New Obligations to Improve Corporate Transparency for Quebec Businesses
Modifications made to the Act respecting the legal publicity of enterprises (the “LPE”) will come into force on March 31st, 2023. This will impact any business governed by the LPE as the government aims to improve transparency. In particular, the new law requires the Registraire des Entreprises (the "Registrar”) to increase the reliability of the information that is found on the register.
The LPE’s purpose is to enhance the protection of the public by providing public access to certain information, particularly in the context of socio-economic relations, and to prevent and fight against tax evasion, money laundering, and fraud.
Today we’ll focus on the ultimate beneficiary, directors, and natural persons related to the business.
The Ultimate Beneficiary
An ultimate beneficiary is a natural person who, (1) either directly or indirectly, exercises 25% or more of the voting power; (2) is the holder of 25% or more of the fair market value of all the issued shares; (3) or the person who holds the de facto control in the business.
Corporations will have to conduct a legal, documentary, and factual analysis of their shareholding to determine who is the ultimate beneficiary. This entails analyzing the corporate minute book, including its securities register and any contracts, like shareholder agreements, to identify the ultimate beneficiary.
Sometimes the ultimate beneficiary can be someone other than a shareholder of the company. This would be the case of an operating company that is owned by a holding corporation. In this case, an analysis of the holding company will reveal the ultimate beneficiary.
However, unlike the federal Canada Business Corporations Act, provincial corporations currently do not have the obligation to create an ultimate beneficiary register.
The following information about the ultimate beneficiary must be filed with the Registrar:
The name of the person;
Their residential address;
Their date of birth;
Other names used in Quebec, such as a pseudonym. It can be any other name of the natural person, regardless of whether or not that name is used in the business;
The type of control exercised or the percentage or unit of shares held by each ultimate beneficiary;
The date on which the person became an ultimate beneficiary; and
The date on which the person ceases to be an ultimate beneficiary (if applicable)
However, while all of this information is filed with the Registrar, the following will not be made publicly available:
The person’s date of birth
The residential address if a valid professional address is declared
Certain information relating to a minor who is the ultimate beneficiary. However, there will be a declaration in the register that the business does have an ultimate beneficiary.
Copy of a Piece of Identification For Each Director
Another new obligation following the modification of the LPE is providing the Registrar with a legible copy of each director’s ID to improve the accuracy of the information on the register. Specifically, the ID must be valid (i.e. not expired), and include the person’s full name and date of birth.
For Canadian directors a copy of the following pieces of ID is accepted:
Permanent resident card;
Quebec birth certificate; or
A piece of ID issued by the government of another Canadian province or territory that includes the director’s date of birth.
For foreign directors, the Registrar will accept a copy of
A passport; or
Any piece of a government-issued ID that includes the foreign director’s date of birth.
Natural Persons Related To The Business
The date of birth of natural persons related to a business, i.e., the shareholders, directors, and officers, will have to be filed with the Registrar but this information will not be publicly available.
Additionally, businesses that are already registered will have to declare the residential address of each natural person, but they now have the possibility of declaring the professional address as well. In this case, they will provide both their residential address and professional domicile with only the latter being published.
Updating the Registrar
For company’s that are already registered, information relating the ultimate beneficiary, the copy of each director’s ID, and the date of births will be filed at the time of the annual updating declaration once the new rules come into force on March 31st, 2023.
Businesses eligible for joint filings with Revenu Quebec will have to file a separate annual updating declaration to include the new information. After this, they will be able to continue with their joint filing in future years.
For those who are not registered, the declaration and copy of the ID will take place at the time of filing a registration, the initial declaration, or declaration of re-registration.
Our business law firm can assist you in navigating these new rules and any other corporate governance matter. Get in touch with us today.
This blog post is not legal advice and is for general informational purposes only. Always speak with a lawyer before acting on any of the information contained herein.