Bill C-42: An Act to amend the Canada Business Corporations Act and to make consequential and related amendments to other Acts

Tabled in the House of Commons, April 18, 2023

Explanatory Note

Section 4.2 of the Department of Justice Act requires the Minister of Justice to prepare a Charter Statement for every government bill to help inform public and Parliamentary debate on government bills. One of the Minister of Justice’s most important responsibilities is to examine legislation for inconsistency with the Canadian Charter of Rights and Freedoms [“the Charter”]. By tabling a Charter Statement, the Minister is sharing some of the key considerations that informed the review of a bill for inconsistency with the Charter. A Statement identifies Charter rights and freedoms that may potentially be engaged by a bill and provides a brief explanation of the nature of any engagement, in light of the measures being proposed.

A Charter Statement also identifies potential justifications for any limits a bill may impose on Charter rights and freedoms. Section 1 of the Charter provides that rights and freedoms may be subject to reasonable limits if those limits are prescribed by law and demonstrably justified in a free and democratic society. This means that Parliament may enact laws that limit Charter rights and freedoms. The Charter will be violated only where a limit is not demonstrably justifiable in a free and democratic society.

A Charter Statement is intended to provide legal information to the public and Parliament on a bill’s potential effects on rights and freedoms that are neither trivial nor too speculative. It is not intended to be a comprehensive overview of all conceivable Charter considerations. Additional considerations relevant to the constitutionality of a bill may also arise in the course of Parliamentary study and amendment of a bill. A Statement is not a legal opinion on the constitutionality of a bill.

Charter Considerations

The Minister of Justice has examined Bill C-42, An Act to amend the Canada Business Corporations Act and to make consequential and related amendments to other Acts, for any inconsistency with the Charter pursuant to his obligation under section 4.1 of the Department of Justice Act. This review involved consideration of the objectives and features of the Bill.

What follows is a non-exhaustive discussion of the ways in which Bill C-42 potentially engages the rights and freedoms guaranteed by the Charter. It is presented to assist in informing the public and Parliamentary debate on the Bill. It does not include an exhaustive description of the entire bill, but rather focuses on those elements relevant for the purposes of a Charter statement.

Bill C-42 would make a number of amendments to the Canada Business Corporations Act (CBCA), building on amendments introduced in Budget Implementation Act, 2022, No. 1, aimed at achieving greater transparency in relation to the beneficial ownership of Canadian corporations governed by the CBCA.

New powers to collect and disclose beneficial ownership information

The proposed amendments would add to the information that companies are required to keep in their register of individuals with significant control under section 21.1 of the CBCA, and that they may be required, in accordance with section 21.21, to send to the Director appointed under the Act (“the Director”). “Individual with significant control” is defined in the CBCA and includes people who own, control or direct a significant number of shares of a corporation as well as people who have significant influence over the corporation without owning any shares. Under the proposed amendments, the register would have to include the residential address of every individual with significant control along with their address for service if an address for service has been provided to the corporation. It would also have to include the citizenship of every individual with significant control.

The proposed amendments would authorize the Director to provide beneficial ownership information to a provincial corporate registry or to a provincial government department or agency responsible for corporate law within the province.

In addition, the proposed amendments would require the Director to make certain beneficial ownership information available to the public. For each individual with significant control, the information that would be made publicly accessible would be:

The obligation to make this information public would not apply in respect of beneficial owners who are under 18 years of age. Beneficial ownership information could also be excluded from the public registry, on application by an individual with significant control, in certain circumstances. This would be the case where the Director reasonably believes that making the information available would present a serious threat to the safety of the individual with significant control. It would also be the case where the Director is satisfied that the individual lacks decision-making capacity, where the information is to be kept confidential pursuant to obligations under legislation governing conflicts of interest, or where prescribed circumstances apply to the individual.

Right to be secure against unreasonable search or seizure (section 8 of the Charter)

Section 8 of the Charter protects against “unreasonable” searches and seizures. The purpose of section 8 is to protect individuals against unreasonable intrusions upon their privacy. A search or seizure that intrudes upon a reasonable expectation of privacy will be reasonable if it is authorized by a law, the law itself is reasonable (in the sense of striking an appropriate balance between privacy interests and the state interest being pursued), and it is carried out in a reasonable manner. Because these powers to collect and disclose beneficial ownership information have the potential to interfere with privacy interests they may engage section 8 of the Charter. The following considerations support the consistency of these provisions with section 8.

The proposed new provisions would apply to a narrow set of information that is necessary to identify the natural persons who own and control Canadian corporations. Privacy interests in this information are diminished given the limited information involved and the commercial and regulatory context, in which privacy expectations are generally lower. The proposed amendments would help to counter the misuse of federally incorporated companies for illegal activities, including money laundering, terrorist financing and tax evasion, by facilitating timely access to beneficial ownership information by relevant agencies. The creation of a central and publicly accessible registry would align with international best practices and would further the goal of improving corporate transparency and accountability more generally, allowing people and financial institutions to make more informed decisions about the companies with which they do business. The provisions governing the public registry are tailored to protect the privacy of minors and of individuals whose safety could be jeopardized by the public availability of the information.

Amendments to existing powers to gather and disclose information

Bill C-42 would also make modifications to existing information gathering and disclosure powers under the CBCA. It would amend the inquiries power in section 237 of the CBCA, which authorizes the Director to make inquiries of any person relating to compliance with the Act, in order to clarify that in the course of such an inquiry, the Director may require the person to provide any records or other documents or information. It would also re-enact and amend the inspection power in section 266 of the Act, which entitles a person who has paid the required fee to examine and make copies of documents or information provided to the Director. Where an individual with significant control makes an application to exclude beneficial ownership information from the public registry, the application and related documents would not be available under section 266.

Finally, Bill C-42 would enact a new provision to protect whistleblowers. In circumstances where a person, on their own initiative, provides information relating to the commission of wrongdoing in the meaning of the Act, the Director would be prohibited from making that information, or any information that could reasonably be expected to reveal the identity of the person, available. The Director would, however, be permitted to provide this information to an investigative body referred to in section 21.31(2) of the Act, the Financial Transactions and Reports Analysis Centre of Canada or any prescribed entity.

Because these powers to collect and disclose information have the potential to interfere with privacy interests they may engage section 8 of the Charter. The following considerations support the consistency of these amendments with section 8. Incorporation under the CBCA reflects a choice to enter into a highly regulated sphere of activity in which privacy expectations are diminished. The re-enacted inquiries power would continue to be available for the regulatory purpose of verifying compliance and preventing non-compliance with the Act, and not for the purpose of advancing a penal investigation. It is, as such, similar to regulatory inspection and requirement powers that have been upheld in other contexts. The inspection power in section 266, providing for public access to information that is required to be sent to the Director, furthers transparency and reflects a reasonable trade-off for the benefits of incorporation under the CBCA. The proposed amendments to that provision would protect the privacy interests of individuals who have applied to have their information excluded from the public registry of beneficial owners, and of whistleblowers who voluntarily report wrongdoing related to the Act.

Offences and punishment

The Bill would re-enact and amend the offence included in section 21.4(1) of the Act. This offence applies to directors and officers of a corporation who knowingly authorize or allow the corporation to contravene its obligations in respect of beneficial ownership information. Currently, the obligations to which the offence in section 21.4(1) applies are the obligation to prepare and maintain a register of individuals with significant control (under section 21.1 of the Act), and the obligation to disclose the information to an investigative body that has made a request pursuant to section 21.31 of the Act. The proposed amendment would add the obligation to provide the information included in the register to the Director. The punishment for this offence – a fine of up to $200,000 on summary conviction or a maximum term of imprisonment of 6 months – would not change.

Right to liberty (section 7 of the Charter)

Section 7 of the Charter protects against the deprivation of an individual’s life, liberty and security of the person unless done in accordance with the principles of fundamental justice. These include the principles against arbitrariness, overbreadth and gross disproportionality. An arbitrary law is one that impacts section 7 rights in a way that is not rationally connected to the law’s purpose. An overbroad law is one that impacts section 7 rights in a way that, while generally rational, goes too far by capturing some conduct that bears no relation to the law’s purpose. A grossly disproportionate law is one whose effects on section 7 rights are so severe as to be “completely out of sync” with the law’s purpose.

Because the offence in section 21.4(1) of the Act carries the possibility of imprisonment, it has the potential to deprive an individual of liberty and so must accord with the principles of fundamental justice. In reviewing the amended offence provision, the Minister has not identified any potential inconsistencies with the principles of fundamental justice under section 7. The amended offence is tailored to the legislative objectives. It encompasses a strong mens rea (guilty mind) element, applying only where a director or officer has knowingly engaged in the prohibited conduct. Finally, it preserves the discretion of trial judges to impose a fit and appropriate sentence.