CANADA Law and Practice Contributed by: Sarah Gingrich, Sean Stevens, Tracy Hooey and Marie-Josée Neveu, Fasken
the company who directed, authorised, assented to, acquiesced in or participated in its commission is liable for the offence. Directors could also potentially face liability under their duty of care for offences under the Act committed by the company. 6. Audit, Risk and Internal Controls 6.1 External Auditors Canadian private companies generally have the option regarding whether or not to appoint an external audi - tor, and often waive this requirement. Public compa - nies in Canada must appoint an external auditor and the auditor must meet independence requirements. It is not uncommon for large Canadian public compa - nies to have an auditor independence policy which, among other things, establishes a process for deter - mining whether the audit and other services provided by the external auditor to the company affect its inde - pendence vis-à-vis the company. 6.2 Risk Management and Internal Controls Unlike Delaware corporate law, Canadian corporate law does not expressly provide for a “Caremark” claim – ie, where a plaintiff can file suit if a company’s board either failed to properly implement an internal system of reporting and controls for key risks facing the com - pany or, having established such an internal system, failed to properly monitor it. Nonetheless, instituting an effective enterprise risk management system is best practice in Canada, as a failure to do so could potentially give rise to a breach of duty of care claim against the company’s directors (see 3.6 Legal Duties of Directors/Officers ). It is therefore common for large Canadian public companies to have one of their com - mittees address enterprise risk considerations and regularly report to the full board.
address evolving stakeholder demands. Key issues in ESG reporting in Canada have recently included: • board oversight, where boards are taking a more active and structured role in ESG oversight, with increasing delegation of environmental and social responsibilities to board committees; • executive compensation, where some companies are increasingly incorporating ESG metrics into their short-term and long-term executive compen - sation decisions; • companies continuing to report using major ESG frameworks, including the ISSB (International Sustainability Standards Board) Standards, SASB (Sustainability Accounting Standards Board) Standards, TCFD (Task Force on Climate-Related Financial Disclosures) Recommendations, and GRI (Global Reporting Initiative) Standards, with a growing number of companies reporting against all four; • social disclosure, which continues to encompass factors beyond diversity and inclusion to include discussion regarding community development, employee wellness, philanthropy, and engagement with Indigenous communities; • greenhouse gas (GHG) reporting, with many com - panies addressing GHG emissions inventories and maintaining at least one reduction target; and • a growing number of companies reporting under the Fighting Against Forced Labour and Child Labour in Supply Chains Act (which entered into force in 2024), outlining policies, risk assessments, and employee training. The ESG disclosure of Canadian public companies has been shifting from employing “ESG” terminology to broader “sustainability” terminology. 7.2 ESG Developments It remains unclear whether Canadian securities regu - lators will impose mandatory climate-related disclo - sure. Such requirements had been under development and were expected to be released towards the end of 2025. However, in April 2025 the CSA announced it was pausing this matter to (i) support Canadian markets and issuers as they adapt to recent devel - opments in the global and geopolitical landscape (ie, trade and tariff uncertainty); and (ii) focus on initiatives
7. Environmental, Social and Governance 7.1 ESG Requirements
ESG reporting in Canada remains fluid as public com - panies continue to consider how best to approach ESG disclosure and build reliable internal systems to
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