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Questions and answers on the Act mainly to improve the transparency of enterprises

Obligation to transmit information relating to the ultimate beneficiaries of enterprises

What is the purpose of the Act?

The main purpose of the Act is to improve the transparency of enterprises. It also aims to prevent and fight tax evasion, money laundering and corruption. It creates new measures to protect the public by improving the information available in the enterprise register and making the search engine more user-friendly. 

What is an ultimate beneficiary?

An ultimate beneficiary is generally a natural person, though it can also be an enterprise. 

The following approaches can be used to determine the ultimate beneficiary of an enterprise:

  • a mathematical approach based on an analysis of the shares or units held. A natural person who holds 25% or more of the capital or voting rights is an ultimate beneficiary;
  • a legal approach based on an analysis of legal documents (for example, the shareholder agreement, undivided ownership agreement or other legal document) under which a person has control of an enterprise;
  • a combination of these two approaches.

The required documents will be published on the Registraire des entreprises website and elsewhere before the new obligations come into effect. Support will also be offered to help enterprises and partners report ultimate beneficiaries to the Registraire. 

What new information will have to be reported to the Registraire des entreprises?

The following information will now have to be reported:

  • the ultimate beneficiaries’ names, including any other name they use to identify themselves in Québec;
  • the date of birth of all natural persons entered in the register (however, this information will not be published in the register);
  • the nature of the “significant control” exercised by the ultimate beneficiaries, such as the percentage of shares or units held. 
  • the date on which a natural person became or ceased to be an ultimate beneficiary.

Natural persons entered in the register will also be able to declare a professional address in addition to their personal address, in which case the professional address will be published.

What is a professional address? 

This is the address of the main place of business or the main place of work where a natural person can be contacted. It can be published in the register instead of the personal address. 

What enterprises will have the new obligations?

Business corporations, trusts operating a commercial enterprise, cooperatives, sole proprietorships and partnerships will have to transmit information on their ultimate beneficiaries.

Foreign corporations doing business in Québec will have the same obligations as Québec businesses.

Are there any exemptions?

The following enterprises do not have to declare their ultimate beneficiaries:

  • non-profit legal persons established for a private interest (non-profit organizations [NPOs]);
  • legal persons established in the public interest;
  • reporting issuers within the meaning of the Securities Act (chapter V-1.1);
  • financial institutions covered by paragraphs (1) to (3) of section 4 of the Insurers Act (chapter A-32.1), such as:
    • insurers,
    • deposit institutions,
    • financial services cooperatives;
  • trust corporations governed by a federal statute or by a law of a Canadian province or territory, including Québec;
  • banks and authorized foreign banks listed in schedules I, II and III to the Bank Act (S.C. 1991, chapter 46);
  • associations within the meaning of the Civil Code of Québec.

Will information on ultimate beneficiaries be available to the public? Why?

All information on ultimate beneficiaries except for the date of birth will be public and available for consultation in the enterprise register.

The collection and dissemination of information on ultimate beneficiaries are part of an international approach to fighting tax evasion, abusive tax avoidance, money laundering, criminal activities and corruption. 

To be effective, information on ultimate beneficiaries must be accessible in international jurisdiction registers to facilitate the identification of corporate schemes used in particular for tax evasion through tax havens.

The Registraire will make the information accessible to the public while ensuring that individuals’ privacy and personal information are protected.

What does it mean that the information published in the register is binding on third parties?

The enterprise register is a declaratory register, which means that the person reporting the information is responsible for ensuring that it is correct and up to date.

Thus, a third party acting in good faith who takes legal action against a company can rely on the information declared in the register, since there is a presumption of veracity concerning most of the information declared in the register. In other words, this third party can present a statement of information before a judge, and this document proves its content. 

A third party acting in good faith can also refute information entered in the register. However, information cannot be called into question by the person themselves against a third party acting in good faith.

What are the penalties for not complying with the new obligations?

The existing penalties and administrative measures for failing to meet an obligation under the Act respecting the legal publicity of enterprises will apply.

Under the Act respecting the legal publicity of enterprises, the Registraire des entreprises currently can apply an administrative penalty that provides for the ex officio cancellation of enterprises that do not comply with an obligation and penal sanctions in the form of fines ranging from $500 to $25,000. 

When will the obligation to declare ultimate beneficiaries come into force?

The new obligation should come into effect by October 2022. The exact date will be set by the government. In the meantime, the Registraire’s computer systems will be updated to develop the new features. Managing the change is a priority, which means that several measures will be taken and new tools developed to provide enterprises and partners with the necessary support.

Documents explaining the new measures and the procedure for determining the ultimate beneficiaries will be published on the Registraire website and elsewhere.

What enterprises will have to provide ID for their directors? 

All enterprises reporting directors to the register will have this obligation. Assistance and information will be made available in the coming months.

Why do enterprises have to provide ID for their directors?

This new obligation will maximize the accuracy of the information in the register.

Public access to searches by first and last names of a natural person

Why allow everyone to search for an individual’s name?

This measure is a way of improving the transparency of enterprises. Its goal is to further protect the public by giving everyone access to certain information contained in the register, thereby facilitating socioeconomic relations.

What are the benefits of making it possible to search for an individual’s name?

There are many benefits to this solution:

  • The general public and civil society can identify all the enterprises in which a natural person is involved.
  • It discourages the use of legal arrangements to conceal or legitimize illicit activities.
  • Governments, organizations, financial institutions, journalists can play an increased role in the fight against illicit activities. 
  • The public can better protect themselves by consulting the register with a user-friendly search tool to access information in order to facilitate their socioeconomic exchanges and flag potential errors. 
  • Government departments and agencies can access information on ultimate beneficiaries instantly, which increases the speed of investigations. 
  • It helps prevent and fight tax evasion, money laundering and corruption at a national and international level by making information accessible to other jurisdictions and other countries.
  • It further proves that Québec, which for years has provided free public access to detailed information about 975,000 enterprises doing business in Québec, is at the forefront of corporate transparency in Canada and worldwide.
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