Activity of a group entity in Quebec may require extensive public disclosure of the structure of a closely-held corporate group

Ss. 2.1, 21.1 and 21.3 of the Canada Business Corporations Act, and various provisions of the Quebec Legal Publicity Act (“QLPA”), require private corporations to record individuals with significant control over the corporation (“ISCs”) under the CBCA, and individuals who are the ultimate beneficiaries (“UBs”) under the QLPA. S. 21.3(2) of the CBCA provides that CRA and various other investigative authorities are authorized to gain access to these registers. Most of the other provinces have enacted or are introducing similar measures.

The QLPA, which currently is scheduled to come into force by October 2022, provides for a public register listing UBs that is to be freely accessible, and searchable by names of corporations, ultimate beneficiaries, directors, and principal officers. It essentially applies to any corporation incorporated in Quebec - or anywhere else in the world but with activity in Quebec so as to be required to register extra-provincially.

Both ISCs and UBs essentially encompass individuals with at least 25% of the votes or fair market value of the subject corporation arising from its shares, so long as they are registered holders or beneficial owners (or, under the CBCA rules, have direct or indirect control or direction) of such shares, or have de facto control of the corporation. However, while the CBCA rules look only at direct ownership, the QLPA provisions specifically recognize both direct and indirect holders of shares, so that they look up through tiered structures.

The resulting breadth of the required public disclosure will make become a significant factor in some structurings, including careful consideration of which entities will have activity in Quebec.

There are substantial uncertainties as to how both the CBCA and QLPA rules will apply to trusts.

Neal Armstrong. Summary of Daniel Frajman, “Update on Beneficial Ownership Transparency under the CBCA, Ontario, and Quebec Models,” Tax Topics, No. 2602 (Wolters Kluwer), 18 January 2022, p. 1 under CBCA, s. 2.1.