Every corporation governed by the Canada Business Corporations Act (CBCA), other than a short list of public and Crown corporations, must keep a register of the individuals who ultimately own or control it, refresh it every year, update it within 15 days of learning something new, and, since January 2024, file the information with Corporations Canada, which publishes part of it. The register is the document a bank, an investor's counsel or a regulator will ask for first. This article covers who belongs on it, what it must hold, and the two clocks that govern it.

Who is an individual with significant control

The Act defines an individual with significant control (ISC) in three ways (CBCA s. 2.1(1)):

  • an individual who is the registered holder or beneficial owner of, or has direct or indirect control or direction over, a significant number of shares;
  • an individual who has any direct or indirect influence that, if exercised, would result in control in fact of the corporation; or
  • an individual to whom prescribed circumstances apply.

A significant number of shares means shares carrying 25% or more of the voting rights, or shares equal to 25% or more of all outstanding shares measured by fair market value (s. 2.1(3)). Both tests apply, so a holder of non-voting shares worth a quarter of the company is an ISC even with no votes.

Two or more individuals are each an ISC where they hold the relevant interest jointly, or where they are parties to an agreement or arrangement to exercise their rights jointly or in concert (s. 2.1(2)). Corporations Canada summarizes the ownership test as 25% or more "individually, jointly or in concert with one or more individuals" (Corporations Canada, ISCs).

The control-in-fact limb catches people with no shares at all. Corporations Canada's guidance lists the factors: how much control the individual has to direct the corporation's activities; rights in the articles, share terms or shareholder agreements that confer significant influence; veto rights over business-management decisions such as adopting the business plan, borrowing or appointing a majority of directors; sufficient influence over a family member who is a shareholder, officer, creditor or supplier; and economic dependence on the individual as the corporation's main supplier or customer (Control in fact guidance).

The same guidance says who is not an ISC on the strength of the relationship alone: professionals advising the corporation, including lawyers, accountants, management consultants, investment managers and tax and financial advisors; arm's-length parties whose influence flows from a franchise, licence, lease, supply or management agreement; a liquidator, receiver or insolvency trustee; and a director as such, including a sole director or one with a casting vote.

What the register must hold

The corporation must prepare and maintain the register at its registered office or at any other place in Canada designated by the directors, and it must contain, for each ISC (s. 21.1(1)):

  • their name and date of birth, their residential address, and their address for service if one has been provided;
  • their citizenship;
  • their jurisdiction of residence for tax purposes;
  • the day on which they became, or ceased to be, an ISC;
  • a description of how they are an ISC, including, as applicable, their interests and rights in respect of shares;
  • any other prescribed information; and
  • a description of each step the corporation took to keep the register up to date.

The address for service deserves attention at the moment of drafting. It is optional in the register, but if none is provided the residential address is what gets published (see below). Asking every ISC for an address for service when the register is first built avoids a later change.

Where the corporation is unable to identify any ISCs, for example because every holder is below 25% and no one has control in fact, the Act requires it to take prescribed steps (s. 21.2), and the Canada Business Corporations Regulations, 2001 prescribe them: the register must record a statement that the corporation has determined it is unable to identify any ISCs, or that there are none, together with a summary of the steps taken to try to identify them (Regulations s. 34.1).

Two clocks: once a year, and 15 days

The first clock is annual. At least once during each financial year, and whenever the Director asks, the corporation must take reasonable steps to ensure it has identified all ISCs and that the information in the register is accurate, complete and up to date (s. 21.1(2)). The Regulations provide that reasonable steps include sending a request for information to every ISC on the register, to every shareholder asking whether they have become an ISC, and to anyone else the corporation has reasonable grounds to believe has relevant knowledge (Regulations s. 33). Shareholders are obliged to respond accurately and completely, and as soon as possible.

The second clock is 15 days. When the corporation becomes aware of any information that belongs in the register, whether from its annual request or by any other means, it must record it within 15 days (s. 21.1(3)). A share transfer, a new investor crossing 25%, a founder leaving, a change of address, a change of tax residence: each starts the clock on the day the corporation learns of it.

Personal information about a former ISC must be disposed of within one year after the sixth anniversary of the day they ceased to be one (s. 21.1(5)).

Filing with Corporations Canada

Since January 22, 2024, CBCA corporations must send ISC information to the Director (s. 21.21; Corporations Canada, ISCs):

  • annually, at the same time as the annual return, which is due within 60 days after the anniversary date (Policy on annual filings);
  • within 15 days after any change is recorded in the register (s. 21.21(1)(b)); and
  • on incorporation, amalgamation or continuance, in the form and period the Director fixes (s. 21.21(2)).

What becomes public

The Director makes available to the public, for each ISC, their name; their address for service if provided to the corporation, otherwise their residential address; the day they became or ceased to be an ISC; and the description of how they have significant control (s. 21.303(1)). Date of birth, citizenship and tax residence are collected but not published.

Information about an individual under 18 is not made public (s. 21.303(2)), and the Director may decline to publish where satisfied that disclosure would present a serious threat to the individual's safety, or in other listed circumstances such as incapacity (s. 21.303(3)).

Who is exempt

Section 21.1 does not apply to a reporting issuer under provincial securities law, a corporation whose securities are listed and posted for trading on a designated stock exchange, or a member of a prescribed class (s. 21.1(7)). The prescribed classes are the wholly owned subsidiaries of those corporations, and Crown corporations and their wholly owned subsidiaries (Regulations s. 34). Almost every private company is inside the regime.

What non-compliance costs

A corporation that, without reasonable cause, contravenes section 21.1 is guilty of an offence and liable on summary conviction to a fine of up to $100,000 (s. 21.1(6)). A director or officer who knowingly authorizes, permits or acquiesces in a contravention of the register or filing provisions, or who knowingly records or provides false or misleading information, is liable on summary conviction to a fine of up to $200,000 or imprisonment of up to two years, and on indictment to a fine of up to $1,000,000 or imprisonment of up to five years (s. 21.4).

The Ontario parallel

Ontario corporations keep an equivalent register under OBCA s. 140.2, with the same 25% thresholds (s. 1.1), the same annual and 15-day duties, and the same six-year disposal rule. Two differences matter in practice: the Ontario register is not filed with any registry, and it is not public. It is disclosed on request to police, tax officials and listed regulators (s. 140.3). A founder choosing between the two statutes should weigh that against the CBCA's public disclosure; the article on federal versus provincial incorporation in the Founder cluster does so.

Misolla tracks the annual and 15-day ISC clocks for federal corporations and prepares the Corporations Canada filing for a lawyer's approval.

This article is general information, not legal advice; a lawyer must review your specific situation.