Proposed Amendments to the Business Corporations Act to create a Public Registry of Beneficial Owners of Private Companies in British Columbia

Proposed Amendments to the Business Corporations Act to create a Public Registry of Beneficial Owners of Private Companies in British Columbia

Over the past few years corporate ownership transparency requirements have been mandated across Canada to promote greater public accountability and combat financial crimes. Notably, since May 1, 2020, private corporations in British Columbia have been required to collect and maintain certain information about their shareholders in a private transparency register.  However, on March 29, 2023, the British Columbia Ministry of Finance announced proposed amendments to the BC Business Corporations Act (the “BCA”) to create a new, public registry identifying beneficial owners of shares of private companies, with a view to providing more confidence to British Columbians that such companies are not being used for money laundering or other criminal purposes.

Current Requirements in BC

Currently, all private companies in British Columbia must establish a transparency register containing details of significant individuals, which is maintained at the company’s records office. Access is limited to current directors of the company, law enforcement and specific inspecting officials. The transparency register contains a list of a company’s significant individuals, including beneficial ownership of shares and individuals who have direct or indirect control of the company or its shares. Information collected includes the individual’s full legal name, date of birth, citizenship and last known address.  If a shareholder is a non-individual entity, the register must disclose the significant individual who ultimately controls, directly or indirectly, such entity, unless the company is excluded from disclosure pursuant to the Business Corporations Regulation.

Increased Transparency

In British Columbia, public beneficial ownership transparency has been recommended by the Cullen Commission (the “Commission”), a money laundering inquiry established by the province, as a tool for combatting money laundering in Canada, and to give British Columbians more confidence that private companies are not being used for money laundering or other criminal purposes.

In its inquiry, the Commission found that corporate and other legal arrangements play an important and legitimate role in the Canadian economy. There are, however, well-known money laundering risks associated with these arrangements. The risks stem principally from the anonymity that corporate and other legal arrangements can provide. Hidden ownership has been identified as a key component of illegal money laundering schemes, including the use of numbered companies and complex corporate structures to hide the identities of beneficial owners.

It is further suggested by the Cullen Commission that a centralized, public registry will provide for more efficient and timely access to information for law enforcement and other authorities, without the need to go directly to individuals to access corporate records; preventing bad actors from being prematurely aware that they are been investigated.

The Ministry has described these recent amendments as the end of hidden ownership in private businesses in BC in an effort to “root[ing] out money laundering” and strengthening how the government detects, deter and “relentless disrupt” illegal business activity in the province. The amendments will require BC companies to submit and confirm beneficial owner information once per year and at any time there is a significant change in ownership or control.

The provincial government has invited feedback on these proposed amendments and there are still many details to be determined, including the specific requirements for the public registry its implementation and timeline. However, the proposed legislative changes are part of the government’s commitment to corporate transparency and accountability and a public beneficial ownership registry is expected to be launched in 2025.

It is also expected that the creation of a beneficial ownership registry will build upon on the Land Owner Transparency Registry (which was implemented to end hidden ownership by providing disclosure as to who is purchasing land in British Columbia) as well as follow similar privacy practices as the Land Owner Transparency Registry, and only selected information will be available to the public.

We have already seen similar amendments in other jurisdictions in Canada. Federally, proposed amendments were tabled in March 2023 to create a free, searchable, and public beneficial ownership registry for corporations governed by the Canada Business Corporations Act. These amendments are not yet in force, but are expect to be implemented by the end of 2023. For more information, see our bulletin. Quebec is currently the first and only province that has implemented legislative changes to require registrants (corporations and partnerships formed anywhere in the world that have activity in Quebec) to publicly disclose beneficial ownership. For more on those amendments, please see our bulletin.

Penalties for Non-Compliance

As the proposed amendments are still in early stages, these do not yet address whether there will be any penalties associated with failing to file information in the public registry. However, under the current regime, if a company fails to identify all significant individuals (or falsely identifies a significant individual) or provides false or misleading material facts about significant individuals, or omits material facts about significant individuals, the company and any involved directors or officers are liable for fines up to $50,000 for individuals and up to $100,000 for corporations.

by Joanna Dawson and Hailey Lonsdale (Articled Student)

A Cautionary Note

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2023