Corporate Law – The Impending Requirement for a Transparency Register in British Columbia

 

British Columbia Bill 24-2019: Business Corporations Amendment Act, 2019 (“Bill 24-2019”)‎ ‎received Royal Assent on May 16, 2019. A copy of Bill 24-2019 can be found here. While Bill 24-2019 is not in effect as of the date of writing this article, the anticipated requirements on businesses in British Columbia are significant.

 

This Bill requires many corporations to maintain a “transparency register” which must list significant individuals. For the purposes of Bill 24-2019, a significant individual is either someone who owns a significant number of shares (i.e. 25% or more of the issued shares of the company or issued shares of the company that carry 25% or more of the rights to vote at general meetings) or someone who can elect, appoint, or remove a majority of the directors of the company. The relevant provisions of Bill 24-2019 with respect to “significant individuals” are reproduced below:

 

Significant individual

119.11  (1) In this section, “significant number of shares”, in respect of a private company, means either of the following:

 

(a) 25% or more of the issued shares of the company;

 

(b) issued shares of the company that carry 25% or more of the rights to vote at general meetings.

 

(2) Subject to any prescribed class of exclusions, an individual is a significant individual in respect of a private company if any of the following apply:

 

(a) the individual has any of the following interests or rights, or any combination of them, in a significant number of shares of the private company:

 

(i) an interest as a registered owner of one or more of the company’s shares;

 

(ii) an interest as a beneficial owner of one or more of the company’s shares, other than an interest that is contingent on the death of another individual;

 

(iii) indirect control, within the meaning of the regulations, of one or more of the company’s shares;

 

(b) the individual has any of the following rights or abilities, or any combination of them, that, if exercised, would result in the election, appointment or removal of the majority of the directors of the private company:

 

(i) the right to elect, appoint or remove one or more of the company’s directors;

 

(ii) indirect control, within the meaning of the regulations, of the right to elect, appoint or remove one or more of the company’s directors;

 

(iii) the ability to exercise direct and significant influence over an individual who has the right or indirect control described in subparagraph (i) or (ii);

 

(c) the individual has a prescribed interest, right or ability in relation to the private company, or a prescribed criterion or circumstance applies to the individual in relation to the private company.

 

At least once a year, within two months of the anniversary the company was recognized as a company in BC, a BC company must update their transparency register. Steps a company can take to determine who significant individuals are may include requesting that a shareholder provide the company with information about significant individuals for the purpose of maintaining the company’s transparency register.

 

Particularly onerous on shareholders, directors, and officers of BC companies impacted by Bill 24-2019 are the new offence provisions under Bill 24-2019. These offence provisions state as follows:

 

Transparency register – incorrect entries and false information

427.1  (1) In this section:

 

“private company” has the same meaning as in section 119.1;

 

“significant individual” means a significant individual under section 119.11.

 

(2) Subject to subsection (4), a private company commits an offence if its transparency register

 

(a) identifies an individual as a significant individual who is not a significant individual in respect of the company,

 

(b) excludes an individual who is a significant individual in respect of the company,

 

(c) contains information about a significant individual that is false or misleading in respect of any material fact, or

 

(d) omits information about a significant individual, the omission of which makes the information false or misleading.

 

(3) If a private company commits an offence under subsection (2), any director or officer of the company who, subject to subsection (4), authorizes, permits or acquiesces in the commission of the offence also commits an offence, whether or not the company is prosecuted or convicted.

 

(4) No person is guilty of an offence under subsection (2) or (3) if the person

 

(a) did not know that the identification or exclusion of the individual was incorrect or that the information about a significant individual was false or misleading, and

 

(b) with the exercise of reasonable diligence, could not have known that the identification or exclusion of the individual was incorrect or that the information was false or misleading.

 

(5) Subject to subsection (6), a shareholder of a private company who sends information to the company for the purposes of the company’s transparency register commits an offence if the information

 

(a) is false or misleading in respect of any material fact, or

 

(b) omits any material fact, the omission of which makes the information false or misleading.

 

(6) No person is guilty of an offence under subsection (5) if the person

 

(a) did not know that the information was false or misleading, and

 

(b) with the exercise of reasonable diligence, could not have known that the information was false or misleading.

 

In addition to the proposed amendments Bill 24-2109 proposes to make to the Business Corporations Act, regulations with respect to the transparency register are also anticipated to come into force. Due to the prospective liability under the proposed amendments, and the uncertainty with respect to the regulations which have not yet been passed, shareholders, directors, and officers in BC companies should remain vigilant to ensure the requirements of the transparency register are met accurately and within the mandated timelines.