Bearer Share Certificate Elimination & Transparency Register

As part of government’s commitment to end hidden ownership of companies in British Columbia and to help crackdown on illegal activities, the Business Corporations Amendment Act, 2019 (Bill 24), amends the Business Corporations Act to:

  1. Fully eliminate pre-existing bearer shares in B.C. companies by requiring the possessor to exchange bearer shares for registered shares before exercising any of the rights, and
  2. Require B.C. private companies to create and maintain a transparency register listing the significant individuals of the company.

Both measures are intended to help companies and, in some cases authorities, identify the actual individuals (i.e., natural persons) who own and control B.C. private companies.

Bearer Share Certificates

Bearer share certificates are share certificates that do not state the name of the owner of the shares. The owner of a bearer share certificate is whoever physically possesses the certificate and that person holds all the rights specified on the certificate. Because bearer share certificates are not registered, they can hide the identity of the true owner of the shares of a company.

Although the Business Corporations Act requires all share certificates to include the name of the person to whom they have been issued, there was no requirement to replace or convert pre-existing bearer shares.

Effective May 16, 2019, all companies must convert bearer share certificates to registered share certificates before any rights associated with the certificates can be exercised. Rights may include, but are not limited to: voting, dividend, share equity, etc. If a shareholder tries to exercise their rights under a bearer share certificate, the company must refuse to recognize those rights until it converts the bearer share certificate into a registered share certificate that complies with section 57 of the Business Corporations Act.

Transparency Register

What is a transparency register?

A transparency register is a list of information on a company’s significant individuals.

A transparency register is specific only to private companies incorporated in B.C. and will be held in each company’s own records office. The public will not have access to the transparency register. Only directors, law enforcement and specific inspecting officials will have access subject to certain rules.

Currently, the transparency register is not required to be completed by private companies.  The effective date of the requirement will be determined by regulation.  Once in effect, every private company in B.C. will be required to create and maintain a transparency register.

How does it work? 

Initial set-up

Companies will need to contact their shareholders to compile the required information.  Companies can request that their shareholders provide information for the transparency register at any time.  Shareholders have a duty to take reasonable steps to gather the requested information and to send it to the private company promptly.

Once a company determines that someone is a significant individual, the company will have to notify that person.

Maintenance

Companies will have to keep their transparency register up-to-date.  Companies must make updates to their transparency register within 30 days of receiving new or different information.

Companies that are unable to obtain or confirm information from shareholders (for set-up, and/or updating) must record all reasonable steps and efforts taken to gather the required information.

Contents

Each company will have to keep the following information about every significant individual:

  1. full name, date of birth and last known address
  2. if they are Canadian citizen or permanent resident of Canada
  3. if they are not a Canadian citizen or permanent resident of Canada, every country or state of which they are a citizen
  4. if they are a resident in Canada for the purposes of the Income Tax Act (Canada)
  5. the date when they became or ceased to be a significant individual in the company
  6. a description of how they are a significant individual

Who are significant individuals?

A significant individual is a person (i.e., a natural person/human) who owns or controls a company or its shares in any of the following ways:

  • Direct Holding
  • Indirect Holding
  • Combined Holding
  • Groups Acting in Concert
  • Joint Ownership

Read the legislation for specific meanings

Direct Holding

Companies must include individuals who have the following types of direct holdings of shares or interests in their transparency register:

  1. An individual who owns:
    1. 25% or more of the issued shares of the company; or
    2. issued shares of the company that carry 25% or more of the rights to vote at a general meeting.
  2. An individual who has a beneficial interest in:
    1. 25% or more of the issued shares of the company; or
    2. issued shares of the company that carry 25% or more of the rights to vote at a general meeting.
  3. An individual who has the right to elect, appoint or remove one or more of the company’s directors.
  4. An individual who has the ability to exercise direct and significant influence on an individual with the right to elect, appoint or remove one or more of the company’s directors.

Indirect Holding

An indirect holding is when linked entities (such as a company, a trust, or a partnership) holds the shares of a company. Only individuals (natural persons/humans) can be listed in the transparency register. If the shares of a company, or right in respect of a company are held by linked entities, the company must look through the linked entities to find the natural person who controls the shares. In particular, companies must list the following individuals in their transparency register:

  1. An individual who has indirect control through linked entities if the linked entities hold:
    1. 25% or more of the issued shares of the company; or
    2. Issued shares of the company that carry 25% or more of the rights to vote at a general meeting.
  2. An individual who has indirect control of rights to elect, appoint or remove one or more of the company’s directors through linked entities.

The meaning of “indirect control” will be defined in the regulations and has not yet been determined. It is the reader’s responsibility to stay up-to-date on the current regulations.  Subscribe to this page through the subscribe box to receive updates as they become available.

Combined Holding

Companies must consider whether an individual crosses the 25% threshold due to his or her combined total of registered ownership, beneficial ownership and indirect control.

Example of Combined Holdings:

Ms. X is the registered owner of 10% of the shares of a company, has a beneficial interest in another 10% of the company's shares, and indirectly controls another 10% of the company's shares. Ms. X’s combined holding is greater than 25%.

Groups Acting in Concert

Groups of individuals who are acting in concert or who are assumed to act in concert, must add their interests together. If the group exceeds either the 25% threshold or has the direct or indirect right to elect, appoint or remove the majority of the directors of a private company, the company must list every member of the group in its transparency register.

Companies must also include in their transparency registers individuals with the following relationships whose combined interests exceed the thresholds:

  • spouses
  • parents and children
  • other relatives who share the same home

Joint Ownership

When two or more individuals jointly own one of the above interests or rights, then all those individuals must be listed in the transparency register. The interests are not divided amongst the joint owners, rather they are fully attributed to all joint owners.

Exclusions

Public Companies and Extraprovincially Registered Companies

Public companies in B.C. (in other words, companies that can be traded on a stock exchange) are not required to have a transparency register. These companies already have additional rigorous reporting requirements with:

  • the B.C. Securities Commission
  • the Registrar of Companies, and
  • any stock exchange on which the company’s shares are listed

Extraprovincial companies that are incorporated outside B.C. but are registered to do business in B.C., also are not required to complete the transparency register. You can consult the legislation in your home jurisdiction to find out if your company is required to complete a similar transparency register.