Corporations in Ontario: Know the New Transparency Register Rules

An image of a private corporation in Burlington Ontario

Are you a private company incorporated in Ontario? Under the Ontario Business Corporations Act, you should comply with the new transparency register rules that became effective on January 1, 2023. Under the new regulations, all private corporations in Ontario should submit the required details of their individuals with significant control (ISCs) to the Transparency Register. Non-compliance will lead to penalties and/or imprisonment.

The Transparency Register already exists in other provinces of Canada and now extends to Ontario’s private corporations. However, wholly-owned subsidiaries of public companies do not fall under the new rule.

The Intent of Transparency Register

As the name suggests, the Transparency Register is like a national registry that will help the federal government enhance corporate transparency. This register, on written request, will be made available to law enforcement, tax and regulatory authorities, or non-Canadian entities to monitor money ‎laundering, tax evasion and other illicit activities. ‎

While the rule looks simple, there are certain things you should know as the owner of a private corporation.

Who Qualifies As an Individual with Significant Control?

The transparency register needs data about ISC, but who exactly are they?

  • You are an ISC if you own 25% or more outstanding shares (as per fair market value) or 25% voting rights of a private corporation. You may be a registered owner or a beneficial owner of these shares or voting rights.
  • If two or more individuals jointly or in concert own interest or have a right in respect of shares, all of them are considered ISCs and should have their details updated in the transparency register.
  • If the individuals holding the right or interest are related (spouse, children, relatives living in the same family home), there are considered ISCs too.
  • ISC also includes an individual to whom circumstances prescribed by regulation apply.

Even if you don’t own 25% shares or voting rights, you are an ISC if you have a direct or indirect influence, if exercised, would show your significant control over the corporation. You can consult a professional to help you identify who qualifies as ISC because failing to register an ISC’s details could have consequences, which we will discuss later.

How Can Private Corporations Comply With the Transparency Register?

Once you have identified all the ISCs in your corporation, the next step is to record the following details of each ISC in the Transparency Register:

  • Essential information like name, date of birth, latest known address and jurisdiction of tax residence.
  • The date on which the individual became an ISC and the date the individual ceased to become an ISC.
  • Description of control: The grounds on which the individuals have “significant control”; along with a description of their interests and rights in respect of the corporation’s shares.
  • Process: List down the steps you took to identify each ISC and ensure the information provided is accurate, complete, and up to date.
  • Any other information the regulation may require in the future.

Compliance with the new rules goes beyond recording the above data. Corporations also have to update the register at least once every financial year. In addition, if there are any changes in the ISC or their information, the corporation has to update the Transparency Register with the new information within 15 days of becoming aware of it.

The corporation should also dispose of any personal information of an ISC six years after the individual ceases to be an ISC. The disposal of information should be done within one year before the end of the seventh year. For instance, if John ceases to be an ISC on February 1, 2023, his data should be disposed of from the Transparency Register between February 1, 2029, and February 1, 2030.

Penalty for Non-Compliance

  • Failing to comply with the above requirements (identifying all ISCs and updating their relevant information) from 2023 could invite a fine of up to $5,000.
  • If the corporation knowingly provides inaccurate information, every director or officer who permitted it could face sanctions, including fines of up to $200,000, six-month imprisonment or both.
  • If the corporation fails to prepare and maintain the register, respond to inquiries or meet disclosure obligations, every director or officer who permitted it could incur a fine of up to $200,000, six-month imprisonment or both.

As a business owner, you should be updated with all new laws and comply with them. Any slip-ups could invite penalties. A professional accountant or legal advisor can keep you updated and compliant with all regulations.

Contact Edelkoort Smethurst CPAs LLP in Burlington to Comply With Transparency Register Rules

Talk to a professional accountant to help you identify the ISCs and prepare the necessary information for the Transparency Register. At Edelkoort Smethurst CPAs LLP, our accountants can provide services such as keeping your record updated as required by law. To learn more about how Edelkoort Smethurst CPAs LLP can provide you with the best accounting expertise, contact us online or by telephone at 905-517-2297.