The nature of business ownership can be legally complex, with different arrangements and configurations coming with their own requirements for compliance. Beneficial ownership, for instance, is should be approached with the right considerations in mind. Let’s take a look.
Defining Beneficial Ownership
As the term implies, the beneficial owner of a property or asset is the person who receives the material benefits of that property or asset, even if they are not named as the legal owner on the title. While often the legal owner and the beneficial owner are the same individual, there are many situations where this is not the case, such as when owning stocks through a brokerage. More importantly, certain complex strategies make it possible for a person or entity to own a significant percentage of shares in a corporation — and to hold a significant degree of voting power and control over it — whether or not they’re explicitly noted as a legal owner on paper.
New Beneficial Ownership Rules in Canada
This ability to create anonymity in one’s ownership and control over a corporation has been a cause for concern among authorities for many years, as it enables criminal financial activity such as money laundering, terrorist financing, and corruption. In an effort to address this activity, the federal government has introduced new requirements for disclosure of beneficial ownership to the Canadian Business Corporations Act. In effect as of June 13th this year, these requirements dictate that corporations can provide detailed registers of individuals or entities who control or own 25% or more of voting rights or fair market value of shares in the company.
Staying in Compliance
The new rules regarding beneficial ownership may be designed to tackle criminal business practices, but they still apply to and must be observed by all Canadian corporations. Depending on the structure and complexity of your incorporated business, maintaining a beneficial ownership registry can be a significant undertaking. Nevertheless, the penalties for noncompliance are considerable. If you want to ensure the accuracy and clarity of your company’s ownership information, as well as smooth transactions with the CRA and other regulators, it’s best to work with an experienced team of corporate accounting specialists.
Do you need help developing a fully compliant beneficial ownership registry for your business? A number of provisions must be met to keep your registry in line with federal law, and the team at Cook & Co. can help to make sure you satisfy all of them. Call (403) 768-4377 to learn more.
