In 2004, the Canadian government introduced Bill C-45, also known as the Amendments to the Criminal Code Affecting the Criminal Liability of Organizations, which aimed to address the criminal responsibility of organizations, including corporations. This bill made amendments to the Criminal Code of Canada, specifically to sections 22.1 and 22.2, which deal with the liability of organizations for crimes committed by their representatives. However, it is important to note that these amendments do not change the current laws regarding the personal liability of directors and officers.
As a director or officer of a public corporation in Ontario, it’s crucial to be aware of the legal implications of your actions. The Criminal Code of Canada includes a number of provisions that pertain to fraud, and these can apply to those in leadership positions within a company. For instance, Section 382.1 of the Code makes it an indictable offence for an individual to buy or sell securities by making use of insider information that they have acquired through their office, duties, or occupation within the corporation. Additionally, it’s also a crime to disclose insider information, or “tipping,” which can result in either an indictable or summary conviction.
The Code also states that it’s illegal to circulate or publish any false information in a prospectus, statement, or account with the intent to deceive. These types of “white collar” offences under the Criminal Code are not often invoked, but the provincial securities regulators may prosecute securities-related offences under their mandate vested in them under securities legislation.
The Ontario Securities Act (OSA) prohibits illegal insider trading and tipping. As a director or officer of a public corporation, you are considered an “insider” by definition, and it’s illegal to purchase or sell securities while in possession of “knowledge of a material fact or material change” that has not been made public. Similarly, it’s also prohibited to tip others with non-public material facts or changes unless it’s in the course of regular business.
The relevant provincial securities authority can prosecute offenders of insider trading or tipping. The OSA does provide an express defence for those accused of insider trading or tipping if they can prove that they reasonably believed the material fact or change had been disclosed at the time of their actions. Additionally, directors or officers can raise the defence of “due diligence,” even if it’s not explicitly mentioned in the law.
Penalties for violating the OSA can include fines of up to $5,000,000, imprisonment for up to 5 years less a day, or both. For insider trading or tipping specifically, fines can be as high as triple the profit made or loss avoided.
Another legislation to be aware of is the Corruption of Foreign Public Officials Act (CFPOA) which makes it illegal to bribe foreign public officials, whether the bribe is given within or outside of Canada. This includes offering or giving any money or other valuable thing with the intent to influence the official’s duties.
It’s important to note that directors and officers are not automatically held liable for criminal acts committed by the corporation solely due to their position. Like any individual, a director or officer must commit the prohibited act and have the corresponding knowledge or intent for a particular offence. However, if they are found to have directed the corporation to commit a crime, they may be charged along with the corporation.
A director or officer can become a “party” to an offence in the corporate context through a variety of actions, such as aiding or abetting the commission of an offence, engaging in criminal activity with a common intention, counselling another to commit an offence, or being an accessory after the fact. It’s important for directors and officers of organizations to be aware of these changes in the law and to take appropriate measures to ensure compliance with them.
It’s also important to note that Bill C-45 introduced the concept of “corporate culture” as a mitigating factor when determining the sentence for a corporation found guilty of an offence. This means that the courts will take into account the steps taken by the corporation to prevent and detect the illegal activity in question when determining the appropriate sentence. This highlights the importance of implementing and maintaining a strong compliance program within the organization to mitigate the risk of criminal liability.
