Written by David Bursey, Sharon G.K. Singh and Patrick J. Sullivan
The May 30, 2017, reporting deadline under the Extractive Sector Transparency Measures Act (ESTMA) is fast approaching. This annual reporting deadline under ESTMA applies to entities that:
- are listed on a Canadian exchange or meet the threshold size requirements (based on assets and revenues);
- are developing oil, gas and minerals (Reporting Entities); and
- have a December 31 financial year-end.
Reporting Entities must file an annual report disclosing certain cash and in kind payments to domestic and foreign governments. Reports must be filed within 150 days of the entity's financial year-end after June 1, 2015–the day ESTMA came into effect.
Reporting Entities with a June 30 year-end had to file their first reports by November 27, 2016. Reporting Entities with a December 31 year-end must file their first report by May 30, 2017.
An officer or director of the reporting entity, or an independent auditor or accountant, must attest that the information in the report is true, accurate and complete. Payments made before June 1, 2017 to Aboriginal governments in Canada need not be reported.
Entities should evaluate reportable payments and payees to ensure compliance with ESTMA. Penalties for contravention can be up to $250,000 per day for every day the offence continues.
While Canada is continuing its commitment through ESTMA to contribute to global efforts to increase transparency and deter corruption in the extractive sector, the United States is reducing it efforts. President Trump recently repealed the U.S. equivalent of ESTMA.
The U.S. Securities and Exchange Commission (SEC) had adopted revised rules requiring resource extraction issuers to disclose payments made to governments for the commercial development of oil, natural gas, or minerals (the U.S. Rules). The U.S. Rules were directed by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The U.S. Rules applied to those entities that: 1) are engaged in commercial development of oil, natural gas or minerals; and 2) must file an annual report with the SEC under section 13 or section 15(d) of the Exchange Act.
The U.S. Rules had required the disclosure of any payments to foreign governments or the U.S. federal government (U.S. states and other U.S. subnational governments were excluded). How the SEC reconciles the U.S. Rules to meet the Dodd-Frank Wall Street Reform and Consumer Protection Act will be important to the global transparency initiative. Meanwhile, companies subject to the U.S. Rules but not to ESTMA may now have a competitive advantage by being able to review what their competitors, subject to the Canadian rules (or other international transparency rules), are paying to governments worldwide.
Please click here to learn more about who must report and further information about ESTMA.