Amendments to the Act Respecting the Legal Publicity of Enterprises - Corporate Transparency at the Heart of Priorities

These amendments apply to any corporation, non-profit organization, partnership, business trust or sole proprietorship, as well as any other business carrying on commercial activities in Québec, whether incorporated in or outside the province.

The fight against tax evasion, fraud and money laundering has become an international priority in recent years, leading several countries, provinces and states to review the legal framework for businesses in this regard. In November 2017, Québec followed suit with the publication of the Action Plan to Ensure Tax Fairness¹, which sets out measures to be implemented to promote corporate transparency and increase the accessibility and reliability of the information contained in the Quebec Enterprise Registrar ("REQ").

On October 3^rd, 2019, the Quebec government launched a public consultation to gather comments on the measures and solutions being considered to strengthen corporate transparency. Several corporate stakeholders and members of the public, including the Canadian Bar Association, Quebec Division, and the Ordre des Comptables Professionnels Agréés du Québec (CPA) published briefs commenting on the measures proposed by the government. Based on the comments received, on March 10^th, 2020, Québec City tabled the 2020-2021 budget in the National Assembly, which largely includes the measures presented in 2017 and 2019.

It was in the midst of the COVID-19 crisis that, on March 17^th, 2020, the Quebec government finally adopted the Act Respecting the Implementation of Certain Provisions of the Budget Speeches of March 17^th, 2016, March 28^th, 2017, March 27^th, 2018 and March 21^st, 2019 which included some of the measures that had been announced in order to promote corporate transparency and the reliability of the information presented in the REQ.

This Act amends inter alia the Act Respecting the Legal Publicity of Enterprises (Chapter P-44.1) (the "Act") in order to, among other things:

• allow the REQ to require documents or information to validate the accuracy of declarations filed with the REQ or of a document transferred to a department or other government agency (Article 74.1 of the Act);
• add the names and domiciles of the three shareholders who hold the most votes to the list of information opposable to third parties in good faith (Article 98 of the Act);
• expand the list of Quebec bodies with investigative powers that may enter into agreements with the REQ in order to communicate all or part of the information contained in the register, the updates made to it, as well as the information or documents obtained to validate the accuracy of the declarations (Article 121 of the Act);
• set the limitation period for a criminal prosecution to one year from the date on which the prosecutor became aware of the commission of the offence and no more than five years have elapsed since the date of commission of the offence (Article 163.1 of the Act);
• give to the Minister responsible, in certain exceptional circumstances, the authority to waive the payment of a fee, penalty or charge (Article 79.1 of the Act).

Companies doing business in Quebec should therefore expect to have to demonstrate the veracity of the information to be declared to the REQ by transmitting, for example, copies of duly adopted resolutions or any other corporate documentation. For this reason, we stress the importance of always preparing and keeping the necessary corporate documents that comply with the legal obligations required by your company's incorporating act in support of the elements that must be declared to the REQ. Do not hesitate to contact our business law team to assist and advise you in the preparation of the necessary corporate documentation. 

The scope of the documents that may be requested remains uncertain and many wonder whether the REQ could, for example, require a copy of a unanimous shareholders' agreement that has been entered.

The issue is important, since, as before, the REQ may communicate all or part of the information and documents collected with a government department, agency or enterprise with which the REQ has, prior to, concluded an agreement. The Act already provided for this right before the new amendments came into force for certain departments and agencies, such as Revenu Québec, among others. The amendments adopted to the Act now add to this list:

• municipal bodies referred to in Article 5 of the Act Respecting Access to Documents Held by Public Bodies and the Protection of Personal Information (Chapter A-2.1);
• organizations whose personnel are appointed in accordance with the Public Service Act (Chapter F-3.1.1), and;
• Commission de la construction du Québec.

Sensitive information could now become more easily accessible by the departments and agencies described above.

Although these amendments are a step forward in terms of corporate transparency, they are only some of the measures that were presented by the Quebec government in its 2017 Action Plan, in its 2019 public consultation, and then in its 2020-2021 budget presented on March 10^th, 2020.

The measures discussed for nearly three years, but are not currently in force, are aimed at adding the obligation for all companies doing business in Québec to obtain and declare to the REQ information on ultimate beneficiaries, that is on the natural person(s) benefiting from at least 25% of the control of the company, and also at adding the possibility for the public to conduct a company search in the REQ using only the name and address of a natural person who would act as director, officer or shareholder. This amendment would make it possible, for example, by entering the name of a natural person in the REQ's search tool, to obtain the complete list of all corporations with which that person acts as director, officer or shareholder.

In addition, regarding ultimate beneficiaries, it should be remembered that, as we presented to you last summer in our June 3^rd, 2019 article titled Société de juridiction fédérale : nouveauté dès le 13 juin, corporations incorporated under the Canada Business Corporations Act (Chapter C-44) (the "Federal Act") are now required to keep a register of individuals having significant control, that is a list of the natural person(s) having at least 25% of the control of the business. In this respect, the amendments presented in the 2020-2021 budget differ from those made to the Federal Act with respect to the intention of making information on ultimate beneficiaries public in the REQ, unlike the register of individuals having significant control at the federal level, which is not accessible to the general public from the outset. Several provinces, such as British Columbia, Manitoba, Saskatchewan and Prince Edward Island, have also adopted or tabled bills that substantially reflect the amendments made to the Federal Act.

At the time of writing, no bill has yet been introduced regarding the concept of ultimate beneficiary or search by natural person in Quebec. We will therefore closely monitor the situation to see if the provincial government will adopt these other measures previously announced and to assess their impact on the obligations of companies doing business in Quebec. In order to obtain ongoing legal information, please do not hesitate to subscribe to our mailing list for the business law sector and do not hesitate to contact our business law team for advice or assistance in the preparation of relevant documents to be sent to the REQ.