SANCTIONS “DEEMED OWNERSHIP”
UNDER CANADA’S NEW RULES, NAME SCREENING ALONE NOW OBSOLETE?
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For years, many people have attempted to comply with Canada's sanctions rules by simply "name screening". New guidance from Global Affairs Canada ("GAC") may have made that approach obsolete, refocusing compliance on "deemed ownership", including aggregated ownership, board control rights and de facto control (e.g., through contracts and proxies).
In this International Trade Report, we review the new rules and their implications for Canadian sanctions compliance.
The New Deemed Ownership Rules
On October 13, 2026, GAC updated its guidance (the “Guidance”) on the “deemed ownership” rules added in 2023 to Canada’s Special Economic Measures Act (“SEMA”) and the Justice for Victims of Corrupt Foreign Officials Act (“JVCFOA”). Under section 2.1 of SEMA and section 2.01 of the JVCFOA, where a person controls an entity, property owned, held or controlled by that entity is deemed to be owned by that person. Control exists if any one of three tests is met: the person holds 50% or more of the shares, ownership interests or voting rights; the person can change the composition or powers of the board; or it is reasonable to conclude the person can direct the entity’s activities, by any means. Because the dealings prohibitions catch any property of a listed person, an unlisted entity controlled by a listed person under any one of these tests is effectively treated as sanctioned!
What the Guidance Clarifies
The Guidance does three things. First, GAC takes the position that interests held by different listed persons are aggregated. For example, two listed persons each holding 49% together meet the 50% threshold, catching the entity as a whole. Second, the board test turns on majority appointment or removal rights, including rights obtained through a shareholder agreement or as a major shareholder holding less than 50%. For example, a listed person holding only 40%, but with a contractual right to appoint a majority of the board, controls the company. Last, the Guidance lists de facto control indicators, such as being the largest shareholder, dominant influence under contracts or articles, and buyback clauses.
Implications & Exposure
A wilful contravention of Canada's sanctions laws is a criminal offence. The Guidance also makes clear that absence from Canada's sanctions lists does not mean dealings are permitted, so "name screening" alone is no longer sufficient.
Entities Controlled by Listed Persons.
Experienced International Trade Counsel
can help navigate these new waters.
Takeaways
New Guidance on Canadian Sanctions indicates that Canada will be applying "deemed ownership" rules broadly. Canadian businesses can no longer rely on a simple "name screening" process. Instead, efforts must be made to understand the counterparty’s full ownership chain, governance rights and contractual arrangements.
Experienced International Trade Counsel can help navigate these new waters.
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