The Government of Canada proclaimed the Extractive Sector Transparency Measures Act, S.C. 2014, c. 39, s. 376 (the “Act”) into force on June 1 2015. Section 6 sets out the purpose of this Act as follows:
6. The purpose of this Act is to implement Canada’s international commitments to participate in the fight against corruption through the implementation of measures applicable to the extractive sector, including measures that enhance transparency and measures that impose reporting obligations with respect to payments made by entities. Those measures are designed to deter and detect corruption including any forms of corruption under any of sections 119 to 121 and 341 of the Criminal Code and sections 3 and 4 of the Corruption of Foreign Public Officials Act.
The Act will require an entity¹ to report payments related to the commercial development of oil, gas or minerals to all levels of government, domestically (including an aboriginal government) and internationally. In particular, the Act will apply to an entity that:
- is listed on a stock exchange in Canada; or
- has a place of business, does business or has assets in Canada, and for at least one of its two most recent financial years, meets at least two of the three thresholds below:
- it has at least $20 million in assets,
- it has generated at least $40 million in revenue, and/or
- it employs an average of at least 250 employees.
Reportable payments are those payments – whether monetary or in kind – that are the amount prescribed by regulation or, if no amount is prescribed, $100,000 and include:
- taxes, other than consumption taxes and personal income taxes;
- royalties;
- fees, including rental fees, entry fees and regulatory charges as well as fees or other consideration for licences, permits or concessions;
- production entitlements;
- bonuses, including signature, discovery and production bonuses;
- dividends other than dividends paid as ordinary shareholders;
- infrastructure improvement payments; or
- as otherwise prescribed
Although the Act is now in force, the regulations, which will provide guidance on the disclosure obligations, have not yet been published. The Government of Canada has not indicated when these regulations will be published, but presumably they will be before the first annual reports are due under the Act.
Disclosure of reportable payments will begin on June 1, 2016, except for payments made to aboriginal governments when such disclosure will begin on June 1, 2017. The first annual reports will be due no later than 150 days after the end of a financial year. For example, if an entity has a December 31 year-end, its first annual report will be due on May 30, 2017, or May 30, 2018 if the payment was made to an aboriginal government. The entity is required to keep records of its payment for a prescribed period or, if no period is prescribed, for seven years from the date it submits its annual report.
The Government of Canada may impose corrective measures for non-compliance with the reporting requirements. Furthermore, any person or entity that:
- fails to comply with the reporting standards or any corrective measures;
- knowingly makes false or misleading statements or knowingly provides false or misleading information; or
- structures any payments – or any other financial obligations or gifts, whether monetary or in kind, that relate to its commercial development of oil, gas or minerals – with the intention of avoiding the requirement to report;
is guilty of an offence punishable on summary conviction and liable to a fine of not more than $250,000. Any officer, director or agent 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 person or entity has been prosecuted or convicted.
It is worth noting that the Act allows the Government of Canada to designate the reporting requirements of another jurisdiction as an acceptable substitute for the disclosure obligations under the Act.²
This article contains general information only and is not intended to provide a legal opinion or advice. Please consult a lawyer or compliance advisor for matters related to your situation before relying on any of the statements made in this article.
- An entity means a corporation or a trust, partnership or other unincorporated organization.
- The United Kingdom and Norway have implemented laws requiring the disclosure of payments made to governments. The United States is expected to implement rules under the Dodd-Frank Act, but such implementation has been delayed because of lawsuits. Once they do, it is anticipated that the US rules will become the most commonly used acceptable substitute.