Pursuant to Bill 24, as of April 1, 2022 most corporations with share capital created under the Corporations Act will be required to keep an internal register of individuals with significant control. This provides greater transparency over who owns and controls Newfoundland and Labrador businesses. It also helps law enforcement agencies expose activities such as money laundering and tax evasion.
What does the corporation need to do?
1. Identify individuals with significant control over the corporation and confirm their information
People who own their own business are typically the only ISC because they own 100 per cent of the shares.
For larger businesses, there may be multiple shareholders and business owners. In this case, the corporation would contact anyone who owns shares, or has a major influence on the business but does not own shares, and ask shareholders if they hold shares on behalf of someone else.
When you request information to complete the register, shareholders have an obligation to comply in a timely manner.
2. Record information in the register
Create a register of individuals with significant control based on the information provided by shareholders or other persons with significant control.
To get started, download a template register or create your own. NOTE: This is an internal record that is not filed with the Registry of Companies.
3. Update the register regularly
Your corporation needs to update its register at least once a year. This means taking reasonable steps to find out:
- if any of the information contained in the register has changed; and
- if new individuals need to be added.
In addition, whenever your corporation becomes aware of a change affecting the register, it needs to record the change within 15 days of becoming aware of the new information.
Who are individuals with significant control?
An individual with significant control (ISC), is someone who owns or controls a corporation. This individual:
- owns, controls or directs a significant number of shares
- has significant influence over the corporation without owning any shares; or
- has a combination of any of these factors.
An individual can also be an ISC if they own or control a significant number of shares with one or more individuals. For example, an individual may individually own less than 25 per cent of a corporation’s shares, but has an agreement with other shareholders to vote the shares the same way. If this group collectively owns 25 per cent or more of a corporation’s shares, each member of the group is considered an ISC and needs to be recorded in the corporation’s ISC register.
Significant number of shares
A significant number of shares is:
- 25 per cent or more of the voting shares, or
- 25 per cent or more of all the shares based on the fair market value of the shares.
Register of individuals with significant control
The register of individuals with significant control is an internal corporate document (e.g. a logbook, database or spreadsheet) held and maintained by the corporation, that contains information about each ISC.
For each ISC, the register must include:
- Name
- Date of birth
- Address (residential or address for service)
- Jurisdiction of residence where the ISC is considered a resident for tax purposes
- Date when control started (e.g. when the ISC purchased 25 per cent or more of the corporation’s shares)
- Date when control ended (e.g. when the ISC sold their shares)
- Description of how the ISC has significant control
Keep this register with the corporation’s corporate records, including the bylaws and articles of incorporation.
Who can access a corporation’s register of ISC?
Your corporation is not required to disclose its register of individuals with significant control to the public.
Upon request, your corporation has to disclose the register to:
- its shareholders and creditors (they must provide an affidavit stating that the information obtained will only be used for matters related to the corporation, such as to influence voting or to acquire shares);
- investigative bodies; and
- registrar, upon request.
Your bank may also ask you for information about who controls your corporation. In this case, you can show them your register of individuals with significant control as proof of who owns and controls your business.
This information is not a substitute for legal advice. Please seek professional advice to ensure that your corporation’s needs are met.