Bill C-42: Amendments to the Canada Business Corporations Act (2024)
Over the past few years, the Canada Business Corporations Act (the “CBCA”) has undergone various amendments. As of June 2019, federal corporations are required to create and maintain a register of “individuals with significant control” (the “ISC”).
In January 2024, new amendments will come into effect as An Act to amend the Canada Business Corporations Act and to make consequential and related amendments to other Acts (“Bill C-42”) was adopted on November 2, 2023.
In today’s blog post, we will provide a brief overview of the ISC framework and its modifications.
Overview of Individuals with Significant Control
The best way to understand the concept of an ISC is through its components: who are the individuals in question, and what does it mean to have significant control? In short, an ISC is someone who has control over 25% or more of the shares of a corporation, has control in fact over the corporation, or a combination of the two.
Let's consider an example involving a tech startup called TechGenius Inc. The company has four shareholders: Alice, Bob, Carol, and David. Alice owns 35% of the company's shares, Bob owns 20%, Carol owns 25%, and David owns 20%. In this scenario, both Alice and Carol individually meet the criteria for significant control because they each own 25% or more of the shares of TechGenius Inc. As a result, Alice and Carol would each be considered the “individuals with significant control” in TechGenius Inc.
A more detailed explanation of an ISC
The individual who is considered an ISC is someone who falls within one of the following categories:
1. The registered holder of shares;
2. The beneficial owner of shares;
3. The individual who has direct or indirect control or direction over them;
4. The individual who has direct or indirect influence that, if exercised, would result in control of fact of the corporation; or
5. To whom other prescribed situations as defined by the law apply .
An individual is considered an ISC if they have a significant number of shares in the corporation. This means that the individual has a number of shares that carry “25% or more of the voting rights attached to all of the corporation’s outstanding voting shares” or shares equal to or greater than 25% of the fair market value .
The Register of Individuals With Significant Control
It’s not enough that a corporation identifies the individuals with significant control. It must prepare and maintain a register of individuals with significant control. This register, which can be kept at its head office or any other location determined by the board, must contain the following information:
The name, date of birth, and last known address of the ISC;
Their jurisdiction of residence for tax purposes;
The day on which the control started;
The date on which the control ended (if applicable);
A description of how each individual is an ISC over the corporation;
Any other prescribed information
Additionally, at least once during each of its financial year, the corporation shall take reasonable steps to ensure that it has identified all of its ISC’s and that the information in the register is accurate, complete, and up-to-date .
Bill C-42 Amendments
Amending the Register of Individuals with Significant Control
Bill C-42 will modify the ISC register by requiring it to be updated to reflect the following information:
The name and date of birth of the ISC;
Their residential address, and;
Their address of service, if it has been provided to the corporation;
The citizenship of each ISC .
Furthermore, the corporation would have to take reasonable steps to ensure that it has identified all individuals with significant control over the corporation and that the information in the register is accurate, complete, and up-to-date at least once during the financial year of the corporation, at the request of the Director of Corporations Canada, and at other times provided for in the regulations .
Publication of Certain Information relating to Individuals with Significant Control
Following the adoption of Bill C-42, certain information relating to individuals with significant control shall be made available to the public. According to s 4 of Bill C-42, this includes:
The names of the ISC;
Their address for service;
If no address for service has been provided, then their residential address;
The day on which the control started (and ended, if applicable);
A description of how they are an ISC;
And any other prescribed information
However, in certain circumstances, this information will not be made available to the public. This would be the case for an individual who is less than 18 years of age . In other situations, a person may apply to the Director to request certain information not be made available . In this case, the Director may grant the request if they reasonably believe that making it public would present a serious threat to the safety of the individual, or if the person is incapable amongst other scenarios .
Penalties for Non-Compliance
For contravening the section relating to the individuals with significant control register, the corporation opens itself up to being guilty of an offence and liable on summary conviction to a fine not exceeding $100,000 .
Additionally, if a director or officer of a corporation knowingly authorizes, permits, or acquiesces in the contravention of a section relating to the individuals with significant control and its registers by the corporation commits an offence, whether or not the corporation has been prosecuted or convicted .
The penalty for a person who commits an offence under subsections 21.4(1) to (4), which is the section related to offences including contravention of the individuals with significant control, recording of false or misleading information, or provisions of false or misleading information is liable on a summary conviction to a fine not exceeding one million dollars or to imprisonment for a term not exceeding five years, or both . This amendment increases the current fine from a maximum of $200,000 and the term of imprisonment from six months .
Whether you still need to update your federal corporation to comply with the amendments in force since 2019 or are proactively seeking guidance relating to Bill C-42, our law firm is equipped to help you understand the ever-changing corporate landscape. We recognize the challenges businesses face in this shifting legal terrain.
For tailored guidance and in-depth legal insights, reach out to us via email at email@example.com. Stay compliant, stay innovative!
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.
 section 2.1(1) Canada Business Corporations Act.
 section 2.1(3) Canada Business Corporations Act.
 section 21.1(1) and (2) Canada Business Corporations Act.
 section 1(1) Bill C-42.
 section 1(2) Bill C-42.
 section 4 Bill C-42.
 section 2(4) Bill C-42.
 section 5(1) Bill C-42.
 section 5(2) Bill C-42
 section 21.4(5) Canada Business Corporations Act.