The rule matters for organizations with Canadian sanctions obligations, which extend to persons in Canada and to Canadian individuals and entities operating abroad. For those organizations, ownership analysis should account for Canadian-listed persons and combine their direct and indirect holdings, since screening each owner separately can miss entities that fall under Canada’s dealings prohibitions.
How the guidance aligns Canada’s 50% rule with US and EU practice
Canada’s deemed ownership provisions already set out three ways a listed person can control an entity: holding 50% or more of its shares, ownership interests, or voting rights; having the ability to change the composition or powers of its board; or being able to direct its activities. These criteria are established by Section 2.1 of the Special Economic Measures Act, and Section 2.01 of the Justice for Victims of Corrupt Foreign Officials Act mirrors them.The October update did not create a new statutory threshold or change the law. It clarified how GAC applies the existing 50% test: holdings by listed persons are added together when determining whether an entity is deemed to be owned by them. GAC says the approach counters circumvention through divided stakes and brings Canada in line with like-minded partners. The Office of Foreign Assets Control (OFAC) already aggregates holdings by blocked persons under its 50 Percent Rule, and the Council of the EU’s sanctions best practices call for aggregated ownership by designated persons to be considered in principle.
How aggregate ownership applies in Canadian sanctions screening
Consider an unlisted company in which two persons listed by Canada hold 30% and 20%. Their combined ownership reaches the threshold, so the company is deemed to be controlled by the listed persons and the applicable dealings prohibition extends to it. GAC illustrates the same result with two listed persons who collectively own 50% of an entity. A screening process that evaluates the 30% and 20% holdings in isolation would miss it, even though the company can be subject to Canada’s dealings prohibitions without appearing on the Canadian sanctions list.
Control can still apply below 50%
Aggregation applies only to the numerical ownership test. Canadian law also reaches cases in which a listed person can change the composition or powers of an entity’s board or direct its activities. A major shareholder able to appoint most directors, for example, may satisfy the control test even when the stake remains below 50%.The guidance also identifies share transfers to front persons, buyback rights, dominant influence under an agreement, and the use of trusts or shell companies as factors in whether a listed person directs an entity. Most of these call for a fact-specific review. GAC is firmer on one pattern: where a listed person claims to have sold a controlling stake to a family member or close associate after being listed, GAC infers proxy control absent compelling evidence to the contrary.
What to review in a Canadian sanctions compliance program
GAC encourages persons in Canada and Canadians abroad to implement a sanctions compliance program and undertake rigorous due diligence. For deemed ownership, that review should cover four areas:
Canadian designations. Confirm that Canadian-listed persons are included in direct and indirect ownership analysis rather than inferred from another jurisdiction’s lists.
Aggregate ownership. Test whether holdings by separate listed persons are combined across corporate layers and whether affected unlisted entities enter screening coverage.
Control evidence. Establish how board rights, governance arrangements, share transfers, and other indicators of control are escalated and documented.
Ongoing monitoring. Reassess customers and counterparties when Canadian designations, ownership structures, or control relationships change.
Canada’s dealings prohibitions bar covered persons from dealing in an affected entity’s property, entering into or facilitating related transactions, and providing related financial services, subject to applicable exceptions and permits.
Identify Canadian sanctions exposure with Kharon
Kharon’s Canada sanctions ownership and control data helps organizations identify entities owned 50% or more or that may be controlled by one or more parties sanctioned by Canada, directly or indirectly, individually or in the aggregate.
Frequently Asked Questions
What is Canada’s 50% rule?Under Canada’s deemed ownership provisions, an entity is treated as controlled by listed persons when they hold, individually or collectively, 50% or more of its shares, ownership interests, or voting rights. The applicable dealings prohibition then extends to the entity even if it is not named on a Canadian sanctions list.
What did Canada’s October 2026 guidance clarify?
GAC’s updated guidance, dated Oct. 13, 2026, confirms that holdings by multiple listed persons are aggregated under the 50% test, consistent with U.S. and EU practice.
Can a listed person control an entity while owning less than 50%?
Yes. Canada’s test also covers a listed person who can change the composition or powers of an entity’s board, or who can reasonably be concluded to direct its activities. A major shareholder able to appoint most directors may meet the test with a stake below 50%.
Who must comply with Canada’s 50% rule?
Persons in Canada, and Canadian individuals and entities operating abroad. Organizations outside that scope are not bound by Canada’s dealings prohibitions.
Is Canada’s 50% rule the same as beneficial ownership?
No. Deemed ownership is the 50% control test for sanctions. The 25% beneficial ownership threshold under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) applies to anti-money laundering compliance. GAC notes that the two work alongside each other.
