New obligations for companies registered in Quebec to come into force soon
Table of Contents
New obligations for companies registered in Quebec will come into force on Friday, March 31, 2023, and will apply to all enterprises doing business in Quebec, regardless of their jurisdiction of incorporation (provincial, federal, or foreign).
These measures are prescribed by the Act mainly to improve the transparency of enterprises (the “Act”), which was passed in June 2021 by the Quebec National Assembly. The purpose of the Act is to enhance the protection of the public, improve the information available in the Quebec Enterprise Register (the “REQ“) and prevent and fight tax evasion, money laundering and corruption.
Under the Act, companies registered in Quebec will be required to disclose the following additional information in the REQ:
- the names, domiciles, and dates of birth of the ultimate beneficiaries of the entity;
- the type of control exercised by each ultimate beneficiary;
- the date on which each ultimate beneficiary became a beneficiary of the entity and, if applicable, the date on which he or she ceased to be a beneficiary;
- the dates of birth of all natural persons listed in the register;
- a copy of an identification document issued by a governmental authority for each director of the company.
Apart from dates of birth and proof of identity, the above information will be published in the REQ and made available to the public.
In addition, all natural persons listed in the REQ will be required to declare their home address. However, if they wish to keep their home address confidential and avoid having it published in the REQ and accessible to the public, they may declare, in addition to their home address, a professional domicile such as the address of their place of business or their principal place of work. However, it should be noted that a person may declare only one professional domicile in the REQ.
To be considered an ultimate beneficiary, a natural person must meet any of the following conditions:
- be the holder or beneficiary, directly or indirectly, of shares or units of the entity conferring 25% or more of the voting rights;
- be the holder or beneficiary, directly or indirectly, of shares or units of a value corresponding to 25% or more of the fair market value of all the entity’s shares or units;
- have a direct or indirect influence that, if exercised, would result in control in fact of the entity. In other words, a natural person, such as a member of the family of a person involved in the enterprise, a long-standing employee or a client or creditor of the enterprise, who exerts significant influence over the enterprise’s decisions;
- be part of a group of natural persons who have agreed to jointly exercise their voting rights, such that together, the group holds 25% or more of the entity’s voting rights; or
- be a general partner of the entity.
It should be noted that if a company has several ultimate beneficiaries, it must declare all of them in the REQ.
Trusts and non-profit legal persons
For a trust that issues units, the ultimate beneficiaries are the beneficiaries who meet any of the conditions stated above as well as the trustees of that trust. For a trust that does not issue units, the ultimate beneficiaries are the trustees and all the beneficiaries of the trust, except for those whose interests are dependent on the death of another person.
However, non-profit legal persons and sole proprietorships where the natural person operating the enterprise is the sole ultimate beneficiary, are not required to declare an ultimate beneficiary in the REQ. Such enterprises, if registered in the REQ, are only under an obligation to comply with the other requirements of the Act, namely, declare the date of birth of each natural person listed in the REQ and provide a copy of an identification document for each director.
Deadline and procedure
The deadline for disclosing the newly required additional information will be the deadline for filing the annual updating following the date the Act comes into force.
Thus, for the purpose of disclosing the additional information, companies will be required to file an annual updating declaration or a regular updating declaration with the REQ before the end of the period granted by the REQ for filing their next annual updating declaration following the date the Act comes into force. Considering that additional information must be disclosed, the annual updating declaration in the REQ cannot be filed with tax returns unless a regular updating declaration was filed before the deadline for filing the annual updating declaration. In other words, the declaration concerning the new information to be disclosed will have to be filed directly with the REQ before the next annual updating declarations can be filed again with the company’s tax returns.
Last but not least, on March 31, 2024 (a year after the coming into force of the Act) you will be able to search the REQ by first and last name of a natural person.
If you have any queries regarding this memo, we invite you to contact one of the lawyers in our Business and Corporations section who will be pleased to answer your questions and guide you through the procedures required for compliance with this new Act.