What is the beneficial ownership registry and how will it work?
Property owners can no longer anonymously list companies, trusts, and partnerships. New provincial legislation establishes Canada’s first public registry of beneficial owners of BC property, and has new disclosure requirements.
The Land Owner Transparency Act, which received royal assent on May 16, will establish the first Canadian public registry of beneficial owners of BC property.
The act will require corporations, trusts, and partnerships, which currently own or buy land, to disclose their beneficial owners.
While information about property owned by individuals is already searchable through the Land Title and Survey Authority, beneficial ownership structures are not.
Finance Minister Carole James says she was motivated to bring in the legislation after seeing people use numbered companies, trusts, and partnerships to conceal who owned a property.
“Their decisions led to BC’s international reputation as a place to anonymously invest wealth and left the real estate sector open to tax evasion, fraud and money laundering,” Minister James said.
Why a registry?
Close to one-third of the 100 most valuable residential properties in Greater Vancouver are owned by companies, according to a 2016 report by Transparency International Canada.
Requiring companies, trusts, and partnerships to disclose their controlling shareholders, beneficial owners, and partners lets everyone know who they’re dealing with in BC’s real estate market, according to Law Society of BC president, Nancy Merrill.
What will the registry include?
The registry will include names of all corporate interest holders, beneficial owners, or partners.
More detailed information will be available to tax authorities, law enforcement agencies, and relevant regulators.
How will beneficial ownership work?
The legislation will require that beneficial ownership of properties be recorded:
- At the time the property is legally transferred.
- For all existing property owners with beneficial ownership.
- For any subsequent changes in the beneficial owners.
Corporations, trustees, and partners (reporting bodies) will be required to report who the beneficial owners of properties are through disclosure reports.
Essential to the act is the responsibility of the reporting body, according to Karen Ngan, a lawyer at Clark Wilson.
The reporting body is defined as a relevant corporation, a trustee, a trust, or a partner, responsible for filing requirements at the time of registering an interest in land, explains Ngan.
The application will include filing a transfer declaration, and, if applicable, a disclosure report, said Ngan.
A transfer declaration indicates whether the interest in land will be registered in the name of a reporting body. If it will be, a disclosure report must be filed by the reporting body.
Failure to file a transparency declaration and, if required, a disclosure report, will result in the land title office refusing to register the interest in land, according to Ngan.
Disclosure requirements for reporting bodies arise in three situations, said Ngan. These are:
- On any application to register an interest in land in the name of the reporting body;
- Any time there is a change of interest holders or beneficial owners, even if it does not result in a transfer of legal title to the land; and
- During an initial transition period all those holding an interest in land for a beneficial owner will be required to file a disclosure report.
Information collected will vary depending on the type of entity involved.
Pre-existing, registered owners of an interest in land in BC must, as the reporting body, file a disclosure report on or before a date to be prescribed by regulation, according Ngan.
If a reporting body becomes aware that the disclosure report they filed no longer discloses the current interest holders, they must, within two months, file a new disclosure report.
A reporting body will have the opportunity to complete or correct information provided in previously filed disclosure reports by filing a new disclosure report with the administrator.
Reporting bodies must make reasonable efforts to obtain all required information and confirm its accuracy.
If the reporting body is unable to confirm the identity of interest holders, they must outline the steps they’ve taken to identify the individual(s) and provide reasons why their identity couldn’t be confirmed.
Reporting bodies must make reasonable efforts to notify interest holders of their right to apply to request their information be omitted.
Business Corporations Act
The BC government is amending the Business Corporations Act to require private companies to:
- hold accurate, up-to-date information about the true owners of their shares; and
- eliminate bearer shares, which are unregistered shares owned by the certificate holder.
The private company’s transparency register must include registered owners, beneficial owners, and owners who have indirect control (such as through an intermediary corporation).
Tax authorities, police, and certain regulators will be able to access a private company’s transparency register as part of their work to crack down on white collar crime.
Corporations, trusts, and partnerships that fail to disclose property ownership could face fines of up to $100,000 or 15 per cent of the assessed property value, whichever is greater.
Individuals could face fines up to $50,000 or 15 per cent of the assessed property value, whichever is greater.