Clarifying ISC Register Rules for Private Corporations

Summary#

The federal government published proposed changes to the Canada Business Corporations Regulations, 2001 that explain how private federally incorporated companies must keep a register of people who own or control them (an ISC Register). The proposal would exempt some Crown- and publicly owned subsidiaries and set out specific steps companies should take each year to identify and update their ISCs. The proposal was published on October 29, 2022, and comments were invited for 30 days.

What it does#

• Clarifies what counts as reasonable steps for a company to update its ISC Register each year. These steps explicitly include sending a request for information to:
  • registered shareholders;
  • any individuals already listed as individuals with significant control; and
  • other people the company reasonably believes might know who controls the company.
• Requires a company that cannot identify any individuals with significant control to record in its ISC Register:
  • a statement saying it could not identify any ISCs; and
  • a short summary of the steps it took to try to find them.
• Exempts certain classes of corporations from having to keep an ISC Register, including:
  • wholly-owned subsidiaries of public reporting issuers (including subsidiaries of provincially incorporated reporting issuers and companies listed on a stock exchange);
  • federal Crown corporations and provincial Crown corporations; and
  • corporations owned only by the Crown in right of Canada or one or more provinces.
• Says the amendments would come into force on the day the regulations are registered. It also notes Innovation, Science and Economic Development Canada plans to publish a template notice companies can use.

Who's affected#

• Private companies incorporated under the Canada Business Corporations Act. Most of these must already keep an ISC Register and would follow the clearer steps described here.
• Small businesses are likely to see little or no extra cost. The proposal notes more than 95% of CBCA corporations are small and typically have only one or two shareholders.
• Wholly-owned subsidiaries of public companies and Crown-owned corporations would be exempt and therefore would not need to keep an ISC Register.
• Investigative bodies such as law enforcement and tax authorities could get more reliable ownership information when they request a company’s ISC Register.

Why it matters#

• It gives companies clearer, practical steps to find and record who truly owns or controls them. That reduces the chance of inconsistent or incomplete registers.
• The exemptions avoid duplication for subsidiaries of public companies and for Crown-owned entities, which should save time and paperwork for those organizations.
• Better, more consistent ISC Registers help investigators and tax authorities trace ownership. That can make it harder to hide money or avoid taxes using corporate structures.
• These are proposed regulations, not final rules. Stakeholders had the opportunity to comment during the 30-day consultation after publication on October 29, 2022.