Corporate Transparency (CA0066)

Corporate transparency
Issue to be addressed
Concealing information about corporate ownership can facilitate:
• tax evasion
• money laundering
• terrorist financing
• human rights abuses
• corruption
By improving corporate transparency, governments can safeguard against the misuse of
corporations and other legal entities while continuing to facilitate the ease of doing business in
order to foster growth and innovation.
In Canada, the responsibility for corporate law is shared between federal, provincial, and
territorial governments. Additionally, international collaboration and information-sharing
where appropriate can support more effective work in this domain by identifying best practices
and common challenges. Coordination is therefore needed to address corporate issues
effectively.
Commitment
The Government of Canada will continue to work with provincial and territorial governments to
implement the federal, provincial, and territorial finance ministers’ December 2017 Agreement
to Strengthen Beneficial Ownership Transparency. We will:
• require federal corporations to hold beneficial ownership information
• engage with key stakeholders on possible options to improve timely access to beneficial
ownership information
Lead department(s)
Department of Finance Canada (FIN); Innovation Science and Economic Development Canada
(ISED)
23
Milestones
What will we do? How we will know we succeeded? What is our
deadline?
3.1 Implement legislative
amendments to require federal
corporations to hold accurate
and up to date beneficial
ownership information, and
eliminate use of bearer shares
(FIN/ISED)
Amendments made to the Canada
Business Corporations Act
July 2019
3.2 Work with provincial and
territorial governments and key
stakeholders representing
various perspectives on
possible options to improve
timely access to beneficial
ownership information,
including retention and
disclosure obligations relating
to such information and the
exploration of a public registry
option
(FIN/ISED)
Consultations, framed by a discussion
document, with stakeholders from civil
society, private sector, academia and
other sectors are held to discuss issues
relating to beneficial ownership
information, including emerging best
practices in other jurisdictions
July 2019
Federal recommendations are provided
to provincial and territorial governments
on improving timely access to beneficial
ownership information
August 2019
3.3 Continue to work with
provincial and territorial
governments to support
coordinated implementation of
the Agreement to Strengthen
Beneficial Ownership
Transparency
(FIN/ISED)
All elements of the Agreement are
implemented by the federal government
August 2020

Design Report

3. Corporate Transparency

The Government of Canada will continue to work with provincial and territorial governments to implement the federal, provincial, and territorial finance ministers’ December 2017 Agreement to Strengthen Beneficial Ownership Transparency. We will:

• require federal corporations to hold beneficial ownership information
• engage with key stakeholders on possible options to improve timely access to beneficial ownership information

Milestones

3.1 Implement legislative amendments to require federal corporations to hold accurate and up to date beneficial ownership information, and eliminate use of bearer shares (Department of Finance Canada/Innovation Science and Economic Development Canada)

3.2 Work with provincial and territorial governments and key stakeholders representing various perspectives on possible options to improve timely access to beneficial ownership information, including retention and disclosure obligations relating to such information and the exploration of a public registry option (Department of Finance Canada/Innovation Science and Economic Development Canada)

3.3 Continue to work with provincial and territorial governments to support coordinated implementation of the Agreement to Strengthen Beneficial Ownership Transparency (Department of Finance Canada/Innovation Science and Economic Development Canada)

For more details about the commitment text, milestones, self-identified success criteria, and estimated completion dates see, https://open.canada.ca/en/content/canadas-2018-2020-national-action-plan-open-government#toc3-4

Start Date: August 2019

End Date: Varies according to milestone

Context and Objectives

This Commitment builds on commitment 12 from Canada’s third action plan, and is in line with broader international efforts [14] at tackling money laundering, corruption, terrorist financing, and tax evasion by requiring federal corporations to retain and provide timely access to beneficial ownership information. [15] As written, the commitment sets out no information about the negative effects the concealing of corporate information is having in the Canadian context, or of the change that is meant to emerge from the commitment’s implementation.

In Canada, responsibility for regulating corporations is divided between the federal government and the provinces and territories. Strengthening corporate law pertaining to beneficial ownership requires coordination across these differing levels of government. In accordance with milestone 3.1, legislative amendments to Canada Business Corporations Act (CBCA) were made in the October 2018 federal budget bill and received Royal Assent on December 13, 2018. [16] These amendments, which apply only to federally incorporated private companies, [17] came into effect on June 13, 2019. Prior to their enactment there was no corporate statute in Canada requiring corporations to maintain a record of beneficial ownership. Under the amendments, federal corporations are now required to actively collect and maintain information about both registered and beneficial shareholders having ‘significant’ control’ [18] over the corporation. The information required to be held about those with significant control includes: name, date of birth, and address; jurisdiction of residence for tax purposes; day they became or ceased to have significant control; description of the interests and rights they have in shares of the corporation; and a description of how the corporation is keeping the registry up to date. The corporate records are to be available to tax authorities, law enforcement, and other regulators dealing with anti-money laundering and other criminal activities. [19] In addition, extracts of the register may be accessed upon request by shareholders and creditors. [20] In April 2019, the government of British Columbia became the first mover on this front by introducing legislation to create a public registry for beneficial ownership of real estate at the provincial level. [21]

The extent to which the Commitment’s three milestones align with OGP values is mixed. Milestone 3.2 aligns with the value of Civic Participation given its focus on consultations with a wide array of stakeholders. In the light of ongoing uncertainties about whether the public will eventually be granted access to the beneficial ownership records, at this time Milestones 3.1 cannot be deemed to be relevant to the OGP value of Access to Information. Milestone 3.3 focuses on inter- and intra-governmental dialogue. Based on the value definitions provided in the IRM Procedures Manual, it is unclear how it aligns with any of the four OGP values.

The milestones are sufficiently specific so as to be verifiable. Legislative amendments have been made to the CBCA, and by the end of the action plan cycle one will be able to ascertain whether the consultations which are meant to be indicators of success for milestone 3.2 have actually occurred. In terms of milestone 3.3 all elements of the Agreement to Strengthen Beneficial Ownership Transparency have been implemented by the federal government. [22]

The implementation of the milestones is set to contribute to improving corporate financial transparency, albeit not directly for the public just yet nor to the extent that public registries of beneficial ownership would enable. [23] Commitment 3 is an incremental, positive step in working toward enhancing financial transparency in the private sector though it falls short of the desire for establishing public registries of beneficial ownership expressed by civil society MSF members and a number of individuals who offered comments via google docs on the July-August 2018 draft commitment. The commitment is deemed as likely having a moderate potential impact on open government in Canada. In other words, it is an important step forward in the relevant policy areas but remains limited in scale or scope.

Next steps

The opinions expressed during the IRM researcher’s discussions with civil society stakeholders suggest Commitment 3 is viewed as one of the three most important proposed areas of reform in the current action plan. While acknowledging the commitment as a positive step, they uniformly expressed disappointment about the inability to bring about publicly accessible registries of beneficial ownership. For these individuals, public registries are seen as central to the commitment having “a real impact with teeth.” This view was made clear by Tracey Lauriault, a civil society member of the MSF, during the opening ceremony of OGP Global Summit 2019. In her welcome addresses to the plenary she noted,

we did not achieve beneficial ownership. And, if anybody is trying to buy property in Canada right now, now you will see why we really, really need beneficial ownership. [24]

The civil society MSF members consider that there has been a lack of progress on beneficial ownership and that it is directly linked to a combination of the disconnect between the timing of Canada’s OGP action plan creation cycle and the time required to bring about major policy changes and initiatives, a perceived lack of political will, and perceived resistance from Innovation, Science and Economic Development Canada.

Milestone 3.2 offers the opportunity for domestic and international stakeholders to continue engaging with federal, provincial, and territorial governments in working toward making beneficial ownership registries accessible to the public. Building on the experience from the United Kingdom, the IRM researcher recommends that beneficial ownership and public registries be recognized as important tools for tackling domestic and international corruption, money laundering, as well as other illicit activities, and that a problem-centered impact/results oriented variation of this commitment aimed at enabling public access to beneficial ownership records be carried forward into the next action plan.

Transitional Results Report

Commitment 3. Corporate Transparency

Completion: Complete

Commitment 3: Corporate Transparency

Aim of the commitment

This commitment saw the GoC stipulating that it would continue working with provincial and territorial governments to implement the federal, provincial, and territorial finance ministers’ December 2017 Agreement to Strengthen Beneficial Ownership Transparency. [21] Specifically, it pledged to: [22]

The commitment sought to build on commitment 12 from Canada’s third action plan [24] and was in line with broader international efforts [25] at tackling money laundering, corruption, terrorist financing, and tax evasion by requiring federal corporations to retain and provide timely access to beneficial ownership information.

The commitment promised to advance the OGP value of civic participation through milestone 3.2 which focused on government-stakeholder consultations. The commitment was not assessed to be relevant to the OGP value of access to information in the Canada Design Report 2018–2020 because it was not clear that new information would be made available to the public as a result of its implementation. [26]

Did it open government?

Did not Change

As per the information reported at the National Action Plan Open Government Tracker, [27] the three milestones comprising this commitment were completed.

The open government potential of this commitment hinged upon the outcome of milestone 3.2 (work across federal, provincial, and territorial governments, and key stakeholders to improve timely access to beneficial ownership information) and, specifically, the potential extending of the right to access beneficial ownership records to members of the public beyond law enforcement, security, tax, and other authorities.

At the time of writing the Canada Design Report 2018–2020, [28] the relevant legislative amendments [29] to the Canada Business Corporations Act (CBCA) [30] at the core of milestone 3.1 (Implement legislative amendments) had already come into effect. Likewise, for milestone 3.3 (Continue to work with provincial and territorial governments), all elements of the Agreement to Strengthen Beneficial Ownership Transparency had been implemented by the federal government. [31]

In the period spanning 13 February to 30 May 2020, Innovation, Science, and Economic Development Canada (ISED) initiated public consultations on strengthening corporate beneficial ownership transparency in Canada, including creating an accessible central registry (or registries) of the beneficial owners. [32] During this consultation, representatives from ISED and Finance Canada, met in person and via telephone with 29 public, private, and non-profit organizations from across the country, and received 50 written or emailed submissions from “law enforcement and tax agencies, industry associations, privacy commissioners, individual Canadians and a coalition of civil society organizations.” [33] In responding to the IRM Researcher’s request for additional demographic information about the participants, ISED pointed out that the consultation engaged: [34]

The results of the ISED consultations were published in April 2021 in a What We Heard Report. However, the filed submissions and notes/synopses/transcripts of the interviews informing the contents of the report are not publicly available.

The report notes there was agreement among the respondents about the desirability of housing beneficial ownership information in government (i.e., federal, provincial, and territorial) registries, but divergent views on public accessibility. [35] At issue here is a reported tension between perceived benefits of full public access, on the one hand, and concerns about the privacy, security, and investment implications of full public access, on the other hand. The What We Heard Report, points to seeming support among respondents for a tiered access regime “in which law enforcement, tax and other authorities could have unrestricted access to beneficial ownership information, with other classes of users (e.g., private sector companies with anti-money laundering obligations) restricted to a more limited dataset, based on need to know,” along with a phased approach that would begin by “granting access to competent authorities, and gradually expanding access to other parties only once a functional, verified registry (or registries) could be put in place.” [36]

The evidence suggests this commitment contributed to supporting ongoing intergovernmental collaboration and the putting in place of jurisdictional infrastructures to enhance corporate beneficial ownership transparency for law enforcement, security, and tax authorities. What remains unclear, is whether these efforts led to concrete improvements of corporate financial transparency as expected from the commitment text. The consultations were a first step to gather information from stakeholders. However, due to the limited access to the input received, it is not possible to assess the scope and scale of these consultations. Additionally, there is no evidence to suggest that the implementation of the commitment led to disclosing more information or improving channels to disclose or request information, at least not yet for members of the broader public. Likewise, the What We Heard Report reveals a continued lack of consensus, with both civil society representatives of the MSF and other civil society interests continuing to advocate for corporate beneficial ownership registries being accessible to members of the Canadian public. [37]

This said, it must be recognized that in its 2022 Federal Budget, the GoC did commit to:

“accelerating by two years its commitment to amend theCanada Business Corporations Actto implement a public and searchable beneficial ownership registry, which will now be accessible before the end of 2023. The registry will cover corporations governed under the aforementioned Act and will be scalable to allow access to the beneficial ownership data held by provinces and territories that agree to participate in a national registry.” [38]

Following the GoC’s recent commitment to establishing a public beneficial ownership registry, Canada’s future action plans present an opportunity to accelerate progress towards transparent corporate ownership of federally incorporated businesses. The IRM recommends that those directly involved in these future developments consult the Open Ownership Principles to ensure effective disclosure. [39] The GoC could also consider joining the Beneficial Ownership Leadership Group to participate in learning and information sharing among governments undertaking similar efforts. [40]