Ontario should familiarize themselves with these amendments and take the necessary steps to prepare the ISC register. Failure to do so could result in significant penalties, including fines and other legal action, against the Corporation and its directors and officers.
If you have questions or would like to discuss how these changes to the OBCA impact your business, please reach out to Lee Abraham, Business Law lawyer, at email@example.com.