The Integrity in Public Contracts Act (the "IPCA"), enacted on December 7, 2012 and known as "Bill 1," aims to promote public confidence by implementing a prior authorization regime that ensures integrity in public contracts and subcontracts through the enforcement of an audit system. Under this new prior authorization regime, only those enterprises that, after being subjected to a screening process, satisfy the required integrity standards, will be eligible to enter into contracts with public bodies or subcontracts that are directly or indirectly related to said contracts.

The IPCA modifies 16 statutes, including the Act Respecting Contracting By Public Bodies (the "ARCPB"). The Autorité des marchés financiers (Québec's Financial Markets Authority) (the "AMF") is designated, under the IPCA, as the public guardian responsible for granting prior authorizations to enterprises in a call for tenders or an award process for a contract or subcontract with a public body. The IPCA applies to, among others, municipalities, departments of the government of Québec, crown corporations, school commissions and hospitals.

The AMF keeps a public register of enterprises holding an authorization to enter into a public contract or subcontract. Currently, there are over 130 enterprises registered in the Register of enterprises with authorization to enter into public contracts and subcontracts.

Due to the large number of enterprises that are expected to apply for AMF authorizations, the Québec government has phased in the application of the IPCA. For now, the IPCA only applies to public construction or service contracts and subcontracts involving an expenditure equal to or greater than $40,000,000 and for which the award process is underway or begins after January 15, 2013. It also applies to certain P3 contracts (Order in Council 97-2013) and to contracts listed in the Orders in Council – Certain contracts of Ville de Montréal. At the time of the present publication, there were 175 contracts from the City of Montréal subject to the IPCA (Orders in Council 1226-2012, 96-2013, 206-2013, 414-2013, 482-2013, 544-2013 and 800-2013). Besides the aforementioned contracts, the Québec government may, from time to time, determine other categories of public contracts to be covered by the IPCA. For instance, the AMF has recently announced that subject to an official decision by the Québec government, the new threshold will be lowered for certain public contracts to $10,000,000 in the fall of 2013. The AMF recommends to enterprises intending to compete for contracts of $10,000,000 or more, over the next months, to apply for prior authorization. In addition, the AMF recommends to all interested enterprises to sign up to its email-information service (E-mail Info), available on the AMF website, to receive updates about application filing dates and changes to the authorization process.

When are Enterprises Required to Obtain an Authorization?

An enterprise wishing to enter into a contract or subcontract with a public body must hold an authorization on the date the contract or subcontract is entered into. In the case of a consortium, such authorization must be held by every enterprise participating in the consortium on that date. Furthermore, with respect to a call for tenders, such authorization must be held on the date the enterprise submits its bid, except in cases where the call for tenders provides for a different date that precedes the date the contract is entered into. Enterprises must maintain their authorization throughout the performance of a public contract or subcontract and must notify the AMF of any changes regarding the information provided during the authorization process.

AMF's Powers to Deal with an Authorization Request

Despite certain exceptional circumstances where an authorization may not be required, the IPCA provides for situations where the AMF must either automatically refuse to grant or revoke an authorization and situations where it may exercise its discretionary powers to do so.

The AMF must refuse or revoke any authorization if the enterprise, or any of its shareholders holding 50% or more of voting rights, directors or officers has, in the preceding five years, been found guilty of an offence listed in Schedule I of the IPCA, except where a pardon has been obtained. The offences listed in Schedule I are diverse and relate to an array of statutes, including offences under the IPCA (4 offences), the Criminal Code (36 offences), the Competition Act (3 offences), the Corruption of Foreign Public Officials Act (1 offence), the Controlled Drugs and Substances Act (3 offences) and the Income Tax Act (11 offences). The list of offences can be found here. A further ground justifying an automatic refusal or revocation is that of an enterprise which has, in the preceding five years, been found guilty by a foreign court of an offence which, if committed in Canada, would have resulted in criminal or penal proceedings for an offence listed in Schedule 1 of the IPCA.

On the other hand, according to the IPCA, the AMF may refuse or revoke any authorization if the enterprise fails to meet the high standards of integrity that the public is entitled to expect from a party to a public contract or subcontract. In order to assess whether or not the high standards of integrity that the public is entitled have been undermined by the lack of conformity of an enterprise, the AMF may examine the integrity of its directors, partners, officers and shareholders as well as that of other persons or entities that have direct or indirect legal or de facto control over the enterprise. The AMF may take into consideration whether, among other elements:

  • the enterprise or any person or entity referred to above has links with a criminal organization or with a person or entity that engages in laundering of proceeds of crime or in trafficking of controlled substances;
  • the enterprise or any person or entity referred to above has been prosecuted, in the preceding five years, for any of the offences listed in Schedule I of the IPCA or has been found guilty or prosecuted for any other criminal or penal offence committed in the course of the enterprise's business;
  • the enterprise or any person or entity referred to above has repeatedly evaded or attempted to evade compliance with the law in the course of the enterprise's business;
  • the enterprise is under the control of another enterprise that has, in the preceding five years, been found guilty of an offence listed in Schedule I of the IPCA;
  • a reasonable person would conclude that the enterprise is the extension of another enterprise that would be unable to obtain an authorization or that the enterprise is lending its name to another enterprise that would be unable to obtain an authorization;
  • the enterprise's activities are incommensurate with its legal sources of financing; and the enterprise's structure enables it to evade the application of the ARCPB.

Prior to the enactment of the IPCA, certain groups raised concerns regarding the broad discretionary powers vested in the AMF. Although such groups support the efforts contemplated by the legislator against corruption and related illegal activities in public contracts and subcontracts, they consider that the application of certain sections of IPCA may result in the refusal of authorizations based on subjective grounds. While the practical application of said parameters remains controversial for the time being, eventual court decisions may provide further guidance regarding the exercise of the AMF's discretionary powers.

How to Obtain an Authorization from the AMF?

Enterprises wishing to obtain an authorization must submit an application for authorization that meets the requirements found in the Regulation of the Autorité des marchés financiers under an Act respecting contracting by public bodies. To this end, the AMF has prepared a form entitled Application for authorization by an enterprise that wishes to enter into a public contract/subcontract (available here) that must be filed by the natural person who is the operator if it is for a sole proprietorship, by a director or an officer if it is for a legal person and by a partner if it is for a partnership.

Applications for authorization must include sundry documents, such as an attestation from Revenu Québec stating that the enterprise complies with fiscal laws and has no overdue account payable to the Québec Minister of Revenue (available here).

How is a Prior Authorization Request Treated?

The AMF first forwards the application to the anti-corruption police squad (the "UPAC") so the latter can perform the audits it considers necessary. The UPAC will then provide the AMF with an advisory opinion concerning the enterprise applying for an authorization. Based on this report, the AMF notifies the applicant about its intention to refuse to grant or renew an authorization. Enterprises will then have the opportunity to submit written observations and to provide additional documents to complete their application. Successful enterprises will receive an authorization valid for three years.


The fees for an enterprise applying for an authorization are $400, plus an additional $200 for each person or entity being audited (i.e. directors, officers, shareholders, etc.).


the IPCA foresees fines where:

  • a person makes a false or misleading statement to the AMF to obtain, renew or keep an authorization;
  • a person makes a false or misleading statement when submitting a bid under the ARCPB;
  • a contractor who does not hold an authorization although required to hold one submits a bid for a public contract in response to a call for tenders or enters into a public contract;
  • an enterprise fails to notify the AMF of any change to any information previously provided for the purpose of obtaining an authorization;
  • a contractor makes a false or misleading request for payment to a public body for an amount that includes an amount to which the contractor is not entitled.

Fines for a first offence under the IPCA range between $2,500 and $30,000 for a natural person and between $7,500 and $100,000 for other cases, depending on the nature of the offence. The prescribed amounts are doubled in the case of a subsequent offence.

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.