Extractive Sector Transparency Measures Act Creates New Reporting Requirements for Oil, Gas or Mineral Companies
Posted by David Kandestin, Associate.
In force as of June 1, 2015, the Extractive Sector Transparency Measures Act (“ESTMA“) is designed to reduce corruption by enacting reporting obligations with respect to payments made to Canadian and foreign governments (including government officials) and, after a two year transition period, aboriginal or indigenous governments.
These reporting requirements apply to entities engaged in the commercial development of oil, gas or minerals that are 1) listed on a stock exchange in Canada; or 2) have a place of business in Canada, do business in Canada or have assets in Canada, and meet at least two of the following three thresholds for at least one of their two most recent financial years
- $20 million in assets
- $40 million in annual revenue
- employ an average of at least 250 employees
The reporting requirements include payments made by a foreign company that is directly or indirectly controlled by an entity that meets the above criteria.
ESTMA applies to financial years beginning after June 1, 2015. Entities that are subject to ESTMA are required to report and publicly disclose, within 150 days of the entity’s financial year, payments within a prescribed category made to a “payee” if the total amount of those payments exceeds $100,000 for the financial year (unless another amount is prescribed by regulation).
Payees include all levels of government in Canada or abroad, corporations or other bodies established to perform government powers and their respective employees and public office holders. The prescribed categories include taxes, royalties, fees and production entitlements, among others. Records of payments made in a financial year typically must be kept for seven years from the date of the report.
Non-compliance with ESTMA can result in stiff penalties. Offences are subject to a maximum fine of $250,000 for each day that the non-compliance continues. Further, any director or officer who directed, authorized, assented to, acquiesced in or participated in the non-compliance can be held personally liable, subject to a due diligence defence.
This article is for information purposes only and does not constitute legal advice. We would be pleased to provide legal advice about the matters discussed in this article upon request.