On April 6, 2020, the British Columbia government introduced several important changes to the transparency register rules for private companies. The transparency rules were originally introduced in 2019 and apply to private companies governed by the Business Corporations Act (British Columbia) (the "Act"). British Columbia was the first province to make good on a federal-provincial commitment to increase beneficial ownership transparency in order to combat money-laundering, terrorist financing and tax evasion. Similar legislation came into force in Manitoba on April 8, 2020.1 Transparency legislation in Prince Edward Island2 and Saskatchewan3 is expected to follow.
As we have previously discussed,4 once the requirements come into force, each private company will be required to maintain a transparency register listing "significant individuals" who have substantial ownership interests in the company or directly or indirectly control the company. The key changes introduced by the new regulations are discussed below; the full text is available online: Order in Council No. 169/2020.
New In-Force Date for Transparency Registers
As part of the B.C. government's response to the COVID-19 pandemic, the coming into force of the transparency register requirements for all private B.C. companies has been postponed to October 1, 2020 (see our Fasken COVID-19 Alert of April 7, 2020).
New Exemptions from Transparency Register Requirements
As previously reported, certain B.C. companies are not considered "private" under the new transparency rules. These are reporting issuers in B.C. or another Canadian jurisdiction and companies listed on a "designated stock exchange" such as the TSX, NYSE or NASDAQ (a full list of designated stock exchanges is published by the Department of Finance Canada).
The amended regulations significantly expand the categories of companies which will not need to prepare transparency registers (the "Exempted Companies"). The Exempted Companies now include:
- Wholly owned subsidiaries of Canadian reporting issuers or of companies traded on designated stock exchanges
- British Columbia insurance companies
- British Columbia trust companies
- Companies whose voting shares are majority-owned by, which act as agents for, or are controlled by, the B.C. government
- Wholly owned subsidiaries of B.C. corporations created or continued by legislation or regulation (for example, universities)
- Companies incorporated or wholly owned by a municipality or regional district
- Companies operating an independent school in B.C.
- Business companies established by B.C. school boards and governed by the Act
- Companies that are wholly owned by one or more Indigenous nations (as defined in the Land Owner Transparency Act [British Columbia])
Exemptions for Indirect Control through Special Intermediaries
Individuals may indirectly control the shares of a private company or the right to elect, appoint, or remove the majority of its directors through an intermediary or a chain of intermediaries. The recent amendments now introduce the concept of "special intermediaries". A special intermediary breaks the chain of control from the private B.C. company to any individual at the top of the chain. In other words, where a special intermediary is part of the chain of intermediaries, no individual exercises indirect control through that chain. Similarly, where a special intermediary is the registered owner of the shares of a private company, no individual indirectly controls such shares, and where a special intermediary holds the right to elect, appoint or remove any director, no individual indirectly controls that right.5
In addition to the Exempted Companies, the following entities are recognized as special intermediaries:
- Credit unions
- Federal or provincial statutory corporations
- Entities operating independent schools in B.C.
- Companies established by B.C. school boards under the School Act
- Trustees of a testamentary trust
- The B.C. Public Guardian and Trustee and public entities with similar functions established federally or by other provinces
Expect Public Transparency Registers?
The B.C. Ministry of Finance is presently concluding consultations to determine whether and to what extent transparency register information should be stored in a publicly accessible centralized registry maintained by the B.C. government. A public register would be in line with transparency steps taken in other OECD countries such as the U.K. and the European Union. It would also be in line with another proposed public register: the public land ownership register that is expected to be introduced in B.C. under the Land Owner Transparency Act later this year, albeit with different threshold tests.
1.See The Corporations Act, C.C.S.M. c. C225.
2.Bill 34, An Act to Amend the Business Corporations Act, 1st Sess, 66th General Assembly, 2019 (assented to 28 November 2019), SPEI 2019; online: General Assembly of Prince Edward Island https://docs.assembly.pe.ca/download/dms?objectId=5347eb26-dd52-4710-b655-55f56166bbdc&fileName=chapter-20.pdf
3. Bill 191, The Business Corporations Amendment Act, 2019, 4th Sess, 28th Leg, 2019 (assented to 16 March 2020), SS 2019; online: Legislative Assembly of Saskatchewan http://docs.legassembly.sk.ca/legdocs/Bills/28L4S/Bill28-191.pdf
4. For a more detailed discussion of these requirements, please see our bulletins: "New Transparency Registry for all Private B.C. Companies in the Offing", and "New Transparency Registers for B.C. Private Companies".
5. However, the chain of control is not broken where a special intermediary is a B.C. trust company or an extraprovincial trust corporation and a person has, under the terms of a trust, the power to direct how the such corporate trustee exercises the rights attached to the shares of private company; the right to elect, appoint or remove its directors; or its control over an intermediary.
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