Ontario Announces New Beneficial Ownership Regime to Fight Illicit Financial Activities

Written By Lincoln Caylor, Nathan Shaheen and Ben Sissons

On November 4, 2021, Ontario’s 2021 Fall Economic Statement announced an intention to address tax evasion, money laundering and other illicit financial activities by amending Ontario’s Business Corporations Act to require privately-held Ontario corporations to record the identities and various details of all individuals who exercise significant control over those corporations.

The proposed amendments would bring Ontario in line with most other Canadian provinces and would seek to further address concerns that Canada is vulnerable as a haven for financial crime.

To provide time to prepare for the new regime, the amendments are intended to come into force on January 1, 2023. The new provisions would require each private corporation to maintain information on all individuals who exercise “significant control” over the corporation. This would include any individual who:

• owns, controls, or directs 25 percent or more of the voting shares of the corporation, or shares that are worth 25 percent or more of the fair market value of all outstanding shares of the corporation; or
• has direct or indirect influence over the corporation without owning at least 25 percent of the shares.

An individual would also be considered to have significant control if they own or control a significant number of shares jointly with other people. In addition, if a group of related persons controls at least 25 percent of the shares, then each group member would have significant control. A “related person” would include any spouse, child, or any other relative living in the same household.

For each individual with significant control, private corporations would be responsible for maintaining information, including:

• name, date of birth and address;
• the individual’s jurisdiction of residence for tax purposes;
• the date that the individual became an individual with significant control, as well as the date that anyone ceases to exercise significant control;
• a description of how the individual has significant control, including a description of any interests and rights in shares of the corporation; and
• a description of the steps the corporation takes to keep this information current each year.

Beneficial ownership registries are becoming more common as jurisdictions around the world attempt to crack down on financial crime. The Ontario government will therefore have a variety of models to reference in crafting the details of its approach to implement the most effective system possible. Even still, challenges are bound to arise.

Ontario will face some of the same concerns the Federal government has encountered surrounding its proposed beneficial ownership regime, which is slated to come into effect in 2025. Among other things, a delicate balance must be struck between the desire to deter financial crime and the privacy interests of individuals involved with private corporations. There is also pressure to ensure that some of the issues experienced in other jurisdictions, such as the U.K. Government’s verification issues, do not plague Ontario’s approach.

Bennett Jones is carefully monitoring the situation and will continue to provide updates as they become available. For further information, contact a member of the Bennett Jones Fraud and Asset Tracing and Recovery team.

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