On July 1, 2015, the U.S. Securities and Exchange Commission
proposed a new set of rules that would result in executives of U.S.
publicly-listed companies to pay back incentive-based compensation
in the event of a restatement of the company's financial
statements. The long-anticipated rules were designed to address the
perceived unfairness that results when executives are permitted to
retain incentives that they arguably may not have received had the
company's financials been accurately reported in the first
The SEC's proposal would require national securities
exchanges and associations to adopt rules requiring their listed
companies to adopt, disclose and enforce so-called
"clawback" policies. A clawback would be triggered in the
event of an accounting restatement arising from a material error in
the original financial statements. In the event of a restatement,
the issuing company would be required to recover from executives
any amount of incentive-based compensation he or she received that
exceeds the amount the executive would have received had the
incentive-based compensation been determined based on the
Other notable aspects of the proposal include the following:
The definition of who counts as an "executive" is
quite broad, ranging from company presidents and chief financial
officers, to vice presidents who head up business units, to anyone
in a policymaking role in a company.
The clawback operates on a "no fault" basis, meaning
that executives would be required to return compensation even if
they did not engage in any misconduct and even if they had nothing
to do with the accounting error or the restatement.
The proposal states that companies that fail to comply with the
rules could potentially face delisting from the applicable
securities exchange or association.
Stay tuned for a detailed commentary from our experts on the
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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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