As of October 1, 2020, B.C. private companies are required to maintain a transparency register of the company’s “significant individuals.” Personal information for each significant individual – including the individual’s date of birth, citizenship, residency and last known address – must be included in the register.
There are several ways for a person to be a “significant individual” of a private company, including being a registered or beneficial owner of 25% or more of the issued shares of the company, or a registered or beneficial owner of shares carrying 25% or more of the rights to vote at the company’s general meetings.
In some cases, determining the significant individuals of a company is a straightforward exercise. For example, a quick look at the Central Securities Register for the company should reveal any registered owner of 25% or more of the issued shares. However, if any shares of the company are held in a family trust (or more accurately, registered in the name of the trustees of a family trust), disclosing the significant individuals of the company can be a trickier – and more onerous – endeavour.
Take the lovely and entirely fictional Jack and Jill as an example. A few years ago, Jack and Jill did some corporate planning that resulted in 25% of the shares of their family business, JackJill Ltd., being legally owned by the trustees of the JJ Family Trust. The beneficiaries of the JJ Family Trust are Jack, Jill, and the “descendants” of Jack and Jill. Jack and Jill have five children and twelve grandchildren. The JJ Family Trust is fully discretionary, meaning that the trustees of the trust can distribute trust property to any of the beneficiaries at any time. Jack and Jill need advice on completing the transparency register for JackJill Ltd.
The trustees of the JJ Family Trust are the legal owners of 25% of JackJill Ltd.’s issued shares, and must be disclosed on the transparency register as such. However, those shares are beneficially owned by the beneficiaries of the JJ Family Trust, because the shares are held by the trustees for the benefit of the beneficiaries. As a result, Jack and Jill will also have to collect personal information for all 19 beneficiaries of the trust – including any minors – and disclose that information on the transparency register.
Jack and Jill’s scenario is all too common in the family trust context: a family trust that includes a broad beneficiary class to maximize the trust’s flexibility and to minimize the addition of beneficiaries after the trust is created. While flexibility is an important trust planning consideration, there is now another important consideration where a trust holds private company shares: the broader the beneficiary class, the greater the required disclosure for transparency purposes.
If you have any questions about your family trust or disclosing trust beneficiaries on your company’s transparency register, please contact Catherine Bunio or our Wills, Estates + Trusts team.
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