Industry Committee on June 5th, 2023

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

First, I would say, going back to the fine issue, there's a $5,000 statutory fine. People may ask, “Is that the cost of doing business?” I would say it's not. That is similar to any other form of non-compliance under the act. That could be for an act or an omission that is not wilful. When you're talking about wilfully providing false information, the fine is up to $200,000 and six months in jail for directors and officers. That is among the most stringent penalties you would find in the world, I would say.

As I said, you keep the $5,000 for someone who omitted—let's say, in good faith—to report something, but if someone does something wilfully, exposing themselves to jail, that, for me, is the hammer, and that's why I think we are best in class in that, if you look at other jurisdictions around the world.

[The Chair, Liberal, Joël Lightbound]

Thank you very much.

Go ahead, Mr. Lemire.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you, Mr. Chair.

Minister, thank you for being with us. Thanks as well for mentioning in your opening remarks the mythic village of Clova, in your region, which was hit by the fires. We're in a similar situation in Abitibi-Témiscamingue, and I understand the feeling of being on alert. I offer all my sympathies and support to the people in your riding, particularly the forest workers and outfitting operators. An entire economic sector is being threatened.

I also want to re‑extend our invitation to meet with us again to discuss the 2023-2024 supplementary estimates in accordance with our order of reference. That's a meeting that committee members always appreciate, as you know.

First, I'd like to address a few points. Bill C‑42 would introduce a new social and environmental responsibility regime for business corporations. I want to emphasize that businesses would be required to consider environmental, social and governance factors in their business decisions and measures. The purpose of this provision is to encourage businesses to adopt a long-term vision and to make a positive contribution to society in addition to generating profits. In the Bloc Québécois' view, these are positive elements. I also want to note that you accepted our recommendation to increase transparency and to ensure greater shareholder accountability by increasing the responsibilities of corporate officers.

However, certain questions remain unanswered. Perhaps you can provide us with some clarification. For example, if business A belongs to corporation B, which in turn belongs to corporation C, is it possible to determine who is the beneficial owner, the one who makes the decisions, if the business is established in a less cooperative country, and if information isn't automatically disclosed to Canada? I am thinking of tax havens, for example.

Would Bill C‑42 help identify the actual owner of a business that has assets in Canada?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

The short answer is yes. The directors and officers of the business have a positive duty to identify the ultimate owner of the business who holds more than 25% of voting rights, and that must be a physical person. In other words, the directors and officers of the Canadian corporation in question have a responsibility to gather and disclose that information. This bill thus creates a positive obligation for directors and officers.

That's why I told you earlier that there are two types of fines. There's a $5,000 fine for those who fail to meet their obligations on time, as a result of an administrative error, for example. However, under the bill, someone who deliberately provided false or erroneous information would be liable to imprisonment for 6 months or a $200,000 fine. This is important because it becomes the responsibility of directors or officers themselves to gather that information on the individuals who hold more than 25% of the corporation's capital stock. Even in the event of overlapping responsibilities, the Canadian director or officer himself or herself must ultimately gather that information and enter it in the registry.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

We saw during our research that some territories, such as the Malaysian territory of Labuan and the British Virgin Islands have strict secrecy laws preventing the public and foreign courts from accessing information on the actual owners of corporations. In other words, these are tax havens that protect each other. Some shell corporations were involved in transactions conducted in France, Brazil and the United States.

How are those countries currently managing this issue, and how are you managing the issues associated with the most stubborn tax havens, if I may call them that?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

First, the directors and officers of a business have a positive duty to take reasonable steps. The courts will have to define reasonable steps in specific cases, such as the one you just mentioned.

Here's something even more interesting. If memory serves me, approximately 120 countries or territories—128, if memory serves me—are also considering the possibility of establishing a beneficial ownership registry. So I think that will require international cooperation. I'm pleasantly surprised to see that so many countries have expressed a wish to establish such a registry.

Getting back to interoperability, that's important because, in a case such as the one you mentioned, the more countries or territories that have interoperable databases accessible to the public, the harder it will be for people who want to conceal their activities to do so. If more than 120 countries or territories in the world have a beneficial ownership registry, people will be able to to crosschecks.

Second, humanity, or rather most countries, are becoming increasingly transparent, somewhat as they were in the case of the minimum income tax, which has been widely adopted around the world.

We also have to make a commitment to transparency, which is why it's important to adopt this bill. We have to demonstrate leadership.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

I know that provides us with some tools. These measures will also help us secure a better framework and to be more agile if we want to address the problems raised by the technological transition, but there's no real response.

If people act in bad faith, they'll nevertheless be able to continue using tax havens without suffering any consequences. We can't really attack tax havens.

What you think about that?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

If the directors or officers of a Canadian corporation provide incorrect information, they'll be liable to six months in prison. I'd suggest they be careful because they'll have a positive duty under the act.

The issue of extraterritoriality was raised. So if 128 countries establish a beneficial ownership registry, it will be increasingly difficult to maintain tax havens. The more countries that have this type of registry, the harder it will be to maintain those tax havens. The international community is committed to this path.

Getting back to interoperability, which is essential, if our registry isn't compatible with those of other countries because we haven't amended the provision regarding 25% of the corporation's stock, it'll be harder for people looking for that information. That's why it's essential to have a common basis under this bill.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you very much.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Lemire and Minister.

Members, as you can see, the bells are ringing. I would need unanimous consent to continue this meeting until 10 minutes before the vote.

Do I have unanimous consent for that?

[Some hon. members]

Agreed.

[The Chair, Liberal, Joël Lightbound]

Also, I'm just looking around the room, and if it's the intention of members to vote electronically, we could push it a little further and get more time with the minister.

Is that the understanding around the room?

[Some hon. members]

Agreed.

[The Chair, Liberal, Joël Lightbound]

That's perfect.

Mr. Fast, the floor is yours.

I'm sorry; I have Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair. I appreciate it.

Thank you, Mr. Minister, for being here.

As we're talking about corporations and accountability, I want to first ask if the minister can update us with regard to Stellantis in Windsor. I'm not shaving until we get a deal, and you can see that I'm starting to get pretty rough here.

[Some hon. members]

Oh, oh!

[Brian Masse, NDP, Windsor West, ON]

Can you perhaps give us a bit of an indication as to what's taking place? There's obviously a lot of interest not only in my community but also in Essex County and across Ontario and Canada.

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

That's a very good question, Mr. Chair.

I'm very happy, and I think you'll have the opportunity to shave in the not-too-distant future. I would say that what you have seen unfolding is us trying to get the best possible deal for our workers, for the auto industry and for Canada. I can tell you that the negotiations with the company are progressing and that I'll be happy to keep you updated as things unfold.

You appreciate that these negotiations are complex and they are sometimes difficult, as you are from the auto sector, Mr. Masse. I remain very confident that we'll get to the right place for everyone at the end, but for now, the discussions are progressing. I think you've seen these things going on and on.

We've been in the auto sector for decades now. I would just say to everyone to take a deep breath. Negotiations are ongoing. For us, it's kind of a day-to-day activity to negotiate with these companies, because there are many companies that want to come to Canada to build batteries, to build the EV ecosystem of the future, not only in Ontario but in Quebec, so my job is to make sure we get the best possible deal for all of us.

[Brian Masse, NDP, Windsor West, ON]

Before I get into questions, I want to acknowledge your hard work on this file. I appreciate your keeping us up as high as possible. I still want to advocate a national auto policy that's a bit more detailed, but at any rate I want to acknowledge your hard work on this issue in particular.

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

Thank you, sir.

[Brian Masse, NDP, Windsor West, ON]

Moving to this issue right here, I want to go back to the $5,000 fine.

I understand what you're saying. It's jail or that, but to prosecute, litigate and charge—all of that—is a big public expense. Why would we not increase the fine? I think sending things through the court system should be the last resort.

The fine is up to $5,000. Why not increase that to at least reflect the basic costs? Has there been costing? What would it actually cost the Canadian government to litigate somebody through that process?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

I'm quite happy to answer that, because I think you would probably agree with me, particularly as you are from the NDP.

The real, vast majority of Canadian corporations will comply and will provide the information needed to maintain the integrity of the system. I come from a small and medium-sized family business, and sometimes there can be an honest mistake made. You don't want to penalize a small business with a fine that would be disproportionate. However, if someone wilfully provides false information, you want to have the big hammer and say, “Well, in your case, you did something illegal. We'll go after you. You'll pay up to $200,000 or you might have six months in jail.”

When we did this kind of balance, I also had in mind the smaller guys who could make an honest mistake at some stage. As you know, $5,000 is a lot of money for a lot of small corporations in Canada. We need to keep the small guy in mind and make sure that if it's an honest mistake, they'll pay a fine of $5,000, while the bad guys may go to jail for up to six months.

[Brian Masse, NDP, Windsor West, ON]

I appreciate that, but it's “up to” $5,000, so the decision could be reflective of that anyway. It could be 500 bucks. If somebody does some type of administrative error, you're right: We don't want to go after the small thing.

By the way, when this came up eight years ago, the NDP actually had these amendments. Our amendments were defeated then, but they're actually here today, so we're very encouraged to see this come forward and we want to see it get done very quickly, hopefully in this session.

I don't want to be argumentative, but it's “up to” $5,000. I understand it now: In the case that you mentioned, a small business might pay maybe 500 bucks, but for these larger corporations, why not have some flexibility so that it can go up to recovering the cost? If they have six months in jail when the hammer comes down, it's going to cost the taxpayers. Maybe I can ask our analysts to find out how much it would cost to prosecute a case like this. I'm curious. I don't know whether we can even find that out, but I'm willing to bet it's more than $5,000, so we end up paying anyway.

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

We can agree to disagree on the philosophy, but for an administrative mistake, let's make sure of the threshold for smaller companies. The vast majority of Canadian companies are small and medium-sized. For the bad actor, for someone who does something wilfully, let's make sure we have the big hammer.

I appreciate where you're coming from and I want to applaud the work of the NDP, and your work, Mr. Masse, in particular; you've done a lot of work on that. However, if you ask me philosophically where I come from, I will say this: For an honest mistake, it's $5,000. That's consistent with what you find in the law in the Canada Business Corporations Act. However, if someone wilfully does something, you take out the big hammer. I'll ask the department, but I think this would be among the strongest penalties in the world. You want to punish the bad guys and somehow make sure that the vast majority of Canadian corporations will never have to deal with that kind of fine. You want to make sure you protect the small guy with a fine of $5,000, which would still be significant for a small business.

[Brian Masse, NDP, Windsor West, ON]

Okay.

On another issue, does this bill, in its context right now, do enough to give oversight of lawyers and accountants? That's primarily where the tools for money laundering are right now. Is it strong enough, in your opinion, for lawyers and accountants to be accessible and part of this review?