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Disclosure of Indirect and Beneficial Ownership in BC

Like other governments across Canada, British Columbia has recently taken a number of measures to combat money laundering, tax evasion and similar concerns, and more measures are planned.  This article provides an overview of three such measures which require the disclosure of indirect and beneficial ownership of real property or corporations as a way of increasing transparency and in some cases also possibly laying the groundwork for new taxes.  Each of the measures is relatively complex and can be expected to add significantly to transaction and compliance costs in the Province.

Disclosure of Indirect and Beneficial Ownership in BC

Property Transfer Tax Information Collection Regulation – In Effect September 17, 2018

On September 17, 2018, the Information Collection Regulation, a regulation made under BC’s Property Transfer Tax Act, came into effect.  The regulation requires the disclosure of personal information of individuals who hold significant interests in corporations and trusts that acquire registered interests in real property in the Province.

The personal information, including the person’s name, birth date, citizenship, residency, contact information and social insurance number or tax number, must be disclosed on the property transfer tax return which is filed in the Land Title Office together with the document transferring legal ownership of the property, or an interest in the property (such as a long-term lease), to the acquiring corporation or trust.

For corporations, such information must be disclosed for any individual who is a “corporate interest holder” of the corporation, which essentially refers to an individual who, directly or indirectly, alone or together with others: (i) has legal or beneficial ownership or control of shares of the corporation representing 25% or more of the corporation’s equity, or 25% or more of the voting rights, (ii) has the right to appoint or remove the majority of the board of directors, or (iii) otherwise has significant influence or control over the corporation.

For trusts, such information must be disclosed for all individuals who are beneficiaries of the trust and, where the beneficiary is a corporation, individuals who are corporate interest holders of the corporate beneficiary.

The disclosure requirements apply to all corporations and trusts acquiring a registered interest in real property unless an exemption applies, including exemptions for government bodies, public companies, financial institutions, corporations owned by First Nations, REITs, charitable trusts and certain investment trusts.

In spite of the new disclosure requirements, currently only transfers of legal (i.e., registered) ownership of real property are subject to property transfer tax in BC.  Transfers of beneficial ownership are not subject to the tax.  Whether the government of BC will eventually impose property transfer tax on transfers of beneficial ownership remains a matter of speculation, but it is clear that the Information Collection Regulation puts it into a much better position to do so and Premier Horgan has previously supported such a tax.

Land Owner Transparency Act – In Effect on Date to be Determined

The BC Land Owner Transparency Act, which received royal assent May 16, 2019, is expected to come into force sometime in 2020.  The Act will establish a beneficial ownership registry for the Province which will be publicly accessible (in part) and maintained by the Land Title Office.

Once in effect, unless an exemption applies, the Act will require every “reporting body” that acquires an “interest in land” to file a “transparency report” when it applies to register the interest in the Land Title Office.

Interest in Land

In the Act, the term “interest in land” does not have its broad common law meaning and refers only a freehold interest, a life interest, a leasehold interest with a term greater than 10 years and certain contractual rights to occupy land or require the transfer of a freehold interest.

Reporting Body

The term “reporting body” means the transferee of a registered interest in land where the transferee is:  (i) a corporation, unless an exemption applies, such as those for government bodies, public companies, financial institutions and corporations owned by First Nations, (ii) a trustee of a trust, unless an exemption applies, such as those for REITs, charitable trusts and certain investment trusts, or (iii) a partner of most forms of partnership, including general partnerships, limited partnerships, limited liability partnerships and professional partnerships.

Transparency Report

Primary Identification Information

The transparency report must include the following primary identification information of the reporting body:

  • Where the reporting body is a corporation: its name, addresses of its registered office and head office (if any), and the jurisdiction of its incorporation or continuation.
  • Where the reporting body is an individual: the person’s name, citizenship, residency and the location of the person’s principal residence.
  • Where the reporting body is a partner: the partnership’s registered business name, the type of partnership, the addresses of the partnership’s principal place of business and registered office or head office (if any), and the jurisdiction whose laws govern the partnership or partnership agreement.

Additional Identification Information

The transparency report must also include the following additional identification information, as applicable:

  • Where the transferee is a corporation: its incorporation number, its business number under the Income Tax Act and the names and personal information described below for every “interest holder” of the corporation.
  • Where the transferee is a trustee of a trust:
      • If the trustee is a corporation, the primary identification information for corporations described above.
      • If the trustee is an individual, the primary identification information for individuals described above.
      • For every beneficial owner of the interest in land being transferred, the personal information described below for interest holders.
      • For every corporate settlor of the trust, the primary identification information for corporations described above.
      • For every individual settlor of the trust, the personal information described below for interest holders.
  • Where the transferee is a partner: the partnership’s registration number and business number under the Income Tax Act, and the names and personal information described below for every “interest holder” of the partnership.

Interest Holders

An interest holder of a corporation generally means any individual who, alone or with others:  (i) is the registered or beneficial owner of, or indirectly controls, 10% or more of the issued shares of the corporation or issued shares carrying 10% or more of voting rights, or (ii) has the right, or the ability to exercise indirect control or direct and significant influence over persons who have the right, to elect, appoint or remove a majority of the company’s directors.  Individuals who are considered to be “associated” with each other within the meaning of the Business Corporations Act, including spouses, children and other relatives who share a home, are presumed to be acting together.

An interest holder of a trust means any individual who, in respect of an interest in land registered or to be registered in the name of a trustee of the trust, is a beneficial owner of the interest in land.

An interest holder of a partnership means any individual who, in respect of an interest in land that is partnership property and registered or to be registered in the name of a partner of the partnership, is either (i) a partner of the partnership or (ii) an interest holder of a corporation that is a partner of the partnership.

For every interest holder, the following information must be included in the transparency report:  the individual’s primary identification information described above, birth date, last known address, social insurance number (if any), tax number assigned by the Canada Revenue Agency (if any), whether the individual is resident in Canada for the purposes of the Income Tax Act, the date on which the individual became an interest holder, and a description of how the individual is an interest holder.

Initial Transparency Report

When the Act comes into effect, a regulation made under the Act will specify a transition period during which every existing registered owner of an interest in land must file an initial transparency report disclosing the information described above.

Access

Only the primary identification information described above will be viewable by the public.  Information for individuals under the age of 19 or declared incapable of managing their financial affairs will not be accessible.  Individuals may apply to have certain primary identification information omitted from public access where its availability could reasonably be expected to threaten the safety or mental or physical health of the individual or a member of the individual’s household.

The additional identification information will be accessible only by police officers and officials and employees of taxing authorities and of certain regulators, including the BC Securities Commission, the BC Financial Services Authority (formerly the Financial Institutions Commission) and the Law Society of BC, only for purposes related to tax collection and law enforcement.

Transparency Register – In Effect October 1, 2020

On October 1 2020, amendments to the BC Business Corporations Act will come into effect, requiring most BC companies to create and maintain a “transparency register” in their corporate records office which contains the names and certain personal information of every “significant individual” who is associated with the company.

An individual is generally considered a significant individual if he or she, alone or with others:  (i) is the registered or beneficial owner of, or indirectly controls, 25% or more of the issued shares of the company or issued shares carrying 25% or more of voting rights, or (ii) has the right, or the ability to exercise indirect control or direct and significant influence over persons who have the right, to elect, appoint or remove a majority of the company’s directors.  Individuals who are considered to be “associated” with each other within the meaning of the Business Corporations Act, including spouses, children and other relatives who share a home, are presumed to be acting together.

The personal information of significant individuals which must be recorded in a company’s transparency register includes the person’s name, birth date, last known address, citizenship, residency and a description of how the person is a significant individual.

A company will be required to update its transparency register within 30 days of becoming aware of any changes in significant individuals or their personal information, to notify individuals when they are added or removed as significant individuals and to review the register annually to confirm its accuracy.  When requested by a company, shareholders will be obligated to provide information for purposes of maintaining the transparency register.

BC companies will be required to maintain a transparency register unless an exemption applies, including exemptions for companies listed on a designated stock exchange (as defined in the Income Tax Act) or reporting issuers (as defined in the BC Securities Act).

A company’s transparency register will not be publicly accessible.  Its contents must be made available for inspection only to (i) the company’s directors and (ii) police officers and officials and employees of taxing authorities and of certain regulators, including the BC Securities Commission, the BC Financial Services Authority (formerly the Financial Institutions Commission) and the Law Society of BC, only for purposes related to tax collection and law enforcement.

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