An individual with significant control (ISC) has influence over a corporation which amounts to "control in fact", also known as "de facto control". This individual must be listed on the corporation’s ISC register. The ISC’s influence has the capacity to affect the economics, operations and day-to-day management of the corporation.
When an individual is considered an ISC
Determining whether an individual has "control in fact" requires consideration of all factors relevant to the circumstances and goes beyond looking solely at whether an individual has the legal authority to effect change in the board. Factors to consider include:
- how much control the individual has to direct the activities of the corporation
- provisions within the articles of incorporation, rights attached to the individual's shares or securities, shareholders agreement or other agreement that give the individual the right to exercise significant influence or control in the corporation
- whether the individual has the right to veto decisions related to the corporation's business management (for example: adopting/amending the business plan, securing additional loans from lenders, appointing the majority of directors)
- whether the individual has sufficient influence to control a family member who is a shareholder, officer, creditor or supplier of the corporation
- whether the individual's relationships with the corporation and its management give the individual the capacity to have significant influence or control
- whether the corporation is economically dependent on the individual because they are its main or sole supplier/customer.
When an individual is not considered an ISC
When an individual has a relationship with a corporation through the normal course of their business, they are not considered an ISC. Examples of individuals and relationships which would not, on their own, constitute significant influence or control of a corporation:
- Individuals who provide advice or direction to a corporation in a professional capacity, including:
- lawyers
- accountants
- management consultants
- investment managers
- tax advisors
- financial advisors
- Individuals who deal at arm's length with the corporation and whose influence is derived from a business agreement or arrangement that governs the relationship between the parties and how the individual conducts business (for example, a franchise, licence, lease, distribution, supply or management agreement). For example, a franchise agreement may provide the franchiser some control over the products sold by the corporation or the hours during which the franchisee conducts its business. This in itself does not result in the franchiser having control in fact of the corporation
- A liquidator, receiver or insolvency trustee
- A director including a managing director, sole director or a director who holds a casting vote in cases of a tie
- An individual from a professional standards organization or a network of companies that promotes common rules, policies or standards to be adopted by network members