Businesses must now disclose who are their true owners
This article first appeared in French in the April 2021 edition of the Journal des Parcs industriels by the Corporation des parcs industriels du Québec.
An international movement pushing for greater transparency in the corporate world has sparked reform initiatives across Canada. In this context, the Quebec government introduced a bill in December 2020 to force companies to be more transparent. Indeed, businesses will be required to disclose their true owners as part of their annual declaration to the Registraire des entreprises du Québec (the “Registrar”), a requirement under the Act respecting the legal publicity of enterprises (the “ALPE”).
Who is affected by these changes?
The amendment to the ALPE affects all businesses registered or required to register with the Registrar, whether they are incorporated in Quebec or another jurisdiction.
However, the Registrar’s questions and answers page on the new bill states that reporting issuers (i.e., companies that have issued a public offering), legal entities governed by public law, and non-profit organizations would be exempt from certain disclosure requirements.
It will be important to review the draft regulations that are expected to be enacted in the wake of the bill to confirm whether these exemptions will indeed be put in place.
What new information must be disclosed?
Declaration of “ultimate beneficiaries”
The reform of the ALPE is part of a Canada-wide movement to require the disclosure of individuals who have significant direct or indirect control over a company. The objective is to disclose who the true owners are.
For the purposes of reporting to the Registrar, an ultimate beneficiary will mean any individual who meets one of the following conditions:
- the individual holds 25% or more of the voting rights, even indirectly; or
- the individual holds 25% or more of the equity interest, even indirectly; or
- the individual has de facto control of the business; or
- the individual is the general partner of a limited partnership.
Companies will henceforth be required to disclose the following information regarding ultimate beneficiaries:
- the name, address and date of birth of each ultimate beneficiary;
- the nature and extent of control exercised by each ultimate beneficiary;
- the date on which the individual became or ceased to be an ultimate beneficiary of the company.
It should be noted that if individuals have agreed to jointly exercise voting rights which, taken together, represent 25% or more of a company’s voting rights, then each of those individuals will be considered ultimate beneficiaries.
Home or business address
To protect the privacy rights of individuals whose home address must be disclosed, they will now be entitled to declare a single business address for all the companies in which they are involved; this will have the effect of preventing public access to details regarding their place of residence. Despite this protection measure, individuals will still have to provide their home address to the Registrar.
Individuals involved in multiple distinct groups of companies should be particularly mindful of the business address that is reported for them. If two businesses choose to declare a different business address for this individual, the registrar may send a notice of default to the businesses and, unless a correction is made by the prescribed deadline, penalize this default by publishing the individual’s home address in the Registrar.
Date of birth
Companies will be required to report the date of birth of each individual listed in Québec’s enterprises register as a director, officer, shareholder and ultimate beneficiary. This information will not be public but will be available to government agencies.
Searches and access to reported information
Unlike the practice at the federal level and in many other Canadian provinces, the personal information of ultimate beneficiaries will be available to the general public at no cost through the Registrar. The bill also requires the enterprise registrar to allow searches by individual name, which means all enterprises in which that person is involved, whether as a shareholder, director, officer or ultimate beneficiary, will be identifiable.
Entry into force
No date has yet been set. The bill is currently moving through the legislative process and may be subject to amendments before it is passed. It could become law in the spring or fall of 2021.
The Registrar’s computer systems will also require upgrades to allow for disclosure and access to the new categories of reported information.
In the meantime, start preparing and gathering the required information, and most importantly, don’t hesitate to contact us if you have any questions or concerns about these changes.
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