On June 1, 2015, the Extractive Sector Transparency Measures
Act came into force, creating stringent reporting standards
for Canadian oil, gas and mining companies. The Act applies to any
entity engaged in the oil, gas, or mining sector that:
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 meets at least two of the following
conditions for at least one of its two most recent financial
has at least $20 million in assets;
has generated at least $40 million in revenue; and/or
employs an average of at least 250 employees.
Any entity that meets the above criteria is required to file,
within 150 days of their financial year-end, reports of payments
made to any government in Canada or in a foreign state, or to a
body that performs or is established to perform a government power,
duty or function. All reports must be publically posted and
Canadian parent companies are responsible for filing reports on
behalf of their subsidiaries.
Non-compliance with the reporting, public accessibility, or
record-keeping provisions of the Act are criminal offences
punishable on summary conviction with fines of up to $250,000. An
offence of non-compliance continued or committed on more than one
day constitutes a separate offence for each day on which the
offence is committed or continued, which creates the possibility of
significant monetary penalties. The Act also provides significant
enforcement powers including audit powers by an independent
auditor, and search warrant powers.
The company, as well as its officers, directors, or agents or
mandataries, are all potentially criminally liable for
non-compliance. The Act, however, does offer a due diligence
defence. Therefore, if an organization fails to comply with the
Act, the existence of a robust compliance program may provide a
full defence to any charges. The Act thus highlights the need for
resource companies to ensure that adequate compliance measures are
Beginning with their next fiscal year, resource companies will
need to internally track payments to governments and report these
payments within 150 days from their fiscal year-end. For example, a
company with a December 31, 2015 year-end will need to internally
track all government payments made starting on January 1, 2016 and
report 2016 payments that are above the reporting thresholds by no
later than May 30, 2017. Reporting of payments to Aboriginal
governments has been delayed for two years, as consultations are
The extent of payments required to be reported is very broad,
licence and other fees;
bonuses, including signature, discovery and production
dividends, other than dividends paid as ordinary
infrastructure improvement payments; or
as otherwise prescribed.
The threshold amount for each category of payments to be
reported will be set out in regulations, which have yet be
published. In the absence of such regulations, the threshold amount
will be a total of $100,000 to any single payee over the course of
the financial year. The reports must be certified as true, accurate
and complete by a company's director, officer or external
auditor. Further, the reports must be made available to the public
for a period prescribed by regulation or, where no period is
prescribed, for a period of five years.
The reporting obligations will assist in the detection of
potentially improper payments and will provide law enforcement
agencies, concerned citizens, and non-governmental organizations
with the ability to scrutinize the activities of global resource
The Act is a key part of Canada's efforts to more fully
implement its international commitments in the fight against
domestic and foreign corruption. The implementation of the Act
fulfils the Canadian Government's earlier vow to adopt the
G8's "Publish What You Pay" initiative, and is
consistent with regimes recently instituted in the EU and UK.
Similar regulations are expected to be instituted in the U.S.,
possibly this year.
Canadian resource companies must adopt, implement, and monitor
the effectiveness of their compliance policies to ensure that the
Act's reporting requirements are strictly followed. Such
policies should work in concert with existing corporate accounting,
audit, and IT policies as well as policies designed to ensure
compliance with Canada's Corruption of Foreign Public
Officials Act and other applicable anti-bribery laws.
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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