Industry Committee on April 21st, 2009

[Coleen Kirby]

The motion creates a new subclause (3.1). There are a number of requirements in the act that certain information has to be dealt with in the bylaws. For example, the manner of giving notice of member meetings must be dealt with in the bylaws.

However, we have recognized that some corporations are not always good at following the rules, so we've also written in a default: if the bylaws don't deal with this particular matter, then the provision is there. The problem we've discovered after reading some of the Canadian Bar Association material is that if they take that method of giving notice to members and put it in the articles and not in the bylaws, the way the statute is written the default would kick in. So all this motion says is that if something is required to be in the bylaws but has been put in the articles instead, it's okay. So we make sure the default provision we've written in won't apply. That's what this motion does.

[The Chair, Conservative, Michael Chong]

Thank you, Madam Kirby.

(Amendment agreed to) [See Minutes of Proceedings]

(Clause 7 as amended agreed to)

(Clauses 8 to 28 inclusive agreed to)

[The Chair, Conservative, Michael Chong]

Clause 29 is in front of us for consideration, and there is a proposal for this clause to be completely removed from the bill. The government is proposing to have this clause voted down.

Madam Kirby, could you comment on why the government would like to see this clause removed from the bill?

[Coleen Kirby]

This again goes back to the comments of the Canadian Bar Association. Under the Canada Business Corporations Act, which was the base document for drafting this bill, the way money is given in exchange for shares is regulated. In your financial statements, there is a requirement to keep track of a stated capital account, which is the money that's received for shares, and when you're doing your assets minus liabilities and you get your result, it's related to the stated capital account.

It only applies to shares, not to debt obligations. When we were drafting the bill, what we missed and what didn't come out until the Canadian Bar Association brought it out is that this is not an issue that needs to be dealt with in respect of debt obligations. The issue of how much money you get in exchange for a debt obligation is not a matter of statutory corporate governance, but a purely private commercial transaction, and therefore as requested by the Canadian Bar Association, we need to get rid of clause 29. It's not required.

[The Chair, Conservative, Michael Chong]

Thank you, Madam Kirby.

Shall clause 29 carry?

(Clause 29 negatived)

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

You were just seeing whether we were awake.

[The Chair, Conservative, Michael Chong]

I was.

Shall clauses 30 through 145 inclusive....

Yes, Madam Coady.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

I've advised the clerk that we want to look at parts 6 and 7. We would like to do exactly what you've just done on the debt obligation. We'd like to do the same, so we advised the clerk of this. As you've recommended removal of clause 29, we'd like to remove part 6 and part 7.

I can speak to it, if you'd like.

[The Chair, Conservative, Michael Chong]

Could you clarify for the members of the committee what you're proposing to do?

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Okay. It's exactly what we just did with clause 29.

[The Chair, Conservative, Michael Chong]

You would do it to which clauses?

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

It would be to the whole of parts 6 and 7.

[Mike Wallace, Conservative, Burlington, ON]

So which clauses are those?

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

It's all of part 6 and all of part 7. I'll have to look at the numbers in the book.

It's clauses 38 to 116.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Clause 116 is on page 46.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

There you go; you're fast. That's right.

Do you want me to speak to this?

[The Chair, Conservative, Michael Chong]

Just wait one moment.

I am going to call the question on clauses 30 through 37 inclusive.

(Clauses 30 to 37 inclusive agreed to)

[The Chair, Conservative, Michael Chong]

I'll call clauses 38 through 116 inclusive.

Madam Coady.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Certainly I would like to speak to this.

We've been talking about the removal of parts 6 and 7. Part 6 is an older U.S. model and is inconsistent with what the provinces currently have. Most provinces have adopted a uniform securities transfer act, the exceptions being P.E.I. and Nova Scotia, and Nova Scotia has announced that it's moving in that direction. That covers transfers.

Part 6 would really overlap with existing law. Even if a statute does not exist, it does exist in precedents or in common law. It's because of the complexity of part 6, because we're trying to streamline, and because it would be a very unusual circumstance for this to be used. In the meantime, it's inconsistent with what the provinces have.

You will recall that the CBA, as well as Imagine Canada, did recommend its removal, saying that it's covered in other jurisdictions.

That's part 6. Do you want me to go to part 7?

[The Chair, Conservative, Michael Chong]

Perhaps we could have the officials from the Department of Industry comment on the proposal in front of committee to remove part 6 from the bill.

Go ahead, Mr. Lennon.

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

Part 6 and part 7 can in many ways be treated as a piece. They are considered to be what we call “contingent provisions”. It is recognized that very few corporations would use these even as they are currently written. There are provinces that now have adopted uniform transfer-of-securities acts. The federal government has, in its own right, been looking at a federal equivalent that would take into account not only this act but also the Canada Business Corporations Act, the Bank Act, and other financial institutions acts. That's one of the reasons we left this in as it is.

As I said, it would very seldom be used. They are grouped together as a piece, so it does not create an unnecessary and complex piece of work for corporations that would never use them, but you have to think of these as something like the user manuals for a DVD recorder or a Blu-ray player: you can plug them in and play them, and they will work fine, but if you want to use the bells and whistles, you would want to have the rules of the game. You would want to have the manuals in front of you.

If there are legal questions, then a not-for-profit corporation would have to call a lawyer, which is not free. These sections are here to assist those few corporations that may use them. In the event that a federal securities act comes into play, they will be adjusted or addressed at that time.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Lennon.

Go ahead, Madam Coady.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Thank you.

As you pointed out, this is used in very rare circumstances. It adds complexity to this act, and we've all talked about the smaller not-for-profit organizations out there that do not have the benefit of those who can interpret this act. It is used in very rare circumstances. It's found in other provinces and statutes. Most specifically, part 6 is found in the Uniform Securities Transfer Act, which is by and large Canada-wide.

Part 7, as I understand it, is not currently in federal law. It's covered in both Ontario and British Columbia as it exists today, and most trust indentures would be national in scope, so they would be captured by those jurisdictions. This is a huge part of the act. For ease of purpose and because it has been recommended to us for the fact that these are used in rare occurrences and found in other jurisdictions, I would suggest that we could remove them from the bill.

[The Chair, Conservative, Michael Chong]

Thank you, Madam Coady.

Mr. Lennon, would you care to comment?

[Wayne Lennon]

If the committee were to decide to take these two sections out.... First of all, you are right in saying that they make up a large part of the act. However, they are self-contained, and small corporations that would be using this act would never use them. They'd just skip by them. For example, in the Canada Business Corporations Act, the same provisions exist. There are thousands and thousands of small businesses--dépanneurs, dry cleaners--that use the Canada Business Corporations Act, and these provisions don't create a problem for them as they use the act either.

From a technical point of view, if we were to remove parts 6 and 7 as a piece, we would also have to remove all the other references to debt obligations that are scattered throughout the act.