Industry Committee on March 31st, 2009

[Al Hatton]

To the second point, absolutely, and on the first point, I think it's a balance, because at the same time there have to be accountability and rigour, and we're subject to the same growing level of skepticism and cynicism about organizations and how they actually use their resources. So anything that enhances our ability to prove and to validate that we're adopting best practices in terms of being responsible organizations is good. If it tips over to that's what we're spending all of our time on, or too many resources on, then you know what? That hasn't worked.

It really is that balance, but absolutely, we'll have to do it anyway. With regard to any support, certainly for the member organizations we have and those we fund, we would have to make sure they are capable of following this kind of regime. The simpler it is, and whatever support we would get, that would be great.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Hatton.

Thank you, Mr. Masse, for those questions.

We'll end this first panel of witnesses and suspend for two minutes to allow the next panel of witnesses to appear.

I want to thank the Canadian Institute of Chartered Accountants and the United Way for appearing in front of us today.

Thank you very much for your testimony and for the briefs.

[The Chair, Conservative, Michael Chong]

Today, the committee will hear officials from Industry Canada.

A vote will be held at 5:15 p.m. I believe we have 50 minutes.

Mr. Charland, you have the floor for 10 minutes.

[Roger Charland, Senior Director, Corporate and Insolvency Law Policy and Internal Trade Directorate, Department of Industry]

Thank you, Mr. Chair and members of the committee.

Thank you for inviting me to appear before you to clarify some points with respect to Bill C-4, An Act respecting not-for-profit corporations and certain other corporations, and to answer any questions you may have. It's a pleasure to be here.

I'm the senior director of the corporate and insolvency law policy and internal trade directorate at Industry Canada. I'm joined by Wayne Lennon, the senior project leader on the not-for-profit file, who works directly with me, and Coleen Kirby, manager of the policy section at Corporations Canada, the agency that would be responsible for the administration of the statute.

As you've already heard from the Minister of State for Small Business and Tourism and other witnesses before this committee, this is a bill that has a long history. Variants of this bill were introduced in Parliament in 2004, twice in 2008, and now in 2009. The bill is intended to improve and modernize an old statute that applies to some 19,000 federal not-for-profit corporations. It does so in a number of ways.

For example, it greatly simplifies the incorporation process, replacing ministerial discretion for issuing letters patent with a process more akin to incorporation as a right. It reduces the paper burden and associated costs for smaller corporations by allowing them to forgo audits of financial statements, with the support of members. It provides the maximum flexibility to not-for-profit corporations to organize their affairs through articles and bylaws. It allows information to be provided to members by electronic means, including the holding of electronic meetings, if members so wish. It provides a clear and well-understood defence for directors and officers against unwarranted liability. It provides members with a new set of rights, including the right to financial information, the right to make proposals for discussion at an annual meeting, and the right to use the oppression remedy in the event of a conflict within the corporation. It provides more public transparency for a corporation that obtains its funding through public solicitation or by government grants. It provides clear rules and procedures for a whole range of contingency situations, including debt financing and trust indentures.

Admittedly, many of these provisions will never be used by most corporations. But the new act will eliminate ambiguities that in some instances can cost a not-for-profit corporation thousands or even hundreds of thousands of dollars in legal fees before a resolution can be reached.

These are only a few of the bill's many improvements over the current legislation.

As committee members know, Industry Canada was aided during the development of the policy that led to this bill by the input of hundreds of stakeholders who were consulted in 2000, 2002, and 2005. During those consultations, many suggestions and recommendations were received, a great number of which found their way into the proposed statute.

Members of the committee, my colleagues and I are prepared to assist you in any way we can by answering any questions you may have.

Thank you.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Charland.

We will continue with Mr. Rota.

[Anthony Rota, Liberal, Nipissing—Timiskaming, ON]

Merci beaucoup, monsieur le président.

We saw something here earlier. I know the CGAs and the CAs were here. I know the way in which the bill was written. We have other examples where the script was put in and we saw it very plainly. It recognizes the accounting that's basically done on a provincial basis.

The concern I have is that if we start making changes, it sounds as if we're getting into a muddle over an argument that is happening among associations. I'm not even sure if it's a provincial matter that the federal government is getting into. What advice would you have as far as meddling with CGA and CA disputes within the provinces?

[Wayne Lennon, Senior Project Leader, Corporate and Insolvency Law Policy and Internal Trade Directorate, Department of Industry]

The bill is very similar, if not exact, to the Canada Business Corporations Act and the Canada Cooperatives Act in that the act itself does not define what the accounting standards are. It really doesn't care. But to the extent that there's a coexistence of corporate entities within a province, it defers to the provincial authorities to make whatever rules or licensing arrangements are required to provide public accounting services within that province.

If the provinces, either through Bill 46 in Quebec or the Public Accounting Act in Ontario, decide to allow CGAs to do public auditing within the confines of the province, it will automatically allow them to do federal incorporations.

[Anthony Rota, Liberal, Nipissing—Timiskaming, ON]

Leaving it to the provinces is the right route to take. It's the safe route.

[Wayne Lennon]

Again, notwithstanding the acts that were cited by the CGAs, it's consistent with other corporate statutes administered by Industry Canada.

[Anthony Rota, Liberal, Nipissing—Timiskaming, ON]

Do you have any concerns about corporations that have less than $25,000 and there's no need for an audit? I've heard some concerns that may leave the door open for some darker sides of society to take advantage of that. Are there any safeguards within this bill that would allow or prevent illegal actions or illegal activities to take place?

Say somebody opens up 25 or 10 non-profit corporations, runs them to about $20,000 or $25,000 and then doesn't have to worry about an audit and just goes from one to the other. That was something that was brought up by someone. I'm not sure if that's realistic. If it is realistic, is there anything within the bill that would prevent that?

[Wayne Lennon]

It's $50,000 and lower that one need not do an audit.

First, there are member remedies. The financial statements have to be provided to members, even though they're not audited. This $50,000 would be for soliciting corporations. Those financial statements, even though they may not be audited, have to be deposited with Corporations Canada so they'd be available for public scrutiny, including scrutiny by regulatory officials, police officials, FINTRAC, Revenue Canada, or anybody who wants to look at them. There is that public oversight.

For non-soliciting corporations, of course, it's $1 million, but money could only be collected from members themselves, so it's a different situation.

For soliciting corporations that get their money from the public or from government grants, there are other ways of looking at their books even though they may not be audited.

[Anthony Rota, Liberal, Nipissing—Timiskaming, ON]

I'll pass it on to my colleague, Mr. Garneau.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Thank you, Mr. Chair.

I understand the Canadian Bar Association sent you their proposed changes, a fairly large number. I would like to get, in your words, what your feelings are about those changes and whether you think some of them should be incorporated.

[Roger Charland]

We received their suggestions for changes and we're looking at them. At this point we don't have a position on any one of them in terms of whether we would agree or not. We could undertake to get back to the committee if the committee so wishes.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

In some of the presentations we have received from witnesses there seems to me to be an encouragement to simplify wherever possible. Is that something that appeals to Industry Canada?

[Roger Charland]

I think some of the proposals that have been submitted go to maybe simplifying the drafting. It doesn't really change the nature of the provision or what the provision was intended to do. To the extent that it would create greater clarity, it becomes interesting in terms of possibilities. But we still have to look at some of these and assess their full implication in terms of how they would play with the other provisions and whether it's simply a matter of drafting, in terms of getting the drafting clearer, or whether it unintentionally changes some of the elements of the bill.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

In some cases, complete sections are recommended to be removed as being not necessary. I think it would be very useful for us to know what your feelings are about some of those. I can remember 6 and 7 repeatedly mentioned as not being really necessary.

[Roger Charland]

We can get back to the committee on that if it would be useful. I can't answer at this point in time.

[The Chair, Conservative, Michael Chong]

If you could get back to the committee, that would be useful. If you do get back to the clerk, we'll make sure that gets distributed to all members.

Do you have another question? Thank you.

Mr. Vincent, you have the floor.

[Robert Vincent, Bloc, Shefford, QC]

Thank you, Chair.

I would like to congratulate Mr. Rota for the excellent question he asked earlier.

I would like to say two things to you. First, the Canadian Bar Association sent you a 74-page brief. I imagine that you read the 50 provisions in this brief. Does this brief contain anything that would make you want to amend this new bill?

[Roger Charland]

As we indicated, I believe that it is premature to answer today. We read them and are continuing to study them. I intend to return to some of the Canadian Bar Association's proposals, particularly the elimination of parts 6 and 7, but we could also do so for all their recommendations. However, I am unable to state our position on every one of the proposals.

[Robert Vincent, Bloc, Shefford, QC]

I am asking this question because we will soon be studying this bill clause by clause. When we carry out this exercise and prepare a report I hope that we will have been able to benefit from your expertise in advance. It would be unfortunate if you were to recommend certain amendments and none were included in our document.

You mentioned parts 6 and 7. As far as you know, are there other clauses requiring amendment, according to the brief?

[Roger Charland]

I do not know the 50 proposals off the top of my head, but we will get back to you as quickly as possible.

[The Chair, Conservative, Michael Chong]

We will be studying the bill clause by clause on Thursday afternoon. It would be best for us if the clerk received your recommendations tomorrow.

[Robert Vincent, Bloc, Shefford, QC]

It is primarily for that reason. On Thursday, when we have finished the clause-by-clause study, we will no longer be able to suggest amendments to the bill. Will you consider their recommendations by Thursday. I imagine that they did a great deal of work to arrive at a 74-page brief. We should follow up because they worked hard and it would be unfortunate to ignore the brief. I expect that there is something in it or that you would have something to say about it.