Ownership Reporting Requirement

Under Sec. 11 of the Real Estate and Business Brokers Act, 2002 (the “Act”), brokerages that are corporations are required to disclose certain information regarding the corporation’s ownership structure to the Registrar at the time of registration.

In particular, brokerages are required, under Sec. 11 (1), to disclose the identity of:

    • each person that beneficially controls 10 percent or more of the equity shares of the corporation;
    • persons that are associated with each other that together beneficially own or control 10 percent or more of the equity shares of the corporation.

For the purposes of calculating the total number of equity shares, each share that carries the right to more than one vote shall be calculated as the number of shares equalling the number of votes carried. In other words, what is relevant to the Registrar is the level of control or voting weight associated with the shares.

Information regarding the corporate ownership structure of brokerages is a critical component of determining whether an application is fit for registration or renewal of registration. Under Sec. 10 of the Act, the Registrar has to consider whether the financial position of a corporation’s officers and directors afford reasonable grounds that the applicant can reasonably be expected to be financially responsible in the conduct of its business.

The Act also requires brokerages to submit information regarding corporations that hold ownership interests in brokerages. Subsection 1(2) of the Act defines what is meant by the term associated persons which is also relevant to ownership disclosure requirements. In situations where a corporation owns or controls 10 percent or more of the equity shares of a corporate brokerage, the definition requires that corporation’s officers and directors to be identified as part of the application process.

In the case of a partnership that owns more than 10% of the equity shares of a corporate brokerage, the identity of all of the partners to the partnership must be identified and disclosed to the Registrar.

The intent of the ownership disclosure provisions found in the Act is to enable the Registrar to consider the financial position of owners in determining fitness for registration. In the case of corporate ownership structures, the Registrar may request more information than is required in the initial application process.

In a case where a corporate brokerage “A” applicant was 50% owned by two other corporations (Corporations “B” and “C”), the following information would need to be submitted to the Registrar as part of the application process:

With respect to Corporation Brokerage “A” Applicant:

    • Officers and directors of the corporation;
    • Any persons holding more than 10% equity shares of the corporation including Corporations “B” (25 % ownership) and Corporation “C” (25 % ownership).

 

With respect to Corporation “B”:

    • the officers and directors of Corporation “B”;

 

With respect to Corporation “C”:

    • the officers and directors of Corporation “C”.

 

Sec. 18 of the Act further requires that certain changes to the ownership of a corporate brokerage must be disclosed to the Registrar regardless of when they occur in relation to the registration cycle. If a new person or group of associated persons acquires more than 10% of the equity shares of the corporate brokerage, that fact must be disclosed to the registrar within 30 days of the transfer of equity shares. Secondly, brokerages must report any increase in the percentage of shares held by a person or persons associated with each other who already hold more than 10% equity shares in the corporate brokerage.

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