In November, the House of Assembly of Newfoundland and Labrador passed Bill 24, which set out amendments to the province’s Corporations Act (the “Act”). The amendments, which come into force 1 April 2022, are notable and require attention as they will impose new obligations upon most corporations incorporated in the province. In summary, the amendments: […]read more
New Shareholder Information Requirements for New Brunswick Corporations
Corporations incorporated under the Business Corporations Act (New Brunswick) (the “Act”) are now required to collect significantly more share ownership information than what has historically been required.
An Act to Amend the Business Corporations Act, S.N.B. 2022 c. 16 was enacted by the Legislature and came into force on June 10, 2022. The amendments require every corporation under the Act, with limited exceptions, to maintain a register of the beneficial owners of shares and individuals with significant control over the corporation. Corporations now also have third party disclosure requirements of the information maintained in the register in a variety of circumstances.
The new requirements bring New Brunswick in line with changes to the Canada Business Corporations Act that came into effect in 2019. Those changes were developed to dovetail with beneficial ownership verification requirements under the federal Proceeds of Crime (Money Laundering) and Terrorist Financing Act. The changes support Canada’s efforts to meet its international commitments that have been developed in concert with other countries to address domestic and international money laundering.
Prior to the amendments, a corporation’s shareholder register was required to include the names and addresses of current and former shareholders, the number of shares held by each shareholder and the date and particulars of any issuance, transfer or cancellation of shares. Under these basic recordkeeping requirements, only the registered ownership of the shares needed to be recorded and tracked, and there was no requirement to look behind holding corporations, trusts or agency and nominee arrangements to identify the individuals who beneficially own shares.
Corporations are now required to identify the beneficial owners of shares and certain other individuals having “significant control” over the corporation. These include:
- An individual who is the registered or beneficial owner of, or who has direct or indirect control or direction over, 25% of the voting shares or holding 25% or more of the voting rights in the corporation;
- Individuals who collectively meet the conditions of the point above and have agreed to exercise their voting rights or control in concert, such as under a shareholders’ agreement; and
- Individuals prescribed by regulation (for which no regulations have been created as of the date of this publication).
As a result, there are circumstances in which an individual is deemed to have “significant control” over a corporation, other than through direct ownership of voting shares.
In relation to individuals having “significant control”, corporations must maintain a separate register containing the following information:
- their names, dates of birth and last known addresses;
- their countries of residence for income tax purposes;
- the dates when they became individuals with “significant control” over the corporation;
- a description of how they have “significant control” over the corporation;
- a description of the steps taken by the corporation to identify all individuals with “significant control” and to ensure the accuracy and completeness of the register; and
- other prescribed information (for which no regulations have been created as of the date of this publication).
Shareholders must provide relevant information needed to compile the register whenever requested by the corporation, as soon as possible and to the best of their knowledge.
At least once during each financial year, each corporation must take reasonable steps to ensure it has identified all individuals with “significant control” and to ensure the accuracy and completeness of the register relating to such individuals. The corporation must also update the register within 15 days of learning of any information that has changed. Additionally, personal information within the register must be disposed of seven years after an individual ceases to have significant control over a corporation.
Access to Information
Access to the information maintained in this new register is limited. It is not accessible by the public, but disclosure is required in certain circumstances. In particular:
- taxing authorities, police forces and the Director of Corporate Affairs of Service New Brunswick are entitled to request a copy or access to information in the register; and
- shareholders and directors of a corporation are entitled to request the names and addresses of individuals with “significant control” over the corporation and the descriptions of how those individuals have “significant control”.
Additionally, if a corporation’s shareholders have appointed an auditor, the auditor could obtain access to the information in the new register under the Act’s previously existing disclosure requirements. However, a shareholder or director is entitled to this information only if they provide an affidavit that they will not improperly use the information. Information may only be used to influence shareholder votes, to offer to acquire shares and for other matters relating to the corporation’s affairs.
Failure to Comply
Corporations are strongly advised to seek advice on the new record-keeping and disclosure requirements. Where a corporation fails to satisfy its obligations, it leaves itself and its directors and officers open to significant fines. Shareholders who fail to comply with their obligations also leave themselves open to significant fines. Fines for non-compliance with the new requirements can reach up to $10,200.
The new requirements do not apply to public corporations that are reporting issuers under securities legislation or the securities of which are traded on a Canadian or international stock exchange.