On October 23, 2014, the Canadian government introduced the
Extractive Sector Transparency Measures Act (the
"Act"). The purpose of the Act is to implement
Canada's international commitments to participate in the fight
against corruption through the implementation of measures
applicable to the resource sector. Specifically, the Act requires
entities involved in the commercial development of oil, gas or
minerals to publicly disclose certain payments they make to
Application of the
Generally, the Act applies to any entity engaged in, or
controlling other entities engaged in, the oil, gas or mineral
is listed on a stock exchange in Canada; or
has a place of business in Canada, does business in Canada or
has assets in Canada and that meets at least two of the following
conditions for at least one of its two most recent financial
(i) the entity has at least $20 million in assets,
(ii) the entity has generated at least $40 million in revenue,
(iii) the entity employs an average of at least 250 employees.
Entities that meet the above criteria must report certain payments
made to Canadian and foreign governments within 150 days of their
financial year-end. For purposes of the Act, governments include
bodies that are established by two or more governments, as well as
any trust, board, commission, corporation, body or authority that
performs or is established to perform a power, duty or function of
government. Beginning two years after the Act comes into force,
entities must also include payments made to Aboriginal governments
The categories of payments that must be disclosed are:
taxes, other than consumption taxes and personal income
fees, including rental fees, entry fees and regulatory charges
as well as fees or other consideration for licences, permits or
bonuses, including signature, discovery and production
dividends other than dividends paid as ordinary
infrastructure improvement payments; or
any other prescribed category of payment.
Entities are only required to disclose payments within a
category of payment that are made to the same payee, if the total
amount of all those payments during the financial year is at least
the amount prescribed by regulation for that category. If no amount
is prescribed by regulation for the category of payment, then the
threshold amount over which disclosure is required will be
$100,000. The definition of "payment" includes payments
that are monetary or in kind. The government may specify the form
of the report, but the Act provides that the report must include an
attestation made by a director or officer of the entity, or an
independent auditor or accountant, that the information in the
report is true, accurate and complete.
To verify compliance with the Act, the government may require an
entity to provide any information or documents, including:
a list of projects for the commercial development of oil, gas
or minerals in which the entity has an interest and the nature of
an explanation of how the entity has treated a payment for the
purpose of preparing a report;
a statement of any policies that the entity has implemented for
the purpose of meeting its obligations under the Act; and
the results of an audit of its report or of the records of
payments for the financial year to which the report relates.
Penalties and Personal Liability of Directors and
Failure to comply with the Act can result in a summary conviction
and fine of not more than $250,000. If an entity commits an offence
under the Act, any officer, director or agent of the entity who
directed, authorized, assented to, acquiesced in or participated in
its commission is a party to and guilty of the offence and liable
on conviction to the punishment provided for the offence, whether
or not the entity has been prosecuted or convicted.
While there is no definitive timeline for bringing the Act into
force, Canada has committed to implementing its international
commitments by June, 2015. Consequently, companies in the
extractive or resource sector should monitor the implementation of
the Act to ensure compliance prior to the Act coming into
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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