On June 29, 2021, An Act to implement certain provisions of the budget tabled in Parliament on April 19, 2021 and other measures received Royal Assent. This Act resulted in significant changes to the Canada Emergency Wage Subsidy (CEWS) for employers that are publicly traded corporations or corporations controlled by a publicly traded corporation. If these corporations raised the compensation of executives in 2021 when compared to 2019, then they may be required to repay all or a portion of the CEWS that they receive in the qualifying periods that start after June 6, 2021 (the 17^th qualifying period and subsequent qualifying periods).

Corporations controlled by a public parent corporation

The new provisions do not define the term “control” when determining whether an employer is controlled by a publicly traded corporation. However, subsection 256(6.1) of the Income Tax Act deems a corporation to be controlled by both its parent corporation and any person or group of persons by whom the parent is controlled. Therefore, a Canadian subsidiary of a foreign parent corporation that is publicly traded will likely be caught by the new legislation and will likely have to repay the CEWS received for qualifying period 17 and subsequent periods if the foreign parent corporation raised executive remuneration in 2021 when compared to 2019.

Executive remuneration

The amount of CEWS repayment is based on the total compensation that is reported in the employers’ (or the public parent’s) Statement of Executive Compensation for Named Executive Officers, pursuant to the Canada Securities Administrators’ National Instrument 51-102, Continuous Disclosure Obligations. In Canada, this is the total compensation reported by the employer for its Chief Executive Officer, Chief Financial Officer and the three other most highly compensated executives.

Where the employer does not have to make this disclosure, but the employer is required to make a similar disclosure to shareholders under the laws of another jurisdiction, then the employers’ executive remuneration is determined based on that similar disclosure for the 5 most highly compensated individuals.

In any other case, an employer's executive remuneration is the amount that would be required to be reported by that employer if it were required to make disclosures to shareholders under Canadian securities laws (i.e. using the methodology for preparing form 51-102F6).

Calendar year

The amount of executive remuneration is based on the calendar year, unless the employer’s fiscal year (or the public parent’s fiscal year) is not the calendar year end, in which case, the amount of executive remuneration is pro-rated.

Agreement

Where there is a group of corporations which have to repay subsidy amounts, then the group may enter into an agreement to determine how much will be repaid by each of them. The agreement must be filed in a prescribed form and must be entered into by each member of the group. The group of employers comprises of the employer, the public parent corporation and each other eligible employer controlled in that period by the eligible employer or the public parent corporation.