Enterprises registered in Québec must declare their ultimate beneficiaries, the natural persons who really hold or control the business. Part of that information is public. The list must be reviewed at every change of shareholding, voting rights or structure, not just once a year.
For a long time the register showed corporations held by other corporations, themselves held by other corporations, without anyone ever knowing who stood at the end of the chain. The corporate transparency reforms changed that: you now have to trace back to the natural persons.
Who is an ultimate beneficiary
The concept is not the same as that of shareholder. An ultimate beneficiary is a natural person who, in one way or another, really holds or controls the business. Several situations lead there.
Significant holdings first: someone who owns, directly or indirectly, a significant proportion of the shares or of the voting rights. Indirect holdings count as much as direct ones, which means you have to pass through the intervening corporations rather than stopping at the first.
Influence in fact next, and this is the broadest concept. Someone who, without holding shares, in practice exercises control over the business’s decisions can be caught. A shareholder agreement giving someone a veto or the power to appoint the majority of the board is exactly the kind of mechanism that triggers this characterization.
Certain positions last, such as that of the person who runs the business, can also lead to a declaration depending on the configuration.
The practical consequence is simple to state and demanding to apply: you cannot answer the question by looking at the register of shareholders. You have to read the articles, the minute book et la shareholder agreement ensemble.
A declared shareholder and an ultimate beneficiary are not the same thing
The confusion is constant, and it leads to incomplete declarations.
| Declared shareholder | Ultimate beneficiary | |
|---|---|---|
| Who it is | The person or corporation entered as the holder of shares | The natural person who really holds or controls |
| Can be a corporation | Yes | No, always a natural person |
| Indirect ownership | Not covered as such | Covered; you have to trace the chain back |
| Control without shares | Non visé | Covered, through influence in fact |
| Source of the information | The securities register | Articles, agreements, the group’s structure |
| Mise à jour | On every transfer | At every change of ownership or control |
Having the list drawn up properly costs less than correcting it under audit.
What is public, and what is not
This is the question every entrepreneur asks, and the answer is worth knowing before you structure an ownership chain rather than after.
Part of the information declared can be consulted by anyone in the enterprise register. Transparency is precisely the point of the measure: to let a partner, a financial institution, a journalist or an authority know who stands behind a business. Other information, notably certain personal data such as the date of birth, is not published.
Two consequences follow. If discretion about your patrimony matters to you, be aware that the register is no longer the screen it once was, and raise it before choosing your structure rather than after putting it in place. And conversely, make use of the information: before contracting with a business you do not know, the register now tells you who really controls it.
The structures where the analysis cannot be improvised
For a corporation held equally by two people, the exercise takes two minutes. Four configurations, by contrast, call for real analysis.
The holding corporation in between. Your operating corporation is held by a holding corporation, itself held by you. You are the ultimate beneficiary, and that is what must be declared, rather than entering the holding corporation and stopping there.
The trust. Holding through a family trust raises the question of who must be declared: the settlor, the trustee or the beneficiaries. The answer depends on the terms of the deed and cannot be guessed.
Voting rights separated from value. A structure where one class of shares carries the votes and another the value can lead to ultimate beneficiaries different from the ones you assume.
Agreements that confer control. A veto, a power of appointment or a voting undertaking can create influence in fact in someone who holds almost nothing.
When the list changes
The most widespread mistake is to treat this declaration as an annual form. It actually follows the reality of your business, and several events change it: a transfer of shares, an investor coming in, the buy-back of a departing partner’s shares, a reorganization adding a holding corporation, the signing or amendment of a shareholder agreement, a death and the passing of shares to the heirs.
Each of these events should trigger a check. In practice the best moment is when you are already preparing the résolutions that record the transaction: the question then arises naturally, while the documents are open.
What you risk by not declaring correctly
Failing to declare, or declaring inaccurately, exposes the business to sanctions, and responsibility for compliance rests with those who run it, as our article on director liability.
There is a more immediate risk, though, and it is the one that touches the most entrepreneurs: getting stuck. Financial institutions, buyers in due diligence and a number of clients now check this information. An inconsistent file, where the declared beneficiaries do not match the real structure, halts a transaction for as long as it takes to explain. That is the kind of delay you cannot make up when a closing date is fixed.
If your structure has more than one tier, have the list drawn up properly once. It will then only move at the moments you would be calling us anyway. The annual updating declaration is the vehicle that carries it to the registrar.
Frequently asked questions
Who counts as an ultimate beneficiary of a business?
A natural person who really holds or controls the business: through a significant holding of shares or voting rights, direct or indirect, or through influence in fact over the decisions, for instance under an agreement conferring a veto.
Is this information public?
Some of it is, and can be freely consulted in the enterprise register, since transparency is the point of the measure. Other information, notably certain personal data such as the date of birth, is not published.
When must the list be updated?
At every event that changes ownership or control: a transfer of shares, an investor coming in, the buy-back of a partner’s shares, adding a holding corporation, signing or amending a shareholder agreement, or a death and the passing of shares to the heirs.