I don’t know if you follow enforcement of the Canada’s Anti-Spam Legislation (commonly known as CASL) but if you don’t and you are an officer or director of a company that sends commercial electronic messages — read on. In a recent decision the CRTC, for the first time, held a company director liable for corporate actions under CASL.
First the background. As I hope you are aware, the ability of Canadians to send commercial electronic messages (CEMs or SPAM) has been strictly regulated for several years now. The stated goal of CASL is to “promote the efficiency and adaptability of the Canadian economy by regulating commercial conduct that discourages the use of electronic means to carry out commercial activities”. One of the ways the legislation seeks to achieve this goal is to declutter our ‘inboxes’ of unsolicited, unwanted spam by restricting the situations in which emails and texts can be sent for commercial purposes. The general rule, subject to specific statutory exceptions, is that the sender must have the express or implied consent of the recipient before a CEM can be sent and the CEM itself must comply with specific standards, including the inclusion of an unsubscribe mechanism (often a link) that the recipient can use to be removed from the sender’s CEM list.
CASL is not one of those toothless pieces of legislation we see from time to time. The CRTC is actively engaged in enforcing the law, receiving more than 250,000 complaints a year. And companies face fines of up to $10,000,000 and individuals $1,000,000. Since its enactment in July 2014 the CRTC has issued more than $1,750,000 in fines and collected another $568,000 in negotiated settlements.
Now, back to director liability. The case at hand (File number: 9090-2015-00414) involved a group of companies known as ‘nCrowd’ that engaged in the business of promoting products and services through on-line vouchers and sales coupons. The CRTC found nCrowd failed to include required unsubscribe features in its CEMs and could not demonstrate that it had the express or implied consents of recipients. They also determined that the company CEO and director had turned a blind eye to these business practices. There was no evidence that he conducted any audit procedures to confirm the accuracy of their marketing lists, or that he instituted any policies or practices to ensure the Company’s compliance with the Act.
Under section 31 of CASL a director or officer can be libel for the violations of the corporation if they directed, authorized, assented to, acquiesced or participated in the violation. nCrowd’s CEO and director was found liable under this section and fined $100,000.
This is the first instance of a company director being held personally liable for a CASL violation. It is another wake up call for passive directors who do not take seriously the possibility of personal liability for corporate activities.
As for CASL, as I said earlier, this legislation has real teeth.
As founding partner, Glenn Rumbell brings almost 30 years of business law experience, a distinguished top legal firm background and a passion for helping startups. Since the early 1990s, he has forged a successful and varied career as a lawyer, entrepreneur and investor in Canada’s legal, investment and technology industries.