Rules on Individuals with Significant Control

Summary#

These are the final rules titled Regulations Amending the Canada Business Corporations Regulations, 2001: SOR/2023-88. They add clearer instructions about how federally incorporated private companies must find and record people who “have significant control” and exempt some government-owned and publicly reported companies. The rules came into force on May 4, 2023.

What it does#

• Creates a new Part 2.1 on Individuals with Significant Control (ISC) and explains what “reasonable steps” are for keeping an ISC register.
• Says a corporation should update its ISC register by sending requests for information to:
  • people already listed in the register as ISCs;
  • its shareholders; and
  • any other person the corporation reasonably believes may know about who controls the company.
• Requires those asked to tell the corporation, as soon as feasible and to the best of their knowledge:
  • any change to the information already in the ISC register (for listed ISCs);
  • whether a shareholder has become an ISC; and
  • any contact details they have for people who may know about an ISC.
• Exempts these classes of corporations from having to create and maintain an ISC register:
  • wholly‑owned subsidiaries of a corporation or body corporate that is a reporting issuer or whose securities are listed on a designated stock exchange;
  • federal Crown corporations;
  • provincial Crown corporations;
  • corporations whose shareholders are only His Majesty in right of more than one province, or His Majesty in right of Canada and one or more provinces; and
  • wholly‑owned subsidiaries of any corporation described above.
• If a corporation cannot identify any ISCs, it must record in the ISC register:
  • a statement saying it was unable to identify any ISCs, or that there are none; and
  • a short summary of the steps it took to try to find them.

Who's affected#

• Private companies incorporated under the Canada Business Corporations Act (federally incorporated private businesses) are the main group affected.
• The exempt groups above (public reporting issuers, Crown corporations and their wholly-owned subsidiaries, and certain government-owned corporations) do not have to keep an ISC register.
• Most small federal corporations will be little affected: the government estimates that more than 95% of CBCA corporations are small and usually have simple ownership, so identifying ISCs should be straightforward.
• Innovation, Science and Economic Development Canada will publish a model request template and guidance.
• Investigators and tax authorities may notice the practical benefit of clearer, more consistent records.

Why it matters#

• The rules remove uncertainty about what steps a company must take to find people who control it. That makes compliance easier and more consistent.
• Companies that are exempt may save time and paperwork because their ownership is already public or government-controlled.
• For the public, regulators and law enforcement, clearer ISC registers make it easier to trace who ultimately owns or controls companies. That helps detect misuse such as tax evasion or money laundering.