Over the last few years, the federal and provincial governments have made considerable efforts to improve corporate transparency and to fight corruption, tax evasion, and money laundering. For instance, Canadian business corporations now have to maintain a register of individuals who significantly control a corporation1. In the same context, the National Assembly assented to Bill 78 on June 8, 2021 (”Bill 78”) amending the Act respecting the legal publicity of enterprises (the “ALPE”). Under the new provisions of the ALPE, enterprises will now be required to transmit to the Quebec Enterprise Registrar (the “REQ“) information concerning their “ultimate beneficiaries”, and this will enable the search for information by a natural person’s name. The entry into force of the new obligations is expected for October 2022.

New Obligations

The enterprises registered with the REQ will have to publicly disclose specific information regarding their ultimate beneficiaries, this to prevent the use of nominees for tax evasion. Here is the information to disclose2:

  • Name;  
  • Residence (personal or professional address of the natural person3);  
  • Date of birth (however, this information will not be published in the REQ therefore will not be public4);
  • The date on which a natural person became and/or ceased to be, as applicable, an ultimate beneficiary; 
  • The type of control exercised by an ultimate beneficiary, or the percentage of shares or units held or of which he or she is a beneficiary;  

The registrants will also be required to provide for each of their directors a copy of a valid identification when filing or updating a declaration, with the purpose of improving the reliability of the information contained in the REQ5.  

The name will also be used as a search term when searching in the REQ. This will enable the public to identify all corporations with which a natural person is associated, when such a person has been named the ultimate beneficiary of a registrant, although information that cannot be consulted will not serve as the basis for a search6.

In particular, non-profit legal persons established for a private interest, legal persons governed by public law, some financial institutions, banks, and associations within the meaning of the Civil Code of Quebec are exempted from this new obligation7.

To whom does the obligation to disclose apply?

The ALPE defines the registrant as “a person or group of persons registered voluntarily or any person, trust or partnership required to be registered“8.

Definition of ultimate beneficiary

The concept of an “ultimate beneficiary” refers to the idea of legal control or control in fact of a legal entity. Thus, under the new law, an ultimate beneficiary means a natural person who meets any of the following conditions in respect of a registrant:

  • 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;
  • Is an individual who exercises direct or indirect influence that would, in effect, result in control in fact of the registrant, for example, pursuant to a shareholder or indivision agreement;
  • Is a general partner of a limited partnership, or if the general partner is a legal person, the natural person who exercises legal control or control in fact of the general partner;
  • Is the trustee of the registrant;
  • And any other additional condition set by the government9.

When natural persons holding shares or units of the registrant have agreed to jointly exercise the voting rights attached to the shares or units, and when the agreement confers on them, together, the power to exercise 25% or more of those voting rights, each of those natural persons is considered to be an ultimate beneficiary of the registrant. And, lastly, a natural person operating a sole proprietorship is presumed to be the only ultimate beneficiary of the sole proprietorship, unless he or she declares otherwise10.

Penalties applicable in the event of non-compliance

The penalties and administrative measures already provided for in the ALPE apply in the event of non-compliance to the new obligations. Under the ALPE, the REQ can apply administrative penalties such as the ex officio cancellation of the enterprises that do not comply with an obligation, and penal sanctions corresponding to $500 to $25,000 fines.

When will the obligation to disclose ultimate beneficiaries come into force?

The new obligations come into force on March 31, 202311. It is as of this date that the persons concerned will be required to provide the REQ with the information he or she is obligated to disclose.

However, it is only as of March 31, 2024, that it will be possible to carry out a search in the enterprise registrar using the surname and first name of a natural person.

Conclusion

While the announced amendments may add an additional administrative burden, their purpose is to rebuild public trust in the interests of transparency. From a broader standpoint, they contribute to the international fight against tax havens and corruption. To follow the right path and to comply with the new rules, do not hesitate to contact our team.

About us

With our team of professionals, lawyers, notaries and tax specialists  covering the entire Quebec territory, Cain Lamarre is the most well-established law firm in Quebec and one of the largest in the province.

Contact us for more information : business@cainlamarre.ca

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[1] Since June 13, 2019, sec. 21.1(1) of the Canada Business Corporations Act (R.S.C., 1985, c. C-44) (the “CBCA”) requires that all corporations incorporated as a Canadian business and governed by the CBCA (except certain distributing corporations), must maintain and update a register listing all individuals with significant control of the corporation.

[2] Sec. 33 (2.1) ALPE (as amended by Bill 78).

[3] Sec. 35.2 ALPE (as amended by Bill 78): a natural person may have only one professional address for the purposes of this Act. When a person discloses a professional address, his or her residence will not be made public.

[4] Sec. 99.1 ALPE (as amended by Bill 78).

[5] Sec. 68.1 ALPE (as amended by Bill 78).

[6]  Sec. 101 para. 2 and 3 ALPE.

[7] Sec. 33 (2.2) ALPE (as amended by Bill 78).

[8] Sec. 0.2 (as amended by Bill 78).

[9] Sec. 0.4 ALPE (as amended by Bill 78).

[10] Sec. 0.4 ALPE (as amended by Bill 78).