Corporations Canada Is Asking Questions About "No Individuals with Significant Control" Filings
Corporations Canada Is Asking Questions About "No ISC" Filings
If your company is federally incorporated and you reported that it has no individuals with significant control, be ready to explain that answer.
Corporations Canada has begun issuing inquiries to CBCA corporations about their ISC filings, and the ones drawing attention are the corporations that reported no ISCs at all. The takeaway is straightforward: a nil report is a statement that now has to hold up, not a box you tick on the way to filing the annual return.
What the CBCA actually requires
Private CBCA corporations have been required to keep a register of individuals with significant control since June 2019. Since January 2024 they have also had to send that information to Corporations Canada, annually with the annual return and within 15 days of any change to the register.
Part of what gets filed is now public and searchable: the individual's name, their address for service (or their residential address if no service address is on file), the dates they became and ceased to be an ISC, and the description of how they qualify.
An individual is an ISC if they own, control or direct 25% or more of the voting shares, or shares carrying 25% or more of the fair market value of all outstanding shares. The test also captures anyone with direct or indirect influence that would result in control in fact, and anyone who meets the threshold through a combination of factors. Joint ownership counts. So do agreements between shareholders to act together. That last piece is where a surprising number of nil filings quietly go wrong.
Why "no ISC" attracts a second look
There are perfectly good reasons a corporation has no ISC. Share capital spread widely enough that nobody crosses the threshold is the usual one.
But in a private corporation with a small number of shareholders, "no ISC" is unusual, and Corporations Canada knows it. In our experience the nil filing is often a symptom of something else.
The shares are held through a holding company or a family trust, and nobody traced the chain up to an actual person. The Act requires you to look through, not to stop at the first corporate shareholder on the share register.
A shareholders' agreement or voting arrangement was never factored in. Two shareholders at 20% each who have agreed to vote together are not two people below the threshold.
Or the corporation genuinely could not identify anyone, and reported nil instead of filing the statement the Act contemplates. Those are different answers. One says there is nobody. The other says we looked, here is what we did, and the search came up empty. The second one is defensible. The first one, on a two-shareholder company, is not.
The consequences are not nominal
A corporation that fails to send the required information to the Director is liable to a fine of up to $100,000, and Corporations Canada can refuse to issue a certificate of compliance or take steps to dissolve the corporation. Directors and officers who knowingly authorize or permit a failure to maintain the register, or who record information they know to be false or misleading, face up to $1,000,000, five years’ imprisonment, or both. Shareholders who ignore the corporation’s request for information are exposed on the same terms.
In practice the commercial consequence arrives long before anything else does. A corporation that cannot obtain a certificate of compliance has a problem the next time a lender, a purchaser or an investor makes one a condition of closing.
The B.C. side of the ledger
B.C. companies have a parallel obligation, and the two regimes are easy to conflate.
Since October 2020, a private B.C. company has had to prepare and maintain a transparency register of its significant individuals at its records office. The threshold is broadly similar, covering 25% or more of the issued shares or the voting rights, and the ability to elect or remove a majority of the directors. The register has to be updated when the company learns of a change, and the company has to record the reasonable steps it took to identify who belongs on it.
The difference until now has been visibility. The B.C. register sits in the company’s own records office and is available to directors and to a defined list of regulators and law enforcement. The public cannot search it.
That is changing. Amendments to the Business Corporations Act will require B.C. companies to file transparency register information with BC Registries, with part of it publicly searchable, on a cycle that closely mirrors the federal one: an initial filing after incorporation or continuation, an annual filing, and an update within 15 days of learning of new or different information. Check the current in-force date before you rely on the timing.
What to do about it
Pull the ISC or transparency register and read it against the share register and the shareholders' agreement rather than from memory. Trace holding companies and trusts through to individuals. If the corporation filed nil, make sure you can say why, and that the steps behind that conclusion are written down somewhere other than in someone's recollection of a phone call.
And if anything has changed since the last annual return, the 15-day clock has probably already started running.
If you would like us to review your register before Corporations Canada does, get in touch.