05/4/13

Understanding the Municipal Conflict of Interest Act


Another of the Acts that direct municipal governance is the Municipal Conflict of Interest Act. While considerably shorter than the previously-discussed Municipal Act – eight pages, 15 sections and less than 3,500 words – it is of perhaps equal importance. While it may seem vague to outsiders, it was written to clearly identify the nature of a conflict in black and white.

The Act allows no grey areas: there are no “perceived” conflicts in law, only clearly defined legal ones. This is obviously intended by the stringent wording that lays out what construes a conflict of interest.

This clarity absolves everyone of trying to second guess the intention of the Act, or trying to interpret degrees of conflict.

As lawyer Stephen D”Agostino writes,

The Municipal Conflict of Interest Act (“Act”) places a significant burden and risk upon local representatives. The standard of care in the Act is greater than that placed on elected representatives at the federal and provincial levels. Since its original proclamation in 1972, the Act has been tested in the Courts on numerous occasions. Often, the context for the dispute involves circumstances outside of the Act; the remedies of the Act providing a convenient arsenal for strategic advantage… The Act follows a simple model. Generally, if there is a “matter” before Council that touches on the councillor’s “direct or indirect pecuniary interest”, then there is a duty on the councillor to refrain from participating in the decision-making process related to the matter. Unfortunately, when dealing with conflict matters, this simple framework has been complicated by statutory exceptions, inclusions, and judicial interpretations.

There are two kinds of interest in the Act: direct and indirect. While direct conflict is not clearly defined, indirect is:

Indirect pecuniary interest
2. For the purposes of this Act, a member has an indirect pecuniary interest in any matter in which the council or local board, as the case may be, is concerned, if,
(a) the member or his or her nominee,
(i) is a shareholder in, or a director or senior officer of, a corporation that does not offer its securities to the public,
(ii) has a controlling interest in or is a director or senior officer of, a corporation that offers its securities to the public, or
(iii) is a member of a body, that has a pecuniary interest in the matter; or
(b) the member is a partner of a person or is in the employment of a person or body that has a pecuniary interest in the matter. R.S.O. 1990, c. M.50, s. 2.

Further, the Act defines ‘controlling interest':

“controlling interest” means the interest that a person has in a corporation when the person beneficially owns, directly or indirectly, or exercises control or direction over, equity shares of the corporation carrying more than 10 per cent of the voting rights attached to all equity shares of the corporation for the time being outstanding;

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