Canada’s modern slavery act keeps Private Equity (PE) and Venture Capital (VC) firms out of the ambit!
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Canada’s modern slavery act keeps Private Equity (PE) and Venture Capital (VC) firms out of the ambit!
The Fighting Against Forced Labour and Child Labour in Supply Chains Act, also known as Canada’s modern slavery act (the “Act”), came into effect on January 1, 2024, to encourage best and responsible business practices.
The legislation creates new obligations for federal government entities and commercial organizations that meet the threshold to report on the measures taken to prevent and reduce the risk that forced labour or child labour is used by them or in their supply chains.
To Whom does the Act apply to ?
- The Act broadly applies to commercial entities that:
- Are listed on a stock exchange in Canada
- Do business or have assets in Canada and meet two of the following conditions in one of their two most recent financial years:
- At least CA$20 million in assets
- At least CA$40 million in revenue
- Employ at least 250 employees.
What are the reporting obligations?
Entities subject to the Act are required to file annual reports with the federal government about the preventative measures taken to prevent and reduce the risk of forced labour or child labour in their operations and supply chains. The first report is due by May 31, 2024, and should cover calendar year 2023.
The report must include information about the entity’s (i) structure, activities, and supply chain, and, (ii) policies and due diligence processes in relation to forced and child labour. In addition, reports must be signed and approved by the board of directors (or other governing body) and available to the public on the entity’s website. Federally incorporated entities must provide these reports to shareholders with their annual financial statements.
What are the consequences of non-compliance?
Entities that fail to comply with the Act or any individual who provides false or misleading information may be found guilty of an offence punishable by summary conviction and liable to a fine of up to CA$250,000. The Act establishes personal liability for any director, officer, or agent of an entity guilty of an offence under the Act.
Are directors or officers of an entity insured?
Coverage may be available to directors and officers under D&O liability insurance policies. Tailored policies may provide several benefits to an entity, such as paying for the cost of defending against allegations involving directors or officers for non-compliance under the Act.
Proprietary blog of Karma Global – collated and compiled by the internal staff of Karma Global with the knowledge and expertise that they possess, besides adaptation, illustration, derivation, transformation, collection and auto generation for its monthly newsletter Issue 23 of May 2024 and in case of specific or general information or compliance updates for that matter, kindly reach out to the Marketing Team – mudra@karmamgmt.com