Over the past decade, Canada has joined a growing coalition of governments from around
the world in toughening its stance against the improper influencing
of foreign and domestic government officials. Two recent Government
of Canada initiatives encourage acquirers involved in extractive
resource industries, or with service contracts with the federal
government, to enhance their diligence efforts to account for new
susceptibilities related to corruption and bribery.
Extractive resources industries
On March 1, 2016, the Department of Natural Resources issued
finalized implementation tools that provide more precise guidance
on the underlying disclosure obligations of companies required to
comply with the Extractive Sector Transparency Measures
Act (the ESTMA). The stated purpose of
this recently enacted legislation is to increase transparency and
ensure Canadian businesses involved in resource extraction
industries are supporting the proper development of the countries
hosting their operations.
Companies subject to the ESTMA will be required to publicly
report any payments made to foreign and domestic government
officials and, soon, the Indigenous governments in Canada. Failure
to comply with the ESTMA would leave a company and its officers and
directors susceptible to a wide variety of discretionary corrective
orders, additional disclosure requirements, summary convictions and
fines of up to $250,000. With an internally established limitation
period of 5 years, potential purchasers will need to enhance their
diligence efforts regarding their targets' relationships with
governments and officials.
Federal government contracts
Receiving less media attention than the ESTMA, the Canadian
government's newly revised Integrity Regime (the
Regime) has recently taken effect and applies to
all federal procurements and real property transactions. Under the
Regime, any "suppliers" (individuals or companies seeking
to do business with the Government of Canada) that have been
convicted in the last 3 years of a wide variety of integrity
related offences will be disqualified from contracting with the
federal government for a period of 5-10 years. The Regime has the
same effect on any supplier if a member of its board of directors
has been similarly convicted.
The Canadian government has now begun notifying companies they
suspect may face debarment. This has included suppliers whose
affiliates have been subject to similar foreign convictions. In
such cases, the supplier would be required to retain the services
of qualified and approved independent third parties to perform an
assessment and determine whether the supplier was involved in the
actions that led to the affiliate's conviction. If they were,
the supplier will be rendered ineligible. This potential loss of
present and future contracts with the federal government will
require keen acquirer's to consider the susceptibility of
foreign and local targets, and their affiliates, to convictions of
a broad range of integrity related offences.
The author would like to thank James Parker, articling
student, for his assistance in preparing this legal
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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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