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Private corporations incorporated under the Ontario Business Corporations Act (OBCA) must keep and maintain a record of individuals holding significant control (ISCs), effective January 1, 2023.
The ISC register includes details of the key decision-makers within a private corporation for the initiative of increasing transparency. Before the end of the year, private corporations incorporated under the OBCA must ensure they are adhering to these requirements and have an ISC register.
“Significant control” refers to an individual holding a significant number in the shares of the corporation. This refers to either:
– shares representing 25 percent or more of the voting rights
– shares constituting 25 percent or more of the total outstanding shares of the corporation based on fair market value
And ISC does not only include the individuals with direct legal ownership, they can also be qualified if they are:
-the registered holder of such shares
-the beneficial owner
-someone exercising direct or indirect control over a substantial number of shares
-an individual with direct or indirect influence over the corporation
The definition of an ISC is intentionally broad and includes individuals involved in various commercial contracts with the private corporation.
The ISC register includes the name, DOB, most recent known address, and tax residence jurisdiction of each ISC. It should also indicate the date of when that individual became, or ceased to be an ISC, as well as indicate the reason defining their status as an ISC. Additionally, the register should include the measures taken to update the register at least once per fiscal year – it is not required to occur on the same date each year. The requirement is to ensure one update of the records per fiscal year. Further details and information may be required under future obligations.
The ISC register can be stored at the corporation’s registered office address, but the directors have the discretion to store it elsewhere on Ontario. The ISC register is not required to be submitted to the government. The records are not publicly available but can be requested by law enforcement, tax authorities and regulators. The purpose of the register aligns with the intention of increasing corporate transparency and diminishing corporations that participate in unlawful financial activities.
Any changes or updates to the ISC register must be documented within 15 days of the corporation’s discovery of the new information. Failure to meet these requirements can result in a fine up to $5,000. Individuals purposely providing false information may face penalties up to $200,000 or imprisonment for up to six months.
Private corporations established under the OBCA should take the necessary steps to ensure compliance with the ISC register requirements.
ACTION: Identify the ISC’s, obtain the information required from the ISC’s for the register, establish procedures and processes to upkeep the ISC register, and prepare to provide this information to authorities if requested.