On June 8, 2021, the Québec government passed Bill 78, An Act mainly to improve the transparency of enterprises which came into effect on March 31, 2023. Bill 78 amends the Act Respecting the Legal Publicity of Enterprises (the "LPE") by introducing additional corporate disclosure obligations with the public register in Québec known as the "Registraire des Entreprises" (the "REQ") in order to increase the transparency of businesses operating in Québec. The new disclosure obligations are mandatory for all persons or entities who are registered in Québec pursuant to the LPE, including corporations, general or limited partnerships, sole proprietorships, cooperatives and trusts (the "Registrant") and including if such registration has been made on a voluntary basis. The obligations apply to all entities operating a business in Québec, regardless of their jurisdiction of incorporation. This is different from similar legislation in other jurisdictions in Canada which only applies to companies existing in those jurisdictions. To be clear, this means that companies incorporated and existing in Canada (a federal corporation existing under the Canada Business Corporation Act), Ontario or New Brunswick, for example, will need to comply with these Québec disclosure requirements if they are registered in Québec in addition to the requirements applicable to them under the laws of their jurisdiction.
Ultimate Beneficiaries
The amendments to the LPE require that the Registrant publicly disclose information about their ultimate beneficiaries to the REQ. The "ultimate beneficiary" for the purposes of the disclosure required under the LPE is defined as a natural person who meets any of the following criteria:
- is the holder of or controls, directly or indirectly, 25% or more of the voting rights of the Registrant;
- is the holder of or controls, directly or indirectly, a number of shares corresponding to 25% or more of the fair market value of all of the issued and outstanding shares of the Registrant;
- has direct or indirect influence that, if exercised, would result in de facto control of the Registrant;
- is a general partner of the Registrant; or
- is a trustee of the Registrant.
Moreover, where individuals agree to jointly exercise the voting rights attached to the shares or units, giving them, together, the ability to exercise 25% or more of those voting rights, each such individual will be considered an ultimate beneficiary of the Registrant.
If a company is a shareholder, it will not qualify as an ultimate beneficiary as only an individual (a physical person) can be an ultimate beneficiary. In the case where a shareholder is a company, it will be necessary to establish the individuals who ultimately control that company, going all the way up the corporate chain until identifying one or more individuals satisfying one of conditions set out above.
Ultimate Beneficiary Information to be Disclosed
The Registrant is required to disclose the following information about its ultimate beneficiaries:
- their full name and any other names used in Québec;
- their date of birth;
- the date the person became, and ceased to be (if applicable), an ultimate beneficiary;
- their residential or professional address (a natural person may have only one professional address in the enterprise register); and
- the type of control exercised or the percentage of shares or units held or of which they are a beneficiary.
In addition, Registrants are required to send the REQ additional information on their directors or any natural person related to the Registrant who appears in the REQ (including officers or individual shareholders). For directors, the Registrant is required to provide the REQ with a copy of a government-issued identification which is current, legible and contains the full name and date of birth of the director. For all natural persons who appear in the REQ, the Registrant must declare their date of birth.
It is important to note that the REQ will destroy the copies of all government-issued identification they receive and the date of birth of individuals provided to the REQ will not be accessible to the public. Furthermore, the names and addresses of minors that are ultimate beneficiaries will not be accessible to the public.
Ultimate Beneficiary Disclosure Exemptions
The above-described amendments to the LPE provide for exemptions of certain businesses from the disclosure obligations described above, including not-for-profit organizations, legal persons established in the public interest, reporting issuers within the meaning of the Securities Act (i.e. public companies trading on a stock exchange), financial institutions within the meaning of the Insurers Act, trust companies, banks and associations within the meaning of the Civil Code of Québec.
Penalties for Non-Compliance
The penalties for non-compliance with the amendments to the LPE include penalties ranging from $500 to $25,000 and the cancellation of the Québec registration of the Registrant.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
