Have you been bugged by your lawyer at some point about these so-called “Transparency Registers” and wondered what the deal is? Fret not, for we have the answers you’re looking for and then some. Read on to find out what the Transparency Register is and how it affects your business.
What is the Transparency Register?
Back on May 1, 2020, the Business Corporations Act (British Columbia) (the “Act”) mandated that private companies must maintain a record that keeps track of individuals with significant controlling powers within a company. The purpose of the transparency registers is part of the government’s initiative to end hidden ownership of companies in BC and enable companies to be held accountable for illegal activities. To this end, the transparency registers help to “look through” companies to identify ownership and define who the significant and beneficial individuals are within the company.
Makes sense. So then, who are considered significant individuals?
Here are a few key points to mention regarding who are considered significant individuals:
1. Individuals who are registered owners, beneficial owners, or who have “indirect control” of a significant number of the company shares;
2. Individuals who have the right or ability to directly or indirectly elect, appoint or remove the majority of the company’s directors; or
3. Individuals who have interests, rights, or abilities that, combined, fit into the above categories as a result of:
- Agreements or arrangements to exercise such rights jointly or in concert (e.g. voting agreements), or
- A close family relationship (spouse, son, daughter, or a relative of the individual or their spouse who shares the same home).
It is also important to note that the transparency register must also list those with indirect control of a company. An individual has indirect control if they:
1. Control an intermediary who is the registered owner of the shares;
2. control a chain of intermediaries with a hierarchal relationship, the last of which is the registered owner of the shares that amount to 25% or more of the total shares or voting shares; or
3. have the ability to exercise direct and significant influence over an individual who has the right or indirect right to elect, appoint or remove one or more directors.
Plainly speaking, all of this means that an individual with significant control of a company through either 25% of issued shares, 25% of the voting rights, or any special privileges that, if exercised, would result in the election, appointment, or removal of the majority of the company’s directors, is considered a significant individual and must be recorded on their transparency register.
Similarly for individuals with indirect control, you can think of those who can exercise influence over the decisions of another who is the registered owner of the shares of a company or those with either direct or indirect control of electing, appointing, or removing directors of a company.
So how do I set up a Transparency Register? I’m already so busy running my company!
Of course you are! However, establishing a transparency register can be a piece of cake. With the right information and a little time, your transparency register can be done just in time for afternoon tea. There are five core pieces of information needed for each significant individual:
1. Full name, date of birth and last known address;
2. Whether the individual is a Canadian citizen or a permanent resident and if not, every country or state of which the individual is a citizen;
3. Whether the individual is considered a resident of Canada for tax purposes, under the Income Tax Act (Canada);
4. The date on which the individual became, or ceased to be a “significant individual” and;
5. A description of how the person is a “significant individual”.
I like the sounds of that. Last question: is the transparency register public record?
Rest assured, these documents will not be public record. It is important to note that the transparency register will only be available to the following:
1. Directors of the company;
2. tax authorities of both British Columbia and Canada and;
3. certain specific regulators, including but not limited to the British Columbia Securities Commission, the British Columbia Financial Services Authorities and the Law Society of British Columbia.
If you refer back to the beginning of this article, the point of these records is to provide transparency for authorities only for specific purposes relating to their functions. For example, tax authorities inspecting a company for the purposes of the administration and enforcement of tax laws, or police officers inspecting the register for specific law enforcement purposes.
What Paperclip Law can do for you
Don’t worry if this all gets too complicated. Our team of legal professionals at Paperclip Law can answer any questions you may have about the specifics of the transparency registers, or the records as a whole. We can help you navigate through the transparency register or, we can do the leg work for you. All you would have to do is fill it out and send it back to us. Simple!
This post was researched and written by Kelvin Tayag.