CANADA Law and Practice Contributed by: Grant McGlaughlin, Sean Stevens and Claire Gowdy, Fasken
In order to eliminate this type of planning, the Income Tax Act was recently amended to include the notion of “substantive CCPCs”, which are private corpora - tions resident in Canada that are not CCPCs but that are controlled in law or in fact, directly or indirectly, by one or more Canadian-resident individuals. Impor - tantly, a substantive CCPC includes a corporation that would otherwise be a CCPC but for a non-resident or a public corporation having a right to acquire its shares or because it ceased to be a Canadian cor - poration. Substantive CCPCs are to be subject to the same higher income tax rates and the refundable tax mechanism that is applicable to CCPCs, and the investment income earned by a substantive CCPC is added to its “low rate income pool”, which when paid out as a dividend to individual shareholders is not eligible for the enhanced dividend tax credit. Moreo - ver, substantive CCPCs do not benefit from the other tax advantages usually conferred to CCPCs, such as those described above. Generally, these amendments apply to taxation years ending after 6 April 2022, sub - ject to certain exceptions. Corporate and Governance Matters Corporate opportunity waivers In Alberta, the Alberta Business Corporations Act was amended in 2022 to permit an Alberta corpora - tion to include a corporate opportunity waiver in its shareholders’ agreement, whereby the corporation expressly waives any interest (present or future) in a particular business opportunity so that a director, offic - er or shareholder may participate in or pursue such opportunity. This rule – nearly identical to a similar rule in Delaware – is generally seen as being beneficial to private equity funds that have board representation on multiple corporations competing in the same indus - try, as it increases certainty for those directors that their actions will not violate fiduciary duties they would otherwise owe to each corporation at common law. As Alberta is currently the only jurisdiction in Canada with a corporate opportunity waiver provision in its corporate statute, it is anticipated that an increasing number of private equity-backed corporations will be incorporated in that province. Corporate transparency requirements Companies governed by the federal statute in Canada – the Canada Business Corporations Act (CBCA) –
are required to maintain a detailed shareholder regis - ter that reflects all individual shareholders who have significant direct or indirect control over the corpo - ration. This obligation extends beyond the previous corporate obligation, which was to maintain a list of registered holders only. The purpose of this reform, like its counterparts in the EU and the UK, is to pro - vide greater transparency in corporate ownership and help combat tax evasion, money laundering and other smokescreen operations. Practically speaking, private equity funds often hold controlling positions (in terms of percentage owned or in fact through shareholder arrangements) in their portfolio companies governed by the CBCA and should therefore be prepared to provide additional information about their own con - trolling interests. Similarly, entities in Québec must provide, for indi - viduals or entities that are registered in the Enterprise Registrar (directors, officers, three largest sharehold - ers and ultimate beneficiaries), the date of birth and professional address or domicile of each individual or entity, as applicable, as well as government identifica - tion for each director. Environmental, social and governance (ESG) While currently just good policy and not statutorily required practice in Canada for private companies, there has been heightened attention on diversity for board and management composition and on ESG cri - teria, including boards having the ability to take into consideration the interest of a company’s stakehold - ers rather than solely its shareholders. These factors have been gaining prominence through case law on the oppression remedy in Canada and through limited partner investment criteria, which sometimes leads to increased requirements imposed on portfolio compa - nies themselves as they carry out their business plans and heightened disclosure obligations if private equity investors exit their investments by way of an IPO. Competition and Antitrust Matters 2025 ushered in a new and important development in competition and antitrust law, specifically that the Competition Act was amended, effective in June 2025, introducing new private rights of action, expanding the number of provisions under which private parties can seek leave to bring applications before the Com -
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