Bill S-13

1st Session, 36th Parliament,

46-47 Elizabeth II, 1997-98

senate of canada

BILL S-13

An Act to incorporate and to establish an industry levy to provide for the Canadian Tobacco Industry Community Responsibility Foundation

Her Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows:

Short Title

1. This Act may be cited as the Tobacco Industry Responsibility Act.

Interpretation

2. The definitions in this section apply in this Act.

“advisory panel” means the advisory panel established under section 11.

“Council” means the Canadian Tobacco Manufacturers’ Council and includes a successor generally recognized by Canadian tobacco manufacturers as their spokesperson.

“Foundation” means the Canadian Tobacco Industry Community Responsibility Foundation established by section 4.

“levy” means the levy for industry purposes imposed by section 36.

“Minister” means the Minister of Health.

“sponsor of the Foundation” means a person who pays a levy.

“tobacco product” means cigarette, tobacco stick, cigar, leaf tobacco intended for retail sale or any other product intended for human consumption the main ingredient of which is tobacco.

“young person” means a person under eighteen years of age.

Purpose

3. (1) The purpose of this Act is to enable and assist the Canadian tobacco industry to carry out its publicly-stated industry objective of reducing the use of tobacco products by young persons throughout Canada, given that

(a) numerous debilitating and fatal diseases and other consequences injurious to health are associated with tobacco use;

(b) young persons throughout Canada use tobacco products and become addicted to tobacco and dependent on its use;

(c) the industry is incapable of addressing on its own the problem of tobacco use by young persons because, by its own admission, its members and agents lack credibility as advocates for a reduction in the use of tobacco products;

(d) young persons can only use tobacco products because the products are manufactured and sold;

(e) it is foreseeable that the industry’s ability to manufacture and sell tobacco products will be further restricted if the rate of use of tobacco products by young persons is not reduced; and

(f) industry efforts to reach this objective need national coordination.

(2) The Act complements the general legislative response to the national public health problem of substantial and pressing concern addressed in the Tobacco Act by coordinating the private and public sectors in a national effort to address the problem of the use of tobacco products by young persons across Canada.

PART I

FOUNDATION ESTABLISHED

4. There is hereby established a corporation without share capital to be known as the Canadian Tobacco Industry Community Responsibility Foundation.

Objects

5. (1) The objects of the Foundation are

(a) to protect the health of young persons throughout Canada from the numerous debilitating and fatal diseases and other consequences injurious to health that are associated with tobacco use;

(b) to protect young persons throughout Canada from inducements to use tobacco products and to counteract such inducements;

(c) to discourage and prevent tobacco use by young persons throughout Canada, including children, and to fight their addiction to tobacco and dependence on its use;

(d) to develop a multi-year strategy to combat the use of tobacco products by young persons;

(e) to monitor the use of tobacco products throughout Canada by gathering, commissioning, sharing and publicizing statistics and, in particular, statistics on the market share of brands and on their use by different groups of young persons;

(f) to gather, sponsor, commission, conduct and share research on the use of tobacco products throughout Canada and on ways to motivate young persons not to start using tobacco products and to cease using them;

(g) to develop and distribute educational tools, plan and execute communications strategies, run advertising campaigns, use the media and disseminate information through other means to discourage and prevent the use of tobacco products by young persons;

(h) to hold and sponsor programs, conferences and peer and other group activities to discourage and prevent the use of tobacco products by young persons;

(i) to engage in and fund, at the local, regional and national levels throughout Canada, activities of health groups and other organizations and persons that are intended to discourage and prevent the use of tobacco products by young persons;

(j) to organize, promote, coordinate, participate in and support, throughout Canada and elsewhere, financially and otherwise, all forms of activity that assists in the protection of young Canadians from tobacco use;

(k) to recommend initiatives by government, the tobacco industry and others that could help to prevent tobacco use by young persons;

(l) to receive and spend the funds raised by the levy imposed by this Act in order to attain its objects;

(m) to receive and spend gifts, legacies and grants in order to attain its objects; and

(n) generally, to do all such things as are conducive to its objects.

(2) The Foundation has the capacity of a natural person and, subject to this Act, all the rights, powers and privileges of a natural person.

Powers

6. The Foundation may, in furtherance of its objects,

(a) borrow money on the credit of the Foundation;

(b) issue, reissue, sell or pledge debt obligations of the Foundation; and

(c) subject to the terms, if any, under which the property was acquired, create any security interest in all or any property of the Foundation, owned or subsequently acquired, to secure any obligation of the Foundation.

7. The Foundation may, in furtherance of its objects, invest the funds of the Foundation in any manner it deems suitable.

8. The Foundation may acquire, establish and manage any non-profit work or undertaking necessary to its objects.

9. (1) The Foundation may do any act or thing that is incidental to or may be conducive to the attainment of its objects.

(2) The Foundation may carry on its activities throughout Canada.

(3) The Foundation has the capacity to carry on its activities and affairs and to exercise its powers in any jurisdiction outside Canada to the extent that the laws of the jurisdiction permit.

Head Office

10. (1) The head office of the Foundation shall be at such place in Canada as the board of directors may determine.

(2) Notice of the location of the head office of the Foundation and of every change in location shall be published in the Canada Gazette.

Advisory Panel

11. The Minister shall establish an advisory panel to advise the Minister with respect to the Foundation, which panel may include a representative of the tobacco industry, representatives of the provincial ministers of the Crown responsible for health, representatives of health care groups and such other persons as the Minister considers appropriate.

12. The Minister shall consult with the advisory panel established under section 11 for the purpose of selecting individuals for appointment as members of the Foundation.

13. No member of the advisory panel may receive any pecuniary gain or remuneration for service on the panel, except a member may be paid by the Foundation a reasonable amount for attendance at meetings of the panel or committees of the panel and may be reimbursed for any reasonable out-of-pocket expenses incurred by them for services rendered to the Foundation, as prescribed by regulation.

Membership

14. (1) The Minister, acting on the advice of the advisory panel, shall appoint as members of the Foundation individuals from across Canada who are from a wide range of groups and communities and who are representative of the diverse perspectives and skills that the Foundation’s members will require in order to carry out its objects.

(2) The Minister shall appoint the first members of the Foundation within 30 days after the coming into force of this Act, and may appoint additional members from time to time.

(3) The first seven members appointed by the Minister under subsection (2) are the first directors of the Foundation and hold office until they are replaced by directors elected at the first general meeting of members.

(4) The first directors shall as soon as possible after their appointment hold a meeting at which they shall

(a) make by-laws for the Foundation;

(b) appoint officers;

(c) appoint an auditor to hold office until the first annual general meeting of members;

(d) make banking arrangements for the Foundation; and

(e) do any other thing necessary to organize the operation and activities of the Foundation.

15. No member of the Foundation may receive any pecuniary gain or remuneration for service as a member, except a member may be paid by the Foundation a reasonable amount for attendance at meetings of the members or committees of the members and may be reimbursed for any reasonable out-of-pocket expenses incurred by them for services rendered to the Foundation, in amounts determined by the board of directors not exceeding maximum amounts prescribed by regulation.

16. (1) An annual general meeting of the members of the Foundation shall be held once in every calendar year.

(2) The first general meeting of the members of the Foundation shall be held within 60 days after the day on which the first member of the Foundation is appointed.

Board of Directors

17. (1) The affairs of the Foundation shall be managed by a board of directors consisting of not less than three directors nor more than such specific number of directors as may be fixed by by-law.

(2) At least one of the directors shall be a health care practitioner with demonstrated expertise in youth behaviour.

(3) Every director of the Foundation in carrying out any functions of a director shall exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

18. (1) The directors of the Foundation shall be elected from among the members of the Foundation at a general meeting of members.

(2) A director whose term of office has expired is eligible for re-election.

19. The board of directors shall meet in its discretion but not less often than once in each quarter of the calendar year.

Other Organizational Matters

20. (1) The directors of the Foundation shall designate the offices of the Foundation, appoint as officers persons of full capacity and specify their duties and functions.

(2) A director may be appointed to any office of the Foundation and two or more offices of the Foundation may be held by the same person.

21. Subject to exceptions provided by by-law, meetings of the members and meetings of the board of directors shall be open to the public.

22. The directors and officers of the Foundation may only be paid such remuneration and reimbursed for any reasonable out-of-pocket expenses incurred by them in performing their duties or attending meetings in amounts determined by the board of directors not exceeding maximum amounts prescribed by regulation.

Conflict of Interest

23. (1) Every position, office, employment, contract or other interest held, directly or indirectly, by the director or by a person or persons with whom the director does not deal at arm’s length, of which the director has knowledge that could give rise to a conflict of interest with the director’s duty to the Foundation, shall be declared by the director in writing to the board of directors at the time the director is elected, or any time thereafter that such an interest is acquired by the director.

(2) A director for whom a contract, grant, activity, plan or other matter to be discussed by the board would give rise to a conflict of interest shall, prior to the discussion, disclose the nature and extent of the personal interest that would be in conflict and follow the directions of the board given under subsection (3).

(3) The board shall give direction to a director who has declared a conflict of interest and shall decide whether the director may participate in the consideration of a matter, should refrain from discussion concerning it, should refrain from voting with respect to it or should withdraw from the meeting.

(4) Where the board determines that a conflict of interest exists between a director’s duty to the Foundation and a personal interest of the director, the board may, in its discretion, put the director to the option of eliminating the conflict of interest or resigning from the board by a specified time.

(5) The board may establish conflict of interest guidelines and additional procedures to resolve conflict of interest, including techniques for the identification of potential conflict of interest situations.

24. (1) No member of the Foundation may be a director, officer, member or employee of a sponsor of the Foundation.

(2) No member of the Foundation may directly or indirectly, knowingly and wilfully, receive a personal financial benefit from a sponsor of the Foundation, except when the benefit is received through the Foundation.

By-laws

25. (1) The board of directors may make by-laws

(a) providing for different classes of members, their term of office, the rights and obligations of members and the cessation of membership by resignation, removal or other means, but without limiting with respect to any voting class the number of members or the right of the Minister to name them;

(b) providing for a maximum number of directors, their election, their term of office and their removal;

(c) providing for meetings of the members and meetings of the directors, including provisions requiring their attendance and provisions for the subject-matter of meetings or portions of meetings that require them to be closed to the public;

(d) providing for the mode of holding meetings, provision for quorum and rights of voting;

(e) providing for the mode of enacting, amending and repealing by-laws;

(f) providing for the establishment and the operations of an executive committee and special committees;

(g) providing for the appointment, functions and duties of the officers, employees and agents of the Foundation;

(h) providing, subject to this Act, for the remuneration of directors, officers, employees and agents of the Foundation and for amounts to be paid to members for attendance at meetings and for the reimbursement of expenses of its members, directors, officers, employees and agents;

(i) regulating the exercise of the powers of subsidiary corporations incorporated pursuant to subsection 26(1), the nomination of their members and the election of their directors;

(j) providing for the head office of the Foundation;

(k) establishing a financial year for the Foundation;

(l) providing for the appointment, at annual general meetings, of auditors and the independent audit of the financial statements of the Foundation and each of its subsidiary corporations;

(m) providing for custody of the corporate seal and certifying of documents issued by the corporation; and

(n) generally, for the governance, activities and undertaking of the Foundation.

(2) No by-law of the Foundation is valid or shall be acted on until it is sanctioned at a general meeting of the members by at least two thirds of the members entitled to vote.

Non-Profit Subsidiary Corporations

26. (1) On application by the Foundation, the Minister of Industry may, subject to such conditions as may be set out in the application, issue under seal of office letters patent of incorporation constituting subsidiary corporations for the purpose of carrying out one or more of the Foundation’s objects without pecuniary gain to the members of the subsidiary corporation.

(2) Notice of the issuance of letters patent pursuant to subsection (1) shall be published in the Canada Gazette.

27. (1) An application for a subsidiary corporation shall set out the proposed name of the corporation, its objects, the powers of the Foundation it is to possess and the place where its head office is to be situated.

(2) Every application for a subsidiary corporation shall be accompanied by a copy of any by-law of the Foundation regulating the exercise of the subsidiary corporation’s powers, the nomination of its members and the election of its directors.

28. (1) On application by a subsidiary corporation, and with the approval of the Foundation, the Minister of Industry may issue under seal of office supplementary letters patent to amend, vary or modify the objects or powers of the subsidiary corporation, but no supplementary letters patent issued pursuant to this subsection shall authorize the subsidiary corporation to pursue any object that the Foundation is not authorized to pursue.

(2) Notice of the issuance of supplementary letters patent pursuant to subsection (1) shall be published in the Canada Gazette.

29. Sections 8, 22 and 23, subsection 24(1), and sections 30 to 33 of this Act, and Part III of the Canada Corporations Act apply, with such modifications as the circumstances require, to every subsidiary corporation incorporated pursuant to subsection 26(1).

Non-Profit Status

30. (1) Subject to any by-law of the Foundation providing for the remuneration of directors, members, officers, employees and agents of the Foundation, any profits or accretions to the value of the property of the Foundation shall be used to further the activities of the Foundation and no part of the property or profits of the Foundation may be distributed, directly or indirectly, to any member of the Foundation.

(2) The Foundation shall spend 90% or more of the aggregate of all amounts raised by the levy under this Act on activities carried on by it and disbursements that directly further its objects, but nothing in this section requires the Foundation to spend the amounts in the fiscal year in which they are raised.

(3) The Foundation shall not spend in a fiscal year more than 10% of the amounts raised by levy in that fiscal year on the administrative costs of the Foundation, but nothing in this section applies to other revenues of the Foundation.

Sponsors

31. Subject to all limitations imposed by law or otherwise, a sponsor of the Foundation may use the name of the Foundation for the purpose of seeking recognition of the sponsorship.

Independence

32. (1) The Foundation is established on behalf of the Canadian tobacco industry but is independent of it.

(2) The Foundation may cooperate with tobacco growers, manufacturers, wholesalers and retailers in order to achieve the Foundation’s objects and in order to assist members of the tobacco industry in their efforts to reduce tobacco use by young persons in Canada.

(3) Notwithstanding subsection (2), no funds of the Foundation shall be paid to a sponsor of the Foundation.

33. (1) For greater certainty, the Foundation is not an agent of Her Majesty and its funds are not public funds of Canada.

(2) The Foundation may cooperate with the Government of Canada or of any province in order to achieve its objects and in order to help the government in its efforts to reduce smoking by young persons in Canada.

Annual Report

34. (1) The Foundation shall, as soon as possible, but no later than six months after the end of each financial year, submit a report to the Council, which report must include

(a) statistics the Foundation has on the use of tobacco products by young persons in Canada;

(b) statistics the Foundation has on the market share of brands and on their use by different groups of young persons in Canada;

(c) statistics the Foundation has on the variations in the annual rates of use of tobacco products by young persons in Canada;

(d) information on the Foundation’s activities and the activities of its subsidiary corporations and an assessment of the effectiveness of these activities; and

(e) financial statements and an auditor’s report for the Foundation and for each of its subsidiary corporations.

(2) Within fifteen days of receiving the report referred to in subsection (1), the Council shall submit it to the Minister, who shall cause a copy of the report to be laid before each House of Parliament on any of the first fifteen sitting days on which that House is sitting after the day on which the Minister receives it.

Wind-Up

35. (1) The Minister of Industry may dissolve the Foundation or any subsidiary corporation

(a) on application therefor by the Foundation, in the manner specified in the application; or

(b) on application therefor by the Council, in the manner the Minister sees fit, if the Foundation has failed for a period of two years to submit to the Council a report required by section 34.

(2) In the event of the dissolution of a subsidiary corporation, any property of the subsidiary corporation that remains after the payment of its debts and liabilities or after the making of an adequate provision for the payment of its debts and liabilities shall be transferred to the Foundation.

(3) In the event of the dissolution of the Foundation, any property of the Foundation that remains after the payment of its debts and liabilities or after the making of an adequate provision for the payment of its debts and liabilities shall be transferred to the Council.

(4) Notice of every dissolution pursuant to subsection (1) shall be published in the Canada Gazette.

PART II

LEVY FOR INDUSTRY PURPOSES

36. (1) Every person who, for the purposes of trade, manufactures, produces or imports tobacco products is liable, on selling, transferring, or otherwise disposing of the tobacco product, to pay a levy at the rate of:

(a) $0.0025 per cigarette;

(b) $0.0025 per tobacco stick;

(c) $0.0250 per cigar; and

(d) $0.0025 per gram of manufactured tobacco used to make a tobacco product other than a product described in paragraphs (a) to (c).

(2) The levy may be assessed and collected only once with respect to a tobacco product.

(3) If the Foundation, in its fifth or any subsequent financial year, determines and reports that five per cent or less of young persons in Canada are using tobacco products, the Foundation may, by resolution of the board of directors sanctioned at a general meeting of the members, reduce the amount of the levy under subsection (1) for the following year to an amount that it considers appropriate or may waive the levy for the year.

(4) Notice of every resolution under subsection (3) that reduces or waives the levy shall be published in the Canada Gazette.

37. Every person who is liable to pay a levy shall

(a) register with the Foundation;

(b) keep statements of account of their activities of manufacturing, producing and importing tobacco products and furnish to the Foundation those statements and such other information and returns as are required under this Part and the regulations;

(c) pay to the Foundation the levies that the person is liable to pay under this Part at its head office if an agent has not been appointed under section 39, or to the agent if an agent has been appointed under that section; and

(d) comply with the requirements of this Act and the regulations made under it.

38. Subject to regulations made under section 41:

(a) a levy that is payable, for the period from the day that this Act is assented to until the day that is the last day of the month in which the first meeting of the board of directors of the Foundation is held, shall be paid, on a self-assessed basis, on the 15th day of the following month; and

(b) for months after the period described in paragraph (a), a levy that is payable for a month or portion thereof shall be paid on a self-assessed basis on the 15th day of the following month.

39. The Foundation may appoint and remunerate an agent to collect the levy for it and the Council may be appointed as agent for this purpose.

40. A levy payable under this Act constitutes a debt payable to the Foundation and recoverable as such in any court of competent jurisdiction, together with all costs associated with the recovery of the debt.

Regulations

41. The Minister may make regulations

(a) providing for the amounts to be paid for attendance at meetings and out-of-pocket expenses of the members of the advisory committee;

(b) providing for the maximum amounts to be paid to the members of the Foundation for attendance of meetings and the maximum amounts for the remuneration of directors and officers of the Foundation and for the reimbursement of out-of-pocket expenses of the members, directors and officers;

(c) providing for the assessment of the levy;

(d) providing for the collection of the levy, including the setting of a date on which a levy is to be paid;

(e) providing for the manner in which the levy is to be paid;

(f) setting out the evidence by which a person’s liability to pay the levy and discharge of that liability may be established; and

(g) providing for such other matters as the Minister considers appropriate.

42. The Minister shall offer the Council the opportunity to make representations with respect to a regulation to be made under section 41, and must allow thirty days from the date the offer is made for the consultation process to take place.

General

43. In the event that the Council ceases to exist or refuses or is unable to act for any purpose under this Act, the Minister may appoint by order, after consultation with such persons liable to pay a levy under this Act as the Minister considers appropriate, a person or body to act in place of the Council for the purposes of this Act.

Offences and Punishment

44. (1) Every person who contravenes section 37 is guilty of an offence and is liable, in addition to paying the levy imposed under this Act,

(a) on summary conviction, to a fine not exceeding $100,000 or to imprisonment for a term not exceeding one year, or to both; or

(b) on conviction on indictment, to a fine not exceeding $300,000 or to imprisonment for a term not exceeding two years, or to both.

(2) In any prosecution under this Act, it is sufficient proof of the offence to establish that it was committed by an employee or agent of the accused, whether or not the employee or agent is identified or has been prosecuted for the offence, unless the offence was committed without the accused’s knowledge or consent and the accused exercised all due diligence to prevent the commission of the offence.

(3) Where a corporation commits an offence under this Act, any officer, director or agent of the corporation who directed, authorized, assented to, acquiesced in or participated in the commission of the offence is a party to and guilty of the offence and is liable on conviction to the punishment provided for the offence whether or not the corporation has been prosecuted or convicted.

(4) No person is, by virtue of subsection (3), to be found guilty of an offence under this Act, if the person establishes that the offence was committed without the person’s knowledge or consent and that the person exercised due care and diligence to prevent the commission of the offence.

(5) A prosecution for an offence under this Act may be instituted, heard, tried and determined by a court in any jurisdiction in which the accused carries on business, regardless of where the subject-matter of the prosecution arose.

(6) A prosecution for a summary conviction offence under this Act may be instituted at any time within two years after the time when the subject-matter of the proceedings arose.

PART III

Transitional Matters

45. The purpose of this Part is to provide a legislative response that will assist the Canadian tobacco industry and its dependents to respond to the problems of economic restructuring caused by the enactment of the Tobacco Act, given that

(a) legislative measures to reduce the promotion of tobacco products to young persons were in both the public interest and that of the tobacco industry;

(b) a decline in the financial sponsorship of its dependents by the tobacco industry as a direct consequence of the enactment of these legislative measures is forecast;

(c) it has been a long-standing practice of the tobacco industry to sponsor the non-profit arts and the arts, cultural and sports industries in Canada and it is in the industry’s interests to retain that goodwill by temporarily assisting in their survival and the preservation of their economic well-being and by fostering their transition from dependence upon it;

(d) the non-profit arts and the arts, cultural and sports industries are a significant part of the Canadian economy for whom a national effort and a reasonable period of time to develop alternative sponsorships and funding will be required;

(e) a reduction in the use of tobacco products by young persons will cause a reduction in the need for tobacco supply from growers;

(f) tobacco growers need time and will have to take financial risks to identify and successfully substitute alternative crops; and

(g) it is in the interests of the tobacco industry to assist in the survival and preservation of the economic well-being of tobacco growers in Canada by fostering a transition of some of their production from tobacco to other crops.

Arts, Culture and Sports

46. A temporary object of the Foundation is to foster a smooth transition for the non-profit arts and the arts, cultural and sports industries in Canada, from dependence upon financial sponsorship by the tobacco industry towards the development of a diversity of financial arrangements and, to this end,

(a) to foster a new business environment for them;

(b) to assist in the development of business and advocacy plans for persons and entities in these sectors who suffer a decrease in financial sponsorship from the tobacco industry;

(c) to encourage the growth of a wide range of financial sponsors for them in the private and public sectors; and

(d) to provide financial support, on a transitional basis, to persons and entities who suffer a decrease in financial sponsorship and in-kind support of their events, activities and permanent facilities from the tobacco industry following the enactment of the Tobacco Act.

47. (1) Within four months after the appointment of the first members of the Foundation, the Foundation shall apply for letters patent of incorporation incorporating a subsidiary corporation to carry out the object of the Foundation set out in section 46 and such other related objects as the Foundation considers appropriate.

(2) The affairs of the subsidiary corporation referred to in subsection (1) shall be managed by a board of not more than 14 directors who are representative of the diverse perspectives and skills that the subsidiary corporation’s board will require in order to carry out its objects, and of whom at least one member is a representative of the non-profit arts in Canada, a second member is a representative of the arts and cultural industries in Canada, a third member is representative of the sports industry in Canada and a fourth member has demonstrated expertise in the production and promotion of artistic, cultural or sporting events, activities or permanent facilities.

48. (1) The Foundation shall transfer to the subsidiary corporation referred to in subsection 47(1) such sums as the subsidiary corporation applies for from time to time in order to allow it to achieve the objective set out in section 46 on behalf of the Foundation, but the total of the sums transferred shall not exceed:

(a) 40% of the amount raised by levy under Part II of the Act in the Foundation’s first financial year;

(b) 32% of the amount raised by levy under Part II of the Act in the Foundation’s second financial year;

(c) 24% of the amount raised by levy under Part II of the Act in the Foundation’s third financial year;

(d) 16% of the amount raised by levy under Part II of the Act in the Foundation’s fourth financial year; and

(e) 8% of the amount raised by levy under Part II of the Act in the Foundation’s fifth financial year.

(2) In order to achieve the objective set out in section 46, the subsidiary corporation referred to in subsection 47(1) shall advertise for applications and may, subject to subsection (3), provide replacement funding in whole or in part, in its total discretion, to be determined annually, by event or activity, to persons who suffer a decrease in financial sponsorship or in-kind support from a sponsor who is in the tobacco industry or who forecast suffering a decrease in financial sponsorship or in-kind support from a sponsor who is in the tobacco industry.

(3) For the purposes of this section, the subsidiary corporation may

(a) in its first program year, replace up to the full amount of any decrease claimed by an applicant;

(b) in its second program year, replace up to 80% of the amount of any decrease claimed by an applicant;

(c) in its third program year, replace up to 60% of the amount of any decrease claimed by an applicant;

(d) in its fourth program year, replace up to 40% of the amount of any decrease claimed by an applicant; and

(e) in its fifth program year, replace up to 20% of the amount of any decrease claimed by an applicant.

(4) An applicant may apply for replacement funding in excess of the amount allowed under subsection (3) and, where the applicant represents that receiving the excess amount in this program year will reduce its need by more than that amount in a later year and provides a written undertaking not to apply for that amount in a later year, the replacement funding may exceed the limits established under subsection (3) in the case of a particular applicant.

Tobacco Growers

49. A temporary object of the Foundation is to provide financial support, on a transitional basis, to tobacco growers who suffer a decrease in revenue arising out of a permanent reduction in their tobacco production following the enactment and coming into force of the Tobacco Act.

50. (1) Within four months after the appointment of the first members of the Foundation, the Foundation shall apply for letters patent of incorporation incorporating a subsidiary corporation to carry out the object of the Foundation set out in section 49 and such other related objects as the Foundation considers appropriate.

(2) The affairs of the subsidiary corporation referred to in subsection (1) shall be managed by a board of not more than 14 directors who are representative of the diverse perspectives and skills that the subsidiary corporation’s board will require in order to carry out its objects, and of whom at least one member is a tobacco grower with demonstrated expertise in the growing of tobacco and a second member is a tobacco grower with demonstrated expertise in the growing of suitable replacement crops for tobacco.

51. (1) The Foundation shall transfer to the subsidiary corporation referred to in subsection 50(1) such sums as the subsidiary corporation applies for from time to time in order to allow it to achieve the object set out in section 49 on behalf of the Foundation, but the total of the sums transferred shall not exceed:

(a) 10% of the amount raised by levy under Part II of the Act in the Foundation’s first financial year;

(b) 8% of the amount raised by levy under Part II of the Act in the Foundation’s second financial year;

(c) 6% of the amount raised by levy under Part II of the Act in the Foundation’s third financial year;

(d) 4% of the amount raised by levy under Part II of the Act in the Foundation’s fourth financial year; and

(e) 2% of the amount raised by levy under Part II of the Act in the Foundation’s fifth financial year.

(2) In order to achieve the objective set out in section 49, the subsidiary corporation referred to in subsection 50(1) shall advertise for applications and may, subject to subsection (3), grant replacement funding in whole or in part in its total discretion, to be determined annually, to persons who suffer a decrease in annual revenue attributable to the permanent replacement of their tobacco production by another crop or who forecast suffering such a decrease in annual revenue from such a replacement.

(3) For the purposes of this section, the subsidiary corporation may

(a) in its first program year, replace up to the full amount of any decrease claimed by an applicant;

(b) in its second program year, replace up to 80% of the amount of any decrease claimed by the applicant;

(c) in its third program year, replace up to 60% of the amount of any decrease claimed by the applicant;

(d) in its fourth program year, replace up to 40% of the amount of any decrease claimed by the applicant; and

(e) in its fifth program year, replace up to 20% of the amount of any decrease claimed by the applicant.

(4) An applicant may apply for replacement funding in excess of the amount allowed under subsection (3) and, where the applicant represents that receiving the excess amount in this program year will reduce its need by more than that amount in a later year and provides a written undertaking not to apply for that amount in a later year, the replacement funding may exceed the limits established under subsection (3) in the case of a particular applicant.

Accountability

52. (1) A recipient of replacement funding granted upon the basis of a forecast under subsection 48(2) or 51(2) shall keep records and account for the funding and shall reimburse the donor corporation to the extent that the actual decrease is less than the decrease that was forecast.

(2) The donor corporation has, on giving not less than seven days written notice to the recipient of replacement funding granted upon the basis of a forecast under subsection 48(2) or 51(2), the right to audit the books and records of account of the recipient.