27 January 2021
Important Proposed Modifications to Corporate Transparency Disclosure Requirements in Quebec
By: Nicolas Sayour
The Government of Québec has recently taken a significant step in order to accentuate corporate transparency requirements by the tabling of Bill 78 (An act mainly to improve the transparency of enterprises) (the “Bill”), therefore following its federal counterpart which amended the Canada Business Corporation Act (“CBCA”) in 2019 to introduce the concept of individual with significant control. In line with the objectives of the federal legislation, the main purpose of the Bill is tackling tax evasion, money laundering, terrorist financing and fraud in general.
The Bill amends the Act respecting the legal publicity of enterprises (“ALPE”) by requiring the mandatory disclosure, by all forms of enterprises doing business in Québec including non-Québec enterprises doing business or having an address in Québec (each a “Registrant”), of information related to their “ultimate beneficiaries” to the Enterprise Registrar of Québec for publication on the Enterprise Register of Québec (“REQ”). This amendment goes beyond what is provided by the CBCA as the disclosed information will be available to the public as opposed to the maintenance of an internal register by CBCA corporations accessible to Revenue Québec and the Canada Revenue Agency upon request.
An individual qualified as an ultimate beneficiary, which is similar to an individual with significant control under the CBCA, is defined as being a natural person which:
- “is the holder, even indirectly, or beneficiary of a number of shares or units of the registrant conferring on the person the power to exercise 25% or more of the voting rights attached to the shares or units;
- is the holder, even indirectly, or beneficiary of a number of shares or units the value of which corresponds to 25% or more of the fair market value of all the shares or units issued by the registrant;
- exercises control in fact of the registrant; or
- is a general partner of a limited partnership”.
Furthermore, similar to the CBCA, if individuals holding shares or units of a Registrant have agreed to jointly exercise voting rights attached to shares or units and an agreement confers on them, together, the power to exercise 25% or more of those voting rights, each of those individuals is considered to be an ultimate beneficiary of the Registrant.
The information to be disclosed by a Registrant regarding each ultimate beneficiary includes:
- date of birth (following the amendments to the ALPE, the date of birth will be a mandatory requirement for any individual whose identification is required to be disclosed on the REQ including directors, officers, partners and shareholders);
- type of control exercised or percentage of shares or units held or of which each one is a beneficiary;
- residential address (or business address: an individual will be authorized to declare a business address instead of a residential address in order to maintain the privacy of his or her residential address); and
- date on which the individual became and ceased to be an ultimate beneficiary.
This information will be required to be updated within 30 days of any modification and non-compliance with the new provisions and disclosure requirements would cause the defaulting Registrant to be subject to penalties of up to $25,000 in accordance with the general penal provisions of the ALPE.
The availability of the abovementioned information on the REQ will enable the public to perform searches by name regarding specific individuals and should permit to identify all the enterprises to which an individual is related, whether as director, officer, shareholder, partner or ultimate beneficiary.
Furthermore, in order to protect and preserve the privacy of certain personal information and prevent a serious threat to the safety of an ultimate beneficiary, as applicable, certain restrictions will apply with regards to the availability of said information (e.g. the REQ will not publish information regarding minors who are beneficiaries of a trust).
It is currently not clear if the abovementioned disclosure requirements will apply to non-for-profit organizations or to public companies, but the expectation is that they will not. Additional regulation should follow in order to answer these questions and provide additional details as to who qualifies as an ultimate beneficiary.
As per the Government of Québec’s announcement, these new requirements are expected not to come into effect until one year after the legislative amendments are adopted, in order to provide the enterprises with a reasonable adjustment period.
KRB Lawyers are experienced with all matters related to the ALPE and other corporate matters. Do not hesitate to reach out to a member of our corporate team for more information or assistance.