On January 15, 2015, further provisions under Canada’s Anti-Spam Law, commonly known as “CASL”, came into effect. These provisions prohibit the installation of computer programs, or sending of electronic messages from a computer system where a computer program has been installed, without express consent. More information can be found on these new provisions in an article I wrote for our Technology and IP Group. With these provisions coming in to effect, it is an opportune time to remind ourselves of the impact of CASL on M&A transactions.
The purpose of CASL is to promote efficiency and adaptability in the Canadian economy and to increase consumer confidence in electronic commerce across Canada by creating a more secure online environment. CASL does this by forbidding the sending of “commercial electronic messages” to electronic addresses accessed within Canada, unless consent has been given by the recipient and certain legislated content has been included with the message. As mentioned above, it also prevents the unsanctioned installation of computer programs. Infringements of CASL’s provisions can lead to serious fines – up to $1million for individuals and $10million for companies.
Buying a business?
Firstly, how does your potential target currently communicate with its clients? You want ensure that you do not inherit a potential liability. Does it have a emailing list? Does it advertise special offers or promotions via emails? If so, has it received consent from the recipients to do so and do these emails contain the necessary “unsubscribe” language? Remember that a representation and warranty from the vendor may not cover the significant fine that CASL is able to impose and any change in business and marketing practices after the acquisition, to bring the target company into line with CASL, could impact on the target company’s profitability.
Selling a business?
If you are selling your business, consider carefully both whether your business could be in breach of CASL and, as with all matters, the representations and warranties you are asked to give. A purchaser will almost always ask for a representation and warranty from you that your business is in compliance with CASL (either specifically or generally). As with other false representations and warranties, a breach of such a provision could result in significant liability to you.