Bill C-4 (Historical)

Canada Not-for-profit Corporations Act

An Act respecting not-for-profit corporations and certain other corporations

This enactment establishes a framework for the governance of not-for-profit corporations and other corporations without share capital, mainly based on the Canada Business Corporations Act.
The enactment replaces the “letters patent” system of incorporation by an “as of right” system of incorporation. The current requirement for ministerial review of letters patent and by-laws prior to incorporation is replaced by the granting of incorporation upon the sending of required information and payment of a fee.
The enactment provides for modern corporate governance standards, including the rights, powers, duties and liabilities of directors and officers, along with related defences, and financial accountability and disclosure requirements.
The enactment sets out the capacity and powers of a corporation as a natural person, including its right to buy and sell property, make investments, borrow funds and issue debt obligations.
The enactment sets out the rights of members, including the right to vote at a meeting of members, call a special meeting of members, advance proposals for consideration at meetings of members and access corporate records.
The enactment provides requirements for financial review by a public accountant and financial disclosure based on whether a corporation has solicited funds and its level of annual revenue.
The enactment gives the Director powers of administration, including the power to make inquiries related to compliance and to access key corporate documents such as financial statements and membership lists.
The enactment includes remedies for members and other interested persons to address the conduct of a corporation that is oppressive or unfairly prejudicial to or unfairly disregards the interests of any creditor, director, officer or member.
The enactment provides procedures for the amalgamation, continuance, liquidation and dissolution of a corporation and other fundamental corporate changes. The continuance provisions govern the continuance of bodies incorporated under other Acts and provide a power for the Governor in Council to require a federal body corporate without share capital to apply for continuance under the enactment or be dissolved.
The enactment modernizes the legal regime that applies to corporations without share capital created by special Acts of Parliament by providing that those corporations are natural persons, requiring the holding of an annual meeting and the sending of an annual return, and regulating a change of a corporation’s name and its dissolution.
The enactment gives corporations with share capital created by special Acts of Parliament and subject to Part IV of the Canada Corporations Act six months to apply for continuance under the Canada Business Corporations Act or be dissolved.
The enactment makes a number of consequential amendments to other federal Acts. It provides for a phased repeal of the Canada Corporations Act as corporations cease being subject to the Parts of that Act.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Thank you, Mr. Chair.

I think you answered the question. You anticipate conducting a review of the Canada Business Corporations Act, along with the committee. Officials from Industry Canada came before the committee on Bill C-4 and told us that they planned to modernize certain provisions, particularly with respect to securities transfer. This may have already been discussed, but I was away for a period of time.

Have you heard that it would be important to review these provisions specifically?

Canada Not-for-profit Corporations Act

[Roger Pomerleau, Bloc, Drummond, QC]

Mr. Speaker, I want to thank the hon. member for his remarks.

I would like to remind him that, as members, we all know of numerous organizations and non-profit organizations in our ridings that do incredible work. So we have all come across volunteers and seen them working every day. However, during election periods, we have an outstanding volunteer working for us, the official agent.

In my view, he is, in some ways, the ideal volunteer who meets all of the requirements of the new act we have been discussing. The hon. member was just explaining the merits of Bill C-4 and why we will be supporting it.

This bill will simplify the constitution of non-profit organizations. A volunteer agent could be chosen from among everyone in the organization.

It will clarify the duties and responsibilities of the directors. A volunteer agent's role is laid out in the elections act in a way that it is not generally explained to the members of society.

It will establish lines of defence for the directors and officers in liability cases. An official agent's role and responsibilities are very well explained, as are the ways in which he is to fulfill those responsibilities.

It will give members more rights, allowing them to be involved in their organization's governance. We know that the official agent's documents are clearly printed and made public a few months after an election.

It will establish a better mechanism for monitoring the organization's accountability. We know that the financial agent must keep the books according to a specific method and that they are examined twice before being made public.

Can the hon. member tell me if he does not see that by adopting Bill C-4 we are perhaps making the people and volunteers in these organizations and non-profit organizations a little more like financial agents during an election?

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Mr. Speaker, I congratulate the member for Montmagny—L'Islet—Kamouraska—Rivière-du-Loup for his excellent presentation. He spoke to a point that we argued for in committee, the classification of organizations.

In the hon. member's opinion, how would Bill C-4 have been improved if a classification of organizations had been accepted and made part of the bill?

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Speaker, I thank the hon. member for his question, though I find the question a little far removed from Bill C-4. Certainly, the more not-for-profit organizations that have clear objectives and members who know what they have to do, the more possibilities there will be for those raising funds for good causes such as preventive health programs, and the better off we will all be.

Certainly, in Quebec, very important and interesting measures have already been taken. Everything to do with health is under provincial jurisdiction, of course. Just last week, I had meetings with people responsible for health in my region. They stressed how important it is to discuss prevention.

There is the whole area of curative medicine that must come into play when people are sick. But we also have a responsibility for comprehensive preventive medicine. This is not just the practice of medicine; it is also making each person responsible for his or her own health and making the government responsible—in Quebec's case—for health education. There is the role of physical education, the way in which each individual must be responsible for his or her own heath. We must also make sure that we have all kinds of tools for our young people so that they are able to determine the quality of their own health and so that they can avoid having to resort to curative medicine unless there is no other choice.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Chairman, I am very happy to rise to speak on Bill C-4, An Act respecting not-for-profit corporations and certain other corporations.

We are indeed at the last stage, in the House of Commons, of a long process that began several years ago. The act governing these matters is completely obsolete. It must consequently be modernized and that is the purpose of Bill C-4. The new act will take financial means into account, as well as the size of the corporation and the implementation of management mechanisms. It offers a flexible framework for the submission of financial statements as well as the establishment of regulations and the structures of the organizations it will govern. There is a considerable increase in the efficiency and transparency of the incorporation process for not-for-profit corporations.

I sat as a member of the Standing Committee on Industry, Science and Technology. We had already begun working on this matter in 2004. This is a very hefty act which demanded an array of detailed analyses. I think that the members from all parties who sat on the committee did their work very well. And consequently, today we have an interesting bill.

The letters patent system of incorporation has been replaced by an as of right system. The incorporation of not-for-profit corporations is greatly facilitated by this procedure. The abolition of the minister's discretionary power in this regard was more than necessary to eliminate the discretion that could be exercised by the minister, which went back to a whole other era. This needed to be corrected.

This will increase the confidence of the public and the credibility of not-for-profit corporations. And we know that the public already has a very favourable view of the nature of not-for-profit organizations. In our work especially, members know that many organizations work to help our citizens and provide different types of support and help their own members. If these organizations did not exist, the state would have to step in instead, in one way or another. From that perspective, it was urgent that the federal act which governs federally incorporated not-for-profit corporations be modernized.

In fact, the Canada Corporations Act, which is the existing act, and will still be in effect until we have passed this bill, provides the frame of reference for the incorporation of not-for-profit federal corporations.

In fact, the types of corporations governed under part II of the Canada Corporations Act include religious, charitable, political, mutual-benefit, and general not-for-profit organizations.

In recent years, some concerns have been raised that the act is outdated, as I was saying earlier. Since 1999, there have been public calls for the act to be reformed. It has been ten years now. A voluntary sector task force created by the federal government called for improvements to the regulatory structure that governs the sector. Industry Canada's proposal to modernize the act was part of the task force's plan.

In July 2000, Industry Canada issued a consultation paper entitled “Reform of the Canada Corporations Act: The Federal Nonprofit Framework Law”. The department then held a series of round-table discussions in cities across the country to consider the ideas presented in the document. That process eventually led to the Liberal government introducing Bill C-21 on November 15, 2004. The bill never made it to second reading.

At that point, we entered a cycle of minority governments, which we are still going through and which I do not think we will get out of for a while yet, in both Quebec and Canada, because the population does not have enough confidence in a single party today to give it a majority mandate. That is especially true in Quebec, where people feel that they have been regularly shortchanged by federalist parties, which have a Canada-wide vision. As a result, they have often put Quebec's interests on the back burner while putting Canada's interests first, and these two sets of interests are not necessarily the same.

So, we are caught in this cycle of minority governments, and we do not know how much longer the cycle will last. In my view, as long as any party aspiring to become the government does not introduce a project that reflects Quebeckers' wants, among other things, the party will not win people's support. Based on experiences in recent years, such as the Conservative party's recognition of the Quebec nation, which was an empty shell and not followed by any other commitments, I think the population has received a very clear message and, as a result, it has not been willing to give such a mandate.

We are now seeing the same thing with the Liberal Party, which is boasting about the fact that it will reform the employment insurance system, when we know very well that that same party is the one responsible for the Axworthy reform in 1994. Even though the Liberals had promised Canadians that they would stop the Conservative reform, instead what we saw was an even speedier reform that hurt the unemployed and had them contributing the most to reduce the deficit. And no one ever returned the favour. I do not think this period is over.

However, in terms of Bill C-4, which is currently before us, this new Canadian legislation on not-for-profit corporations is making its way through the various stages. In this Parliament, we have the opportunity to vote at third reading and send it to the other place. We hope the new legislation will come into force quickly.

I agree with the minister who said this bill will cut administrative costs faced by not-for-profit corporations. That is a good thing, and it will strengthen and clarify the governance rules that apply to these corporations. The only reservation that the Bloc Québécois has expressed in committee and that it strongly defended, although unsuccessfully, is that the bill contains no classification measures. All not-for-profit corporations will be lumped into the same category. I think that constitutes a weakness and that we will be back in this House in three, four or five years to amend the act accordingly. Only then will people see that the Bloc Québécois was right about that.

Overall, the Bloc Québécois believes that this is a good bill that will simplify the incorporation of not-for-profit organizations. Previously, corporations had to obtain letters patent with clear objectives. Now, all they need is articles of incorporation that are recognized. I believe that this will be simpler. The bill will clarify the directors' duties and liabilities. We have seen in the past in this sort of organization that when things are going well, there are no problems. When things are not going well, it is important that each person's liabilities be well defined and that the directors know what they are getting themselves into when they join the board of a not-for-profit organization. There was a need for clarification.

The bill will also establish defences for officers in the event of liability, so that a director's personal property is not at risk. These issues will be clarified in the act, which may motivate more people to get involved in not-for-profit organizations. Our society will benefit, because not-for-profit organizations often fill needs that the government cannot fill and the private sector is not filling either. Consequently, it is appropriate to keep going in the same direction.

The bill will also give members greater rights by enabling them to play a role in the governance of the organization. The liability of members versus directors was not always clear in the old act. These things are clarified in the bill, and anyone who joins a not-for-profit organization will have a clearer understanding of his or her rights, responsibilities and authority and will be able to act accordingly.

The bill will also establish a better oversight and accounting mechanism for corporations. We believe that this will be a great improvement. This bill has many parts that are very complicated, but I would just like to mention a few.

Part 1 outlines the bill’s purpose, which is to allow the incorporation of organizations without share capital for the purposes of carrying on legal activities, and defines the concept of a soliciting corporation. This expression designates any corporation that solicits funds from the public or a government or any corporation that receives private donations or government grants. We can see that this clarification is designed to distinguish soliciting corporations from non-soliciting corporations. I believe that this will be an appropriate clarification.

As I said, the present letters patent system is being replaced with an as-of-right system. Once again, this represents some worthwhile progress. It also sets out the capacity of a corporation as a natural person. This is a simplification as far as the legal interpretation of these matters goes, and will be to the benefit of both members and the corporation itself. A number of more technical aspects are also clarified, for instance the technical aspects relating to issuing debt obligations and trust indentures. These are more technical and more complex matters that would do well to be clarified.

It is stipulated that the by-laws must set out the conditions for membership, and the articles of incorporation the categories of voting rights for each.

There is a section specifically on members' rights, as well as another complete section on complainants and their recourse in the event of such things as abuse, and the possibility of court orders. It establishes a defence based on religious doctrines against the actions and recourses referred to. A religious organization can make use of this defence when it can reasonably prove that the act leading to the court action was based on a tenet of faith held by the members of the corporation. In such a case, the court may not make an order under this legislation against the organization in question.

There is a clear delineation of individual and collective rights, while taking into consideration the charter implications but without this meaning that people will have to take their recourse as far as a charter challenge on each occasion. These clarifications will be welcomed. There is also indication as to how organizations are to communicate with their members electronically, something that was not there before. The act is obsolete and was drafted at a time when there was nothing like the Internet and various other means of electronic communication. It is important that this be included, especially since it will result in significant savings.

There are a number of general administrative provisions as well to ensure that the framework functions very smoothly, but there are still a few questions left untouched. For instance, there is still no classification system, as I have said before. I think that great attention needs to be paid to the application of the law, and perhaps the Senate will re-examine this matter.

There is transparency and accountability. The current law requires non-profit organizations to keep detailed accounts of their activities; however, there is no requirement—as there is under this bill—to disclose this information. With Bill C-4, non-profits must make their financial statements available to their members, directors and officers as well the director. This makes it possible for directors and officers to have better oversight of the corporation's management, for members to monitor the organization's financial position between annual meetings and to ensure that the monies are truly used for the stated purposes and objectives.

We were speaking earlier of the interest in democratization so that members truly know what organization they belong to, what powers they have and how to obtain information. This clarification is welcomed by most stakeholders and organizations. This bill is the result of consultations undertaken in various parts of Quebec and Canada. This is the umpteenth version and one which, I believe, will result in an important consensus in this House.

The current legislation allows anyone to obtain a copy of the list of members of a non-profit organization, and the law contains a list of permissible uses. The new bill would restrict this right to members, creditors and directors. This provision will make it easier for members to communicate, to require directors to keep an up-to-date list of members, to protect the sales of certain types of non-profit organizations, prevent the misuse of such a list and ensure that it is not forwarded to just anyone. We have all received documents inviting us to apply for a certain credit card or program. We wonder where they get their information? On occasion, these lists were provided under this law, which was not specific and did not prohibit this type of transfer of information. That will now be prohibited. That is a useful benefit.

In terms of effectiveness, the former law had a system of letters patent that were very difficult to obtain. Under the law, establishing a corporation was not a right. Now, it will be one and it will be much easier to be approved. In an “as of right” system the establishment of a company is automatically granted. With this major change, the procedure for discretionary approval will disappear.

This is an improvement to the whole of the system and advances its democratization. The incorporation process will be simplified and corporations will benefit from increased flexibility, and a more efficient and less costly system. In that regard, improvements are considerable and well-thought-out.

As regards fairness, we can see that with the new legislation the clear definition of the duties and responsibilities of directors will facilitate the recruitment and retention of qualified people on boards of directors. This was not always the case under the previous act.

The due diligence standards that are being proposed are well defined by the courts. Thus, they offer an established instrument to not-for-profit corporations. This standardizes diligence standards for directors, and the bill takes harmonization with other federal acts into account.

It was urgent that this be done, as the acts that are affected were obsolete and referred to several acts that were no longer in effect or had been modernized.

This too is important: directors and officers are currently exposed to much liability. The new legislation introduces several measures to limit liability, for instance, the incorporation of the organization, which creates a legal entity that can be held responsible; a clear definition of diligence standards; the possibility for the director of defending him or herself by invoking a due diligence defence; new provisions which would compensate the director for costs incurred and costs entailed by legal action pursuant to an unfounded suit or incidents which would, in the opinion of the corporation, justify compensation.

After several years of consultation, this act now appears to us to be one which deserves our support. There will be some specific follow-up to be done on certain aspects of the bill but overall this is a positive piece of legislation. The Bloc Québécois contributed to making this a bill of the highest possible quality. We have arrived at the final stage and I think that the House of Commons will see fit to pass this bill. We will thus have carried out the modernization of the not-for-profit corporations legislation, which will be to the advantage of this entire sector.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Mr. Speaker, I would like to congratulate the member for Repentigny on his brilliant speech about Bill C-4.

As he pointed out, Bill C-4 modernizes the existing act and makes the system more democratic.

I would also like him to comment on an element he did not mention, but that I am sure he can discuss: the elimination of the minister's discretionary power. I would like him to comment on the fact that the powers are now in the hands of members and organizations.

[Nicolas Dufour, Bloc, Repentigny, QC]

Mr. Speaker, the Bloc Québécois has repeatedly said that it supports Bill C-4, given that the present Canada Corporations Act has become outdated.

Modernization of the act is certainly a step in the right direction, as has been said several times. The new act would take into account the financial resources and size of the organization in establishing its management mechanisms. It offers a flexible framework for the presentation of financial statements and for the internal rules of the organizations subject to it.

As well, we see a significant increase in efficiency and transparency in the process of incorporating not-for-profit organizations. Replacing the letters patent system by an as of right system of incorporation facilitates the creation of NPOs considerably. Elimination of the minister’s discretion in this regard is essential. All of this will enhance public confidence in NPOs and enhance their credibility in the public’s eyes.

I would like to give a little background to the enactment of the not-for-profit corporations act. The Canadian Corporations Act provides the framework for the incorporation and governance of federal not-for-profit corporations. The kinds of corporations governed under Part II of the Canada Corporations Act (CCA) include religious, charitable, political, mutual-benefit and general not-for-profit organizations.

In recent years some concerns have been raised that the act is outdated and that its provisions no longer meet the requirements of the modern not-for-profit sector. There have been public calls for its reform and in 1999 the federal government’s Voluntary Sector Task Force called for improvements to the regulatory structure that governs the sector. Industry Canada’s proposal to modernize the CCA was part of the task force’s plan.

In July 2000, Industry Canada issued a consultation paper, “Reform of the Canada Corporations Act: The Federal Nonprofit Framework Law”. Subsequently, the department held a series of roundtable discussions in cities across the country to consider the ideas presented in the document, and the various legislative options open to it. Following the suggestions made at the roundtables, the government decided to make concrete proposals for reforming the not-for-profit law.

On November 15, 2004, the Liberal government introduced Bill C-21, which never reached second reading. On June 13, 2008, during the second session of the 39^th Parliament, the Conservative government adopted substantially the same direction as the Liberals and introduced Bill C-62. With the hasty election call last September, it died on the order paper, as did a number of other good bills, including the one presented by my hon. colleague to provide a tax credit for young people from the regions who go outside their region to study. This was an excellent bill, which had reached the end of the process and unfortunately, because of the Conservatives’ stubborn desire to trigger an election, died on the order paper. I find this regrettable because at last we had a concrete private member’s bill that could really have helped young people, students, to stay in their region. Because of the hasty election call, it died on the order paper. We will recall that what was uppermost in the Conservatives’ minds was to save their jobs, rather than to save the jobs of workers and young people.

This morning I read in the newspaper that scientists—if I can change the subject for a moment—are starting to leave Canada because of cuts to science and research. We have to set the tone.

I want to get back to Bill C-4. On September 3, 2008, a similar bill was introduced at first reading by the Minister of State (Small Business and Tourism).

Once again, it died on the order paper when Parliament was prorogued last September 4. This was another bill that died on the order paper because of Conservative ideology. The Conservatives wanted to prorogue the House because they were afraid they would be defeated. Twice in six months they tried to save their jobs.

The minister finally re-introduced the same bill on January 28, 2009. This was Bill C-4, which we have been debating all day. The purpose is to propose new Canadian legislation on not-for-profit organizations that will establish a more modern, transparent framework for them to operate within. To this end, the system for not-for-profit organizations will be similar to the system for companies that fall under the Canada Business Corporations Act. The new bill will gradually repeal the Canada Corporations Act and replace its parts II, III and IV.

According to the minister, Bill C-4 will reduce the administrative costs of not-for-profit organizations and strengthen and clarify the rules governing them. More specifically, the bill will simplify the process for incorporating not-for-profit organizations, clarify the duties and responsibilities of their directors, set forth defences that their directors and officers can advance in case they are held responsible for something, increase the rights of the members of these organizations and allow the members to participate in the governance of their organization, and establish a better mechanism for overseeing the accounting of these organizations.

Bill C-4 is very complex. It imposes a whole new framework on not-for-profit organizations. Here is a brief summary of each of its 20 parts.

Part 1 identifies the purpose of the bill and allows for the incorporation of organizations without share capital so that they can carry out their lawful activities. It defines what a soliciting corporation is, namely any organization that solicits funds from the public or a government or any other organization that receives donations from the public or government grants.

Part 2 replaces the current letters patent system with an as of right system of incorporation. After receiving and examining the required documents, the director immediately issues the certificate of incorporation. This will help not-for-profit organizations establish themselves much faster and start providing direct assistance to our fellow citizens.

Part 3 stipulates that these organizations have the capacity of a natural person.

Part 4 states that these organizations must keep accounting records and a list of their members and directors and must make this information available to their members. My colleagues just asked the hon. member for Berthier—Maskinongé and his answer with quite clear. Having accounting records and a list of members will greatly improve the transparency and governance of these organizations. There really will be transparency and not just the impression of it. Part 4 also provides measures to protect the privacy of the members of these organizations. We were discussing this point just a little while ago. It is also very important to keep the membership list private. My colleague from Longueuil—Pierre-Boucher said that with the advanced technologies of today, people need transparency but also their privacy. Bill C-4 covers that part too.

Part 5 gives corporations the authority to borrow, issue debt obligations and invest as they see fit. It also stipulates that corporations are prohibited from distributing their assets to their members, except in furtherance of their activities or as otherwise permitted by the act.

Part 6 deals with the technical aspects of debt obligations and Part 7 deals with the technical aspects of trust indentures.

Part 8 describes the authority and role of receivers, receiver-managers and sequestrators.

Part 9 stipulates that corporations must have a minimum of one director and that soliciting corporations are required to have at least three directors. It also clearly sets out the obligations of directors and corporations as well as the due diligence defence.

Part 10 stipulates that the by-laws set out the conditions of membership, whereas articles set out the various classes of membership and associated voting rights, which makes a clear distinction between the two.

Part 10 also establishes the voting procedure, including electronic absentee voting. It sets out the rules governing the way in which members can submit proposals at meetings, establishes the procedure for calling meetings of the members, including the obligation to give members advance notice of the meeting, and defines what constitutes a quorum.

Part 11 states that a corporation shall place before its members its financial statements and any report submitted to it by its public accountant. As was said earlier, the bill's purpose is to increase transparency and efficiency, and that aim is furthered directly in this part of the bill.

Part 11 makes it mandatory for soliciting corporations to table a copy of their financial statements and of the report of their public accountant with the director, who will then make these available to the public. Thus, donors to these non-profit organizations will know precisely where the money goes.

As members, we are giving a hand up to the corporations in our ridings. In this way it will be possible to see clearly where the money of our very important organizations is going, especially in more difficult times such as the ones we are experiencing currently. We can see how important this is. I attend numerous activities in my riding, which gives me an opportunity to take the pulse of these organizations and see how they operate. This will allow people to concretely see the expenditures and investments these organizations make to give back to the community, which is, to my mind, extremely important.

In Part 12 we see that the level of financial audit that is required is determined by the level of gross annual revenues of the corporation, and depends on whether or not the organization concerned is a soliciting corporation or not. This part states that the public accountant must be qualified to conduct the financial audit while being independent of the organization. The purpose, as you will have understood, is here again to promote transparency. The bill institutes the obligation of placing financial statements at the disposal of members, directors and officers when the organization is a soliciting corporation which solicits funds from the public, and these documents must of course also be made available to the public.

Part 13 establishes the procedure to be followed when the corporation undergoes fundamental changes, including amendments to the articles or by-laws of the corporation, amalgamation, continuance, reorganization or arrangements.

Part 14 describes the procedure for liquidation and dissolution of a corporation incorporated pursuant to the act. It establishes that in cases of dissolution of soliciting corporations or charitable organizations, any property remaining shall be distributed to one or more qualified donees within the meaning of the Income Tax Act, and not to its members.

Part 15 lists the various powers which a court may confer upon an inspector to conduct an investigation, through an order, to follow up on complaints submitted by an interested party.

Part 16 contains provisions regarding the remedies that a complainant can exercise, specifically, the derivative action, the oppression remedy and injunctions. It establishes a defence against the above-mentioned actions and remedies that is based on tenets of faith. A religious corporation can use this defence when it can prove that the act leading to the action was reasonably based on the beliefs of its members. In this type of case, no order is made under the act against the corporation in question.

Part 16 also sets out the offences and punishments for violations of the Act, mainly, with respect to false and misleading statements, and improperly using information taken from a corporation's register of members or other directories.

Part 17 allows for the use of electronic communications between the corporation and its members. We have been talking about this a lot in the Bloc Québécois, and, in light of technological advancements, we believe that this possibility will become extremely important, crucial, actually—emphasis on “crucial”—to corporations' survival. We are now in the Internet age, and it is becoming more and more complicated to reach certain groups, such as young people, who are big Internet users. Electronic communications such as emails would make it easier for organizations to reach and attract them.

Keep in mind that, as the population ages, it will become important over the next few years to attract young people to community and non-profit organizations. Without new blood, these organizations could cease to exist because of a lack of new members to ensure their survival and continued dedication to causes such as protecting the poor. In my riding of Repentigny, Maison La Trace de l'Assomption helps those most in need. It has an incredible team of five directors who do wonderful work for the town of L'Assomption and its most needy residents.

I do not mean that this organization would not be able to find new volunteers, but sometimes the idea that it might experience difficulties recruiting new volunteers touches me personally. Since I am young myself, I understand that ways must be found to go and find new blood, just as political parties must do. The Bloc Québécois does this and has been encouraging young people for years, contrary to the big federal parties who find it somewhat more difficult to do so. My colleague is nodding his head, showing that he agrees with my position. Honestly, we have to help young people to join these organizations and encourage them to volunteer. As someone who has done a lot of volunteering, I know that this work is extremely gratifying, and helps people to mature. It increases a person's self-esteem immeasurably.

To get back to Bill C-4, part 18 sets out the general administrative provisions needed for the application of the act.

Part 19 identifies the passages of the legislation which apply to bodies corporate without share capital incorporated pursuant to a special act of Parliament. It also provides a procedure to revoke organizations incorporated pursuant to a special act of Parliament and associated with a body corporate that was later dissolved.

To conclude, part 20 provides for a three-year transition, for organizations incorporated under part 2 of the act governing community organizations. It also repeals parts II and III of the CCA.

The main issues are subdivided into four categories concerning four different aspects of the changes created by the adoption of this bill. The first classification concerns flexibility and permissiveness. There is no non-profit organization classification system in the Canada Corporations Act. There is no such provision in Bill C-4 either.

I must conclude but I could talk for hours. You can see that I am very interested in this file and very knowledgeable about it, because of the lengthy discussions that took place with my Bloc Québécois colleagues.

We would have liked to see this in Bill C-4.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Mr. Speaker, I first want to congratulate the member for Berthier—Maskinongé for his speech. He gave us a good summary of Bill C-4. It is obvious that he is very well acquainted with the voluntary sector and the structure of not-for-profit organizations. This is very interesting and commendable. I also think that volunteers who work at the local and national levels deserve our admiration.

He talked about a lot of things but I want to ask him a question about financial statements. These have to be made available to members, to the director appointed under the act and to organizations collecting funds.

I would like the member to tell us why, in his opinion, financial statements are useful and should be made available to the public and to members.

[Guy André, Bloc, Berthier—Maskinongé, QC]

Mr. Speaker, I am pleased to speak today to Bill C-4, An Act respecting not-for-profit corporations and certain other corporations.

I would like to start by saying that the Bloc Québécois is in favour of this bill. As several of my colleagues have already mentioned, the current act governing not-for-profit corporations is considered somewhat outdated. For the past few years, a number of representatives of community and economic organizations governed by that act have been calling on the government to update the Canada Corporations Act.

I would like to tell this House that before I became a member of Parliament, I worked regularly with several not-for-profit corporations that came under part III of the Companies Act of Quebec's Department of Financial Institutions and Cooperatives. I realized at the time that the people working in these not-for-profit organizations faced a number of challenges. They had to deal with issues such as funding for these organizations, which is a never-ending problem. Often, these people work in various areas of activity, whether it is with disadvantaged people, youth or women or in volunteer centres that provide street worker or mental health services. I am talking about areas with well-targeted clienteles. These people spent hours and hours working in often difficult financial circumstances.

These people were also managed by the administrators of these not-for-profit organizations, community volunteers who worked evenings and weekends and handled the organization's finances, managed staff and looked after community relations. This work is very demanding. I admire all the people who give of their time to help others. In my community, in Berthier—Maskinongé, all these organizations are made up of people with big hearts. That was the theme of this year's National Volunteer Week, and it is worth pointing that out today.

In summary, many people who work in these areas were aware that some provisions of the act were outdated and simply no longer addressed the increasingly complex and diverse demands of today's not-for-profit sector. The law in Quebec has been adjusted. The federal government is now following suit and, with this bill, is trying to make things easier for these not-for-profit organizations by providing a better framework for their actions.

Let us give a brief overview of the background to this bill. Following on a paper published by Industry Canada—my colleague from the Bloc Québécois sits on the Standing Committee on Industry, Science and Technology—titled “Reform of the Canada Corporations Act: the Federal Non-profit Framework Law”, the federal government held a series of round table discussions with a view to preparing the various possibilities for reforming the not-for-profit law.

After those round table discussions, the government felt it was time to make some concrete proposals for a reform of the legislation on not-for-profit organizations.

Since 2002, in fact, there have been a few attempts by the Conservative and Liberal governments to introduce bills, but these have all died on the order paper.

Finally, last January, a bill was at last introduced, the one we are debating today in this House.

In short, the underlying principle behind Bill C-4 is to propose a new Canadian legislation on not-for-profit organizations which would make their administration more effective and more transparent. Transparency and effectiveness are vital to these organizations, particularly the ones I am familiar with, because they are faced with increasing challenges. Day in and day out, they have to deal with the poverty and the ageing of their respective populations.

The underlying principle behind this new legislation would be to take into consideration the financial means, size and objectives of the organization as far as these management mechanisms are concerned.

With this new act these organizations will, I believe, and I am certain my colleagues share my opinion, be able to operate within a more flexible framework with respect to such things as presenting financial statements or setting up by-laws.

For example, the new legislation encompasses: voting procedures, by-laws regulating general meetings, special meetings, regular meetings, and notices of meetings, and quorum. The new provisions will be better suited to not-for-profit corporations in today's reality.

Another part of the bill talks about financial statements. It states that the corporation must make available to its members the financial statements and any report submitted by its public accountant. As we know, not all not-for-profit corporations are required to perform audits. It depends on the financial statements and on the money administered by these corporations. Some not-for-profit corporations manage very small amounts of money and, therefore, are not always required to do an audit. However, when a large amount of money is involved, it is normal for these corporations to have financial statements that meet the criteria of an audit.

That part of the bill provides that corporations must table a copy of their financial statements and of the report submitted by their public accountant to the director, who will then make these documents available to the public.

So, this bill sets more specific operating rules. To this end, the operational framework for NPOs would be similar to corporate governance under the Canada Business Corporations Act.

The new legislation would gradually repeal the Canada Corporations Act and would replace parts II, III and IV of that act.

In addition to significantly clarifying the role of these corporations in our society, both for their members and directors, the bill will also establish defences for officers and directors, in the event of liability.

We must protect the directors who serve on the board of these not-for-profit corporations and who, as we know, do so on a voluntary basis and often with little information on the responsibilities and duties that come with their role within these organizations. We must protect them from the sometime dubious practices that can be used by a member and which have the effect of laying responsibility on all members of these corporations.

I personally believe that the bill achieves that goal. In this regard, it would be important if, at some point, Parliament could look at another issue related to this legislation, namely how to better train the directors who sit on the boards of these not-for-profit corporations.

It is all very well to enact a law that defines the roles and responsibilities of members of organizations, but people are not always informed and do not always have the time to read a law that is 150 or 200 pages long before joining the board of a not-for-profit organization. Often, if we simply look at the mission and objectives of the organization and see a little of the everyday work that is involved in sitting on an organization’s board, they do not always have the time to learn about all the procedures that their role, responsibilities and duties involve, and the relevant laws.

It is the role of government to give the volunteer members who often sit on the boards of these not-for-profit organizations more information. Very little information is provided. I just wanted to point that out.

This bill will also give members of those organizations additional rights, and will thus allow them to participate fully in the governance of their organizations. As well, it will establish a better body to oversee the organization’s accounting, and this is very important. Another benefit of this bill, one that I think is very important, is that it increases public confidence in not-for-profit organizations and their credibility among the general public.

It is important that the people who sit on the boards of these organizations, often as volunteers, and the organizations themselves, which often have few resources for taking action in the community, be perceived by the public as a whole in a positive way.

For example, in my riding, there are often organizations that deal with young people in difficulty or with disadvantaged or illiterate people, and there are many prejudices often expressed against those organizations.

Having a law that can provide more protection for the directors and managers of those organizations is an accomplishment in itself, and it will certainly facilitate the organizations’ work.

Bill C-4 is indeed complex, because it imposes an entirely new framework on not-for-profit organizations, those under federal jurisdiction of course. Organizations under federal jurisdiction and organizations under the jurisdiction of Quebec and the provinces must never be confused. However, this legislation had become necessary here, in Parliament, because the existing law did not reflect our modern circumstances.

The issues this bill addresses are important and it involves major and necessary changes in the way not-for-profit organizations operate.

Bill C-4 involves transparency and accountability, that is, financial responsibilities. At present, the law does not require that detailed accounts of their activities be disclosed. Under Bill C-4, not-for-profit organizations will now be obliged to make their financial records available to their members, directors and officers, as well as the director. That is a step forward.

In more concrete terms, this bill will certainly simplify the incorporation of not-for-profit organizations. Incorporating a not-for-profit organization should be a relatively simple matter. The process should not be surrounded by hard and fast administrative procedures that would make it so that people who came together to create a not-for-profit organization would be reluctant to take action to provide greater support for the community in whatever area or field of activity it might be.

What is interesting in this bill is that the minister will no longer have the right to agree or refuse to allow a group to incorporate a not-for-profit organization.

As I already mentioned, this bill will clarify the duties and responsibilities of the directors. It is important for people who sit on boards to know what their responsibilities, duties and roles are in not-for-profit organizations. This kind of information needs to circulate more freely. My experience has been that people who sit on the boards of these organizations sometimes learn on the job. People show up at the general meeting some evening and end up on the board. They do not always know, though, what their responsibilities are.

More specifically, this bill will set forth defences for managers and directors in case they are held responsible. It is important to protect volunteers who sit on boards against suits from the public, other institutions or other businesses as a result of a purchase or any other situation. I think that the volunteer directors of these not-for-profit organizations should be protected.

The bill will also increase the rights of the organizations’ members and help them participate in the governance of the organizations. These people need to be in charge of what they are doing and have a certain amount of autonomy in the exercise of their duties on boards and in voluntary organizations. The bill provides a certain latitude in this regard.

Finally, the bill provides a better mechanism for overseeing the accounting of these organizations. It is hard to be against that. I think that any organization that receives money and grants should be ready to account to its donors.

In summary, I have taken a good look at Bill C-4 and I think it is a step forward. However, as my colleague in the Bloc Québécois indicated previously, we would have liked to see at least some procedures for classifying the different kinds of organizations. There are no classifications in this bill. Whether it is a charitable organization, an economic organization or a cultural organization, there is nothing in the bill to enable the public or the government to know what kind of organization it is.

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

Mr. Speaker, I am pleased to rise today to speak to Bill C-4, an act respecting not-for-profit corporations and certain other corporations.

The legislation has seen several incarnations since first being introduced by the Liberal government in 2004 and makes important modernizations to the regulations governing Canada's valuable not-for-profit sector. While provisions within this bill are modelled on those of the Canada Business Corporations Act, the creation of dedicated legislation governing Canada's voluntary sector will better respond to and address the needs of this country's charities, community organizations and other not-for-profit entities.

Canadians value volunteerism and charitable organizations. On average, each Canadian is a member of four non-profit or voluntary organizations and some 22 million people donated approximately $9 billion to such enterprises in 2004.

Among other things, Bill C-4 eases much of the regulatory burden on non-profit organizations in this country by allowing these organizations a heightened degree of flexibility in how they choose to operate. A major potential benefit under this new legislation enables non-profit corporations to hold meetings electronically as opposed to sometimes costly and less responsive face-to-face meetings currently required.

The new ability to file documents under Corporations Canada electronically may also serve to reduce strain by reducing paperwork and other regulatory burdens currently faced by non-profit entities. Given that the non-profit sector employs some two million people across the country working in some 160,000 not-for-profits, this flexibility to adapt bylaws based on the needs of the specific organization stands to benefit a significant portion of the population.

I am pleased to have had the opportunity to work with other members of the industry, science and technology committee to review this legislation and respond to some of the concerns put forth by stakeholders. Recognizing the importance of getting this long overdue legislative framework right for the nearly 19,000 federally incorporated not-for-profit organizations, it was necessary to ensure that those concerns were heard and addressed through our study of Bill C-4. In fact, a number of issues highlighted by witnesses appearing before the committee have been acted upon through amendments presented during a clause-by-clause review of the bill and have not been adopted and incorporated into this legislation.

Chief among the concerns raised by stakeholders, particularly by the Canadian Bar Association, was the need for clarity concerning important definitions within the legislation. The diversity of the non-profit sector in Canada is a great source of strength but it also poses challenges in balancing the needs of large organizations that solicit public funds with small sporting organizations or mutual aid societies for example, when it comes to setting a new legislative framework.

While there are few differences between how non-soliciting and soliciting corporations are treated under the act, there are rules governing the number of directors required, the filing of financial statements with government and agreements transferring powers within the organization. This is why I and other Liberal members of the committee made it a priority to ensure the distinction between soliciting and non-soliciting corporations was clearly and precisely laid out within the bill.

I am pleased the committee saw fit to adopt an amendment prescribing the test period for determining whether a not-for-profit corporation was soliciting to the corporation's most recent financial period. It was also vital to ensure newly minted soliciting corporations would have adequate time to make preparations for compliance with the more onerous regulations inherent in this classification.

As such, we brought forward a clarification ensuring the change in status would only take effect at the conclusion of the next ensuing annual meeting of the corporation. These changes would go a long way to ensuring non-profit corporations will be prepared for compliance should such a change in status occur.

A further issue of balance with this bill concerns the complexities of what I will call contingency sections of the act. The size and complexity of this bill are largely due to provisions contained in clauses 6 and 7 dealing with debt, trust indentures and receivership, which are situations that likely will never be faced by most of the non-profit organizations incorporated federally.

The inclusion of this complex regulatory road map fills in some of the gaps that currently exist but also enforces compliance on all non-profit corporations in the sector, whether they will ever need these provisions or not. This is a concern for me, as it seems to streamline a process for very few corporations at the expense of many smaller charities, community groups and foundations that will never require these clauses of the bill. The committee agreed that it would be better to offer clear direction to organizations that wished to proceed in this manner than to leave a further regulatory void.

Several organizations, including Imagine Canada, articulated concerns surrounding some rights of members being enshrined within the act itself as opposed to within individual bylaws or articles of non-profit corporations. Some stakeholders felt that the important issue of voting rights of members must be subject to periodic review and change as the mandate and nature of the organization changes, and should not be specified within the act itself.

Bill C-4 does require that each non-profit corporation determine what voting rights will exist for members but does not prescribe the mechanisms for doing so, and authorizes the creation of a class of non-voting members. Should a situation arise where fundamental changes to the corporation are possible, non-voting members would be given the right to vote under this legislation.

According to Industry Canada officials, non-voting members will have the right to vote when, for example, their membership is to be exchanged to another class or their class rights are to be changed; the corporation intends to amalgamate with another corporation; the corporation intends to continue into another jurisdiction; the corporation intends to sell off all or substantially all of its assets; and, if the corporation intends to dissolve. It would seem that these situations would likely be rare. and this is again the case of building in a contingency to ensure appropriate procedures are set out for organizations to follow.

Some concerns surrounding the liability of officers and directors were raised during hearings on the legislation. Boards of directors and officers from many of Canada's charities, foundations and other non-profit entities are often composed of volunteers who dedicate their time to ensuring important causes are furthered to improve the lives of Canadians. At times, some organizations can find the recruitment of these volunteers to be a challenge, as it often means taking on a degree of personal liability and responsibility for the actions of the organization.

Bill C-4 introduces provisions for the due diligence defence for directors and officers, which satisfies many of the concerns raised by organizations intervening on behalf of the non-profit sector.

I am pleased to support Bill C-4, which comes after many years of work and review undertaken by industry officials, advocates in Canada's voluntary sector and the many organizations that made presentations on this legislation.

Not-for-profit organizations provide many of the services cherished by Canadians. Universities, colleges and hospitals across this country provide vital services to their communities and are general regional employers.

In 2003, the non-profit sector accounted for some $112 billion in revenue. Thousands of organizations are supported by over 12 million volunteers, fully 45% of the Canadian population aged 15 and older, who contributed an average of 168 hours each. This totalled 2 billion hours, the equivalent of more than 1 million full time jobs in 2004 alone. Truly, there is no end to the value this sector offers to Canadians.

As a new member of Parliament, it is a pleasure for me to have taken part in the study of this bill. It was impressive to see the balanced approach taken by my colleagues on the industry, science and technology committee in reviewing the legislation. I thank all of my colleagues for their hard work on this matter, for those who intervened and for those who made presentations during the committee hearings. I look forward to seeing this long overdue legislation become law.

[Glenn Thibeault, NDP, Sudbury, ON]

Madam Speaker, I am very glad to be here today to discuss Bill C-4, an act to amend the not-for-profit corporations act. It is of importance for not-for-profits in our communities right across our great land.

I can offer some advice, as the former executive director of the United Way in Sudbury, that there were several initiatives we were involved with that caused us to slow down the process because of the bureaucracy, red tape and heavy paperwork involved. This amended legislation that we amended in committee would actually help us change some of that.

However, before I go into the discussion that took place at the industry committee in these past few weeks, let us first look at how we got to this point.

For five weeks in the spring of 2002, a team from Industry Canada crossed the country listening to the views of stakeholders on proposals for a new not-for-profit corporations act. Over 300 individuals participated in the consultation sessions, while others sent in briefs to the consultation website.

A preliminary round of consultations was held in the previous fiscal year, and feedback from those first consultations and commissioned research studies was incorporated into the two discussion papers circulated prior to this second round of consultations. Written in plain language, “Reform of the Canada Corporations Act: Draft Framework for a New Not-for-Profit Corporations Act” promotes a corporate governance structure grounded on the themes of transparency, accountability, fairness, and efficiency. The second volume, “Discussion Issues for a New Not-for-Profit Corporations Act” highlights some of the proposals in more detail.

What was determined by these consultations?

A number of stakeholders who had participated in the preliminary round of consultations thanked Industry Canada for incorporating many suggestions in the new framework proposal.

Participants were generally supportive of the various reform proposals, as well. Strong support was expressed for the proposals concerning: the due diligence defence, the standard of care and insurance, and limiting liabilities of directors and officers. There was a divergence of views among participants on issues such as: a classification system, the filing of by-laws, and audit requirements.

At the end of the consultations, participants had several overarching concerns. Co-ordination with other federal statutes and provincial legislation was imperative. Many participants were concerned with ensuring that new legislation would fit with other federal statutes and provincial legislation. In each venue, participants concluded that coordination and consistency at the federal and provincial levels was imperative.

There is ongoing confusion about the distinction between not-for-profit corporations and registered charities. Many issues that arose were tax specific and, as such, under the jurisdiction of the Canada Revenue Agency and the Ministry of Finance.

Discussion of many issues returned to the need for a classification system. Although participants were divided on the need for a classification system, discussion of many other issues returned to the question of whether to include a classification system in a new act.

I will now look at some of the structures within the act that caused some concern.

The first structure that was of concern was the classification system. Reaction about the merits of including a classification system in the new not-for-profit legislation was mixed across the country. However, participants returned to this issue time and again, often noting that other issues could not be resolved without deciding on the issue of a classification system.

Those opposed to the inclusion of a classification system felt it would unduly complicate matters. One of the reasons offered was that it would be difficult to classify some organizations because of the varied work that they do and/or the services that the provide. For example, the United Way that I used to be involved with offers leadership development services which provide support, governance training, fundraising training, training to all sorts of small not-for-profits and charities throughout the greater city of Sudbury and, at the same time, offers services to do people's taxes, to help people find shelter. Those are some of the services that we offer, as well as fundraising.

A number of participants were in favour of a classification system that was either based on levels of revenue or number of members or that distinguished between public benefit, mutual benefit, religious and, in some cases, political organizations.

Another area of concern was the filing of by-laws. There was general agreement that moving away from the archaic letters patent system was a positive step. With respect to the filing of by-laws, a number of participants expressed support for the simpler structure proposed; in fact, a minority of participants agreed that there should be no filing requirements at all.

There was a difference of opinion on whether by-laws and amendments should take effect immediately upon passage by members, or only when filing was complete.

Some did not see the benefit of filing at all if by-laws become effective when passed. Others noted that there could be problems if by-laws did not become effective at the moment when members passed them, particularly for organizations that do not meet frequently. One person predicted that with a filing requirement but no scrutiny, Industry Canada would end up with “the worst of both worlds”: organizations that are not in compliance with the law and filed by-laws that are inaccurate. Participants in a number of cities voiced concern about the possibility of an increased security risk without thorough scrutiny.

Recognizing that some organizations have rapid turnover and limited corporate memory, many participants supported the notion of the government acting as a central repository. There were several requests for Industry Canada to put by-laws online if it accepts the repository role.

Most participants agreed that model by-laws would be very helpful, and urged they be kept simple. Some asked for the creation of an easily updateable web interface, including secure access and summary reports.

Another area of concern was the disclosure and accountability. A majority of participants across the country were in favour of the framework proposal that organizations be required to make corporate financial statements available to members, directors, officers, and the director. However, not all agreed that members should be subject to a fee for copies of the financial statement, and many more disagreed with the proviso to allow exemptions to the requirement.

Those opposed to the requirement were concerned that a requirement to make financial statements available could be burdensome and expensive. A number of participants at one meeting objected strongly to the director having access to financial statements at any time. One suggested that the law be written in as narrow a context as possible, only granting the director a right to information for a specific purpose.

It was proposed that a clearer definition of “financial statement” be developed. A number of participants took exception to the notion that financial statements are presented to members “for their approval”. A suggestion was made to change the language on page 45 to read, “directors would be required to present the audited reports”, without mentioning approval or acceptance.

Several participants in Edmonton, Regina, and Toronto were very concerned about the proposal to allow exemptions from the disclosure requirements, arguing that issuing an exemption would place Industry Canada between the auditor of an organization and the organization itself. Exemptions were seen to contravene the principles of transparency and accountability, and should only be granted according to clearly articulated criteria.

Another issue was membership lists. A majority of participants agreed with the framework proposal that would allow members to obtain copies of the membership list of their organization, provided that the framework is narrowly defined and access is restricted. Several asked that the issue of selling lists be addressed. Some participants noted that it would be essential to ensure that the new act mesh with other federal legislation including the Personal Information Protection and Electronic Documents Act and the Anti-Terrorism Act.

In order to circumvent the release of membership lists that include names, addresses, and telephone numbers, it was suggested that an organization charge for undertaking mailings on behalf of members in order to ensure that the privacy of members is not breeched.

The definition of member was confusing to some and worrisome to others.

The definition of “member” was confusing to some and worrisome to others. Some organizations define members as anyone who receives services while others include donors. The statement on page 35 of the “Draft Framework for a New Not-for-Profit Corporations Act”, 'the act would contain a provision defining a member as anyone designated by the board of directors', alarmed some participants and elicited a promise to clarify the wording.

Some participants believed that signing an affidavit in order to obtain a membership list would be pointless. The cost, and the expense of tracking down individuals to sign the affidavit in the first place and pursuing legal action in the event of an infraction, was also seen as problematic.

In addition, the proposed timelines were questioned. The allotted 15 days for changes was seen as too short, and the requirement to maintain records for six years was viewed as “impossible” for many organizations.

Rather than the framework proposal that stipulates a prescribed amount as a threshold above which corporations would be required to have annual audits, most participants across the country favoured a graduated approach, or one based on classification or size.

Many supported the Saskatchewan model in which provincially incorporated not-for-profits with revenues of over $100,000 must be audited, those between $25,000 and $100,000 must have at least an internal review, and those with less than $25,000 have no audit requirements. Concurrent with this was widespread support for the adoption of a graduated standard such as a review engagement, which is less than an audit but satisfies an understanding of the costs involved.

Other suggestions included differentiating between organizations that receive public funding and those that do not, or basing it on classification. For example, if an organization is classified as political it should be required to have an audit regardless of its size, a charitable organization with tax benefits should be subject to a threshold, and mutual benefit organizations could determine their own thresholds.

Suggestions were made to adopt the Canadian Generally Accepted Accounting Principles rather than keeping separate books for protection against not-for-profit corporations using their tax benefits to subsidise for-profit activities, or to have separate statutes for charitable and noncharitable organizations.

Yet another issue was auditors. Representatives of the Canadian Institute of Chartered Accountants did not agree with the framework proposal as it pertains to auditor qualifications and proposed that the new act adopt the Canadian Business Corporations Act definition of “auditor”. The opposite view was conveyed by representatives of the Certified General Accountants, or CGAs), of Ontario. There were several calls to have audits not be restricted to either CGAs or CAs if made mandatory. Some agreed that a smaller organization should be able to agree to an internal review by a non-accountant, provided that individual had no ties to the board.

Two specific suggestions were made about the wording in the “Draft Framework for a New Not-for-Profit Corporations Act”: First, the last paragraph on page 46 be amended to read, “The auditor meets the standards of the auditing profession.” Second, on page 47, “Right to attend meetings,” would imply that the auditor’s expenses to attend all meetings would automatically be paid by the corporation, something that might be a burden for small organizations. It was suggested the wording could be changed to “the auditor is entitled to attend at the request of the board, and expenses will be paid.”

Something I know quite personally about is directors' liability. The vast majority of participants at the 10 consultations favoured the adoption of the framework proposal that specifies that every director or officer of a corporation would owe a duty of care to the corporation. This objective test would create a uniform standard of care for directors and officers, and is clearly understood by Canadian courts.

It was noted that there could be ambiguity in the notion of “acting in best interest.” As many organizations registered as not-for-profit corporations address a public good, one participant wondered about a potential conflict of interest when a director acts in the best interest of the entity as opposed to the community it was designed to serve.

Participants emphasized the need for consistency with other statutes such as the Canadian Human Rights Act, the Employment Standards Act, and the Income Tax Act, commenting that little can be changed in one without amendments to the others.

There was unanimous approval of the framework proposal that would include a due diligence defence for directors and officers of not-for-profit corporations. Participants saw this as a codification of common law and the right thing to do.d

A majority of participants favoured adoption of the framework proposal that would broaden the scope of situations to allow organizations to identify directors and officers, to provide mandatory review of directors and officers in specific circumstances and to allow corporations to purchase insurance. Many participants were concerned about insurance issues, and many supported advancement of defence costs. Many participants across the country were very concerned that the cost of insurance would be prohibitive for small organizations and impossible to obtain.

A majority of participants also agreed with the framework proposal that would place no statutory limit on liabilities for directors and officers and would encourage proper care and diligence in management of organizations. Participants who supported the framework proposal liked the idea of clarifying but not limiting liability. Some remedies were suggested for these concerns.

Mainly, the draft framework proposal does not make a recommendation with respect to the derivative remedy. The concept of including a derivative remedy received mixed reviews across the country. Those opposed to providing for derivative action said that its inclusion would be used to burden organizations with frivolous actions, or allow a third party to hijack the agenda of an organization.

Those who favoured the inclusion of this remedy felt its inclusion was necessary in order to ensure accountability and credibility. A number of other saw this mechanism of accountability as important and urged that it be included as a hallmark of modern statutes. Others suggested keeping derivative as a remedy, but limiting access so that small, special interest groups could not abuse it in clarifying the rules under which it could be used.

Participants were mixed in their reaction to the framework proposal, which does not provide for an oppression remedy. Those who agreed with its exclusion included a participant who argued that any one disgruntled member could use it to halt the workings of an organization. It was pointed out that the common law remedies were made for truly distressful situations.

Among those who argued in favour of including this remedy was one participant who contended that there were many disputes within not-for-profit organizations and therefore a real need for remedies. In Quebec a participant found this option redundant because such protection was already available under civil law.

A strong consensus emerged across the country for the proposition that the dissent right and appraisal remedy should not be included in the new act, but the corporation should be free to include similar provisions in its articles or bylaws.

The framework proposal includes no provisions respecting natural justice and fair procedures. The majority of participants from across the country agreed with the framework proposal. Many participants liked the fact that corporations would be free to include these provisions in their articles and bylaws, rather than enshrining them in the act.

Most participants in St. John's, Halifax, Winnipeg, Edmonton and Vancouver agreed with the framework proposal not to include a modified proportionate liability regime, while several participants in Montreal, Ottawa, Toronto and Regina did not agree with it. A number of the comments made during the consultations were actually points of clarification that reflected the highly technical nature of this subject area.

One participant saw no valid reason for including MPL in the statutes as not-for-profits were not the types of corporate organizations that needed it. Another disagreed and urged that MPL be included, stressing the importance of consistency in legal approaches. Secured creditors rely on audited statements and auditors would be liable to secured creditors, as would directors and officers. A suggestion was made to make the NFP statute consistent with the CBCA.

The CICA argued that the MPL should be included in the act for the sake of fairness. Accountants should be responsible for their own acts, but not the acts or omissions of others. A person who makes a relatively smaller, non-existent contribution to a wrongful act should not, in all fairness, have unlimited liability.

The framework proposal, which has no provision allowing for the creation of corporations sole, met with strong approval across the country. However, the provision to allow standard, not-for-profit corporations to be set up with only one director and one member was not enthusiastically embraced. Many participants in most cities preferred to see a minimum of three directors.

Bill C-4 is long overdue legislation for a very crucial, important part of Canadian society. I urge all members to support this amended and improved bill so the Canadian Parliament can improve the systematic framework for not-for-profits.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Madam Speaker, the main purpose of Bill C-4 is not to propose funding, but to modernize regulations governing rights of incorporation in Canada.

One good reason to make that happen is transparency. When an organization raises funds from members of the public, it is accountable to those providing the funds. Financial reports have to be made available. Any member belonging to a national corporation should have access to the list of members and, as a member, should be able to review the organization's financial information and management policies. The current act does not allow for such things.

Bill C-4 introduces transparency and a modern approach. Organizations should be accountable to those who contribute financially.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Madam Speaker, Bill C-4 creates legislation regulating and governing organizations incorporated across Canada. In my opinion, what may discourage both volunteers and non-profit organizations is not Bill C-4 but this government, which is cutting programs indiscriminately. That is what will discourage the voluntary sector and stifle new corporations at the local and provincial levels.

[Carol Hughes, NDP, Algoma—Manitoulin—Kapuskasing, ON]

Madam Speaker, my colleague has explained Bill C-4 but I want to mention that the organizations would have preferred to see changes to secure stable, long-term financing. They would also have liked to see some rules that would clarify and improve the charitable status process. We are concerned about charities.

Would my colleague agree that this bill may discourage people from establishing non-profit organizations? Does he think this bill could be costly for these organizations?

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Madam Speaker, I think I would answer my colleague by saying that Bill C-4 regulates and governs organizations of a national character, that is organizations across Canada.

Obviously, we must help volunteers and make their task easier. However, local and provincial non-profit organizations are regulated by the Quebec government or other provincial governments. Having read and studied Bill C-4, I think it should be acknowledged that it brings improvement, modernization and more transparency and protection for volunteers.

I would like to get back to what my colleague said about the program to support volunteers that the Conservatives cancelled. They weakened a lot of programs helping disadvantaged people and the voluntary sector when they cut their financing by $1 billion. This is an aberration. Instead of cutting these funds, the Conservative government should have transferred the money to Quebec. I think Quebec and the other provinces are directly responsible for developing the voluntary sector at the local and provincial levels.