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.

[Carole Presseault, Vice-President, Government and Regulatory Affairs, Certified General Accountants Association of Canada]

Thank you, Mr. Chairman and honourable members.

Mr. Chairman and Honourable Members.

Thank you for your welcome this afternoon and for the opportunity to appear before this committee to talk about Bill C-4, An Act respecting not-for-profit corporations and certain other corporations. The Certified General Accountants Association of Canada, together with its 71,000 members and students, represents really the future of the accounting profession. Our designation is built on a strong foundation of ethics, education, examination, and experience.

CGA Canada strongly supports the objective of providing a modern, transparent, and accountable framework for the governance of the not-for-profit sector in Canada. CGA Canada recognizes the important role of the not-for-profit sector, a role that it plays in communities across our country. Many of our members work with and within the sector as chief financial officers and chief executive officers of not-for-profit organizations. Others provide public accounting expertise and services to these organizations in communities across Canada.

Our interest in this legislation is quite narrow, Mr. Chair. It resides really in the provisions concerning financial disclosure, so I'll have some very brief remarks about our recommendation in this area. But I want to start by saying that as the not-for-profit sector benefits from the benevolence of Canadians and a favourable tax regime, a rigorous financial disclosure regime ensures appropriate transparency and accountability.

The financial reporting regime must adhere to exemplary governance practices. Professional accountants must meet the highest standards of professional competence, conduct, and ethics, no matter which sector they provide services to.

We would therefore like to suggest improvements to what we think is to simplify and strengthen the financial reporting requirements. Our focus is on clause 181 of the bill, specifying the qualifications to meet the three requirements to qualify to be a public accountant under Bill C-4. The first requirement is that the public accountant be a member in good standing of an institute or an association of accountants. The second requirement regards meeting any qualification under an enactment of a province. And the third one is with regard to independence criteria.

The first requirement recognizes that it is the responsibility of the professional association to ensure its members are competent and qualified to provide professional accounting services.

The professional bodies set professional standards of competence and ethics and only those professional bodies have the duty to ensure their members meet those standards by adhering to a conduct and disciplinary regime. In turn, these provincial institutes or associations of accountants have been delegated by their provincial and territorial governments to govern their respective members in the public interest.

The second provision requires public accountants to meet any qualifications under an enactment of a province. This is vague and redundant because a professional accountant who provides public accounting services must comply with the requirements of his institute or association whether these requirements are matters of law or practice. The requisite level of oversight is appropriately captured in the first requirement.

We also think that this provision in subclause 181(2) could impede the mobility of accounting professionals. Chapter 7 of the Agreement on Internal Trade, which was recently amended by Canada's trade ministers, stipulates that any worker certified for an occupation by a regulatory authority of one province or territory will be recognized as qualified to practise that occupation by all other provinces or territories. We believe this provision could be interpreted as adding another test of competency that is unnecessary.

The third provision requires the independence of the public accountant and proposes that professional accountants meet a number of tests of independence. We totally agree that the public accountant needs to be independent of the corporation. In fact, in the aftermath of major corporate failures in North America and Europe, the accounting profession, internationally and in Canada, proceeded to develop independent standards to ensure that the audit process is free of interference, conflict, or undue bias. These standards are more rigorous than what is required in Bill C-4. They are current, and they will remain current through a constant renewal process. They satisfy not only national requirements but international requirements, and they mainly require the identification of all threats to independence and the application of necessary safeguards. These standards are recognized for other types of corporations including report issuers.

We propose that Bill C-4 require that professional accountants comply with the standards of independence established by the professional regulatory body--whether it be CGA-Canada, the CICA, or CMA Canada--that has jurisdiction over them.

CGA-Canada's proposals to strengthen the legislation by clarifying the provisions respecting the qualification of auditors and also by significantly strengthening the independence requirements will ensure a high degree of harmonization across jurisdictions while maintaining high standards of competency and ethics.

Copies of our proposed amendments have been provided to the clerk.

Thank you and I would be pleased to answer your questions.

[The Chair, Conservative, Michael Chong]

Good afternoon, members of the committee.

Good afternoon to our two groups of witnesses.

Today we're studying Bill C-4, An Act respecting not-for-profit corporations and certain other corporations. We're pleased to have witnesses from two organizations in front of us.

We have Madam Carole Presseault, vice-president of government and regulatory affairs, Certified General Accountants Association of Canada. We have Madam Tamra Thomson, director of legislation and law reform at the Canadian Bar Association. We have Mr. Wayne Gray, a member of the national business law section of the CBA. Finally, we have Mr. David Stevens, who's a member of the national charities and not-for-profit law section of the Canadian Bar Association.

Welcome to all of you.

We'll have about 10 minutes of introductory statements from each organization, and we'll begin with the Certified General Accountants Association of Canada.

Ms. Presseault.

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

Yes. I have a question for Mr. Reid from the Red Cross.

Mr. Reid, as you said, the Red Cross has a presence in many communities across Canada and in all provinces, as well as internationally. Your organization's purpose is to improve the situation of the vulnerable.

Do you have any reservations about Bill C-4 applying to co-operatives given that you work in humanitarian aid?

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

There was an attempt, I think, in this new bill, Bill C-4, to define soliciting versus non-soliciting. In my mind, it seemed to be--perhaps I misunderstood--that a soliciting corporation went out and got funds from the public, from government, or from outside, as opposed to there being strictly contributions by members.

[Mike Wallace, Conservative, Burlington, ON]

Compared to the act that has existed for a hundred years, Bill C-4, as presented to us today, is simpler than it was in the past. Is that an accurate statement?

[Alan Reid, General Counsel, Canadian Red Cross Society]

Thank you, Pam.

Good afternoon, Mr. Chair and members of the committee.

I think the gist of our message is that the Canadian Red Cross recognizes the need for new legislation governing not-for-profit corporations in Canada. I want to underscore that; I think just about everybody would be in support of that. The Canadian Red Cross participated in consultations organized by Industry Canada in, I think, 2002. We recognize that those consultations have influenced, in many respects, the form and content of Bill C-4. In fact, those consultations went on over a significantly longer period than that.

In 2005 the Canadian Red Cross appeared before the committee to express its support of Bill C-21, a forerunner to Bill C-4, as well as to make some general observations that we believe still largely apply. At that time and again today, I want to mention a few particulars of the legislation that we consider to be important and things that will help us in our operations.

They include specific authority for telephone and electronic meetings and voting; the authority to make binding, unanimous resolutions without actually having to come together for a meeting; tighter conflict of interest requirements; the broadening of indemnification authority, including indemnity advances, which may become increasingly relevant given the current public appetite for enforcing government's accountability; and, overall, the increased deference Bill C-4 extends to corporate bylaws on many issues that were formally regulated by the Canada Corporations Act and ministry policy directives.

While we support the “as of right” approach to incorporation, and welcome the fact that the new corporate model will eliminate upfront government regulation—for example, there will no longer be ministerial approval of articles of incorporation or bylaws—we do note that the new corporate model places a large emphasis on self-regulation and on checks and balances resting upon enhanced legal rights and access to courts.

Bill C-4 is detailed and difficult legislation and will be complemented by lengthy regulations. It will pose compliance challenges, not just for small not-for-profits that operate without legal departments and/or sizable legal budgets but even for large organizations, such as the Canadian Red Cross, with easier access to legal assistance. In that respect, I am sympathetic with the points that have been made by Imagine Canada with respect to the voluntary sector and the difficulties some organizations will have adjusting to this.

However, every new comprehensive piece of legislation presents interpretive and operational issues and Bill C-4 is no exception. It calls upon not-for-profits to address many new challenges: systems for tracking and allowing access to a large and changing membership, especially in the case of an organization such as ours, which has a large membership and growing; procedures to meet enhanced accountability thresholds; adjustments to new financial procedures; and the redoing of bylaws, all of which will require careful efforts to ensure that governance provisions and practices measure up to the new legislative standards.

Because there is a lot of room for error and dispute in adapting to this new model, we encourage the government to support and build upon current Industry Canada initiatives to educate the not-for-profit sector—in particular, the voluntary sector—through publications, websites, model bylaws, workshops, and non-binding administrative opinions on key issues, all of which will assist not-for-profits, both large and small, in their due diligence and other compliance efforts.

While it is noted in the accompanying explanatory text that the bill provides directors with an express due diligence defence against potential liability, we also note that the bill equally promises to enhance and protect members' rights and gives members additional power to enforce their rights and to oversee the activities of their organizations as well as to monitor the director's activities. Finding ways of satisfying due diligence will become even more challenging and critical for directors than it is today. Arguably, this bill may heighten tension between membership and directors, increasing the risk of liability rather than reducing it.

While we have no doubt that well-qualified directors will continue to come forward to serve the not-for-profit and charitable sectors, it will be interesting to see how insurance underwriters will assess the balance of risk and rights and what impact this legislation will have on already steep premiums for liability insurance for directors and officers.

In part, this question may be influenced by the extent to which the new corporate model stimulates resorting to courts to resolve corporate governance issues. Given our concern that enhanced members' rights, coupled with broader judicial remedies, could elevate dispute resolution costs for not-for-profits and charitable organizations, we would have preferred to see overt legislative encouragement of administrative process and alternative dispute resolution mechanisms in the legislation.

Clause 293 gives the director authority to “make inquiries of any person relating to compliance with this Act”, but for the most part the director, like everyone else in the new model, may feel compelled to rely on courts to enforce compliance. We hope that the legislative model will prove flexible enough to allow for less formal and less costly means of resolving member/board/management tensions, as well as compliance issues raised by the director. We would encourage the government to create and finance a mandate for Industry Canada to assist not-for-profits in developing efficient and humanitarian approaches to resolving compliance issues, in lieu of engaging the courts.

The Canadian Red Cross, in preparing for this presentation, has chosen not to single out particular sections and clauses of Bill C-4 for specific criticism. Doubtless there are sections that might be improved, but a lot of work has gone into this bill over many years by many experts in the field. We choose not to repeat before this committee comments we may have made in the reform process that have not found their way into Bill C-4.

Notwithstanding small concerns that we may have about some of the details of certain provisions of the bill, our primary message to the committee today is that we view Bill C-4 as an important legislative initiative, and we support the change that it will bring. We will undoubtedly gain a deeper understanding of its complexities as we work through our governance and financial procedures in an effort to bring the society into compliance with the new regime.

The bottom line is that we would like to see the bill move through the legislative process as quickly as possible. We've watched it die too many times on the order paper. Reform of this area has been a long time in coming, and we are anxious to get on with the task of adjusting to the new regime.

Thank you once again for inviting us to appear before you. Merci beaucoup.

[The Chair, Conservative, Michael Chong]

Good afternoon, everyone.

We're here pursuant to the order of reference made on Wednesday, December 2, 2008, to study Bill C-4, An Act respecting not-for-profit corporations and certain other corporations.

I'd like to welcome our four witnesses today. From Imagine Canada, we have Madam Cathy Barr, vice-president of operations. We have Madame Susan Manwaring, a partner at Miller Thomson LLP. From the Canadian Red Cross Society, we have Madam Pam Aung Thin, who is the national director of public affairs and government relations, and Mr. Alan Reid, general counsel. Welcome to all of you.

I want to let members of the committee know that you've been given two documents, in both official languages. The first is a submission from Imagine Canada, and the second is a very in-depth comparison of the various iterations of this bill in front of us from previous Parliaments, which our analyst has prepared for us.

Thank you very much for that work.

She's also indicated that you will get an electronic copy at your office at some future time.

Without further ado, we'll start with Imagine Canada. You have 10 minutes for your opening statement.

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

Thank you, Chair.

Thank you, Minister, for coming to see us today.

Bill C-4is obviously long overdue, and contains some changes that I think will be welcome, not only to government workers, but especially to the not-for-profit sector. Clause 282 of Bill C-4, however, concerns me, and it has to do with the appointment of a director. It states that the minister can appoint a director or one or more directors.

Can you clarify or comment on what criteria or what guidelines there are or how the minister decides who to pick and who to put in that position?

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

Thank you, Mr. Chair.

I thank the honourable member for her introductory remarks on Bill C-4. I certainly echo her comment that this bill is long overdue.

As the member knows, the bill actually traces its origin back a number of years to the Liberal Party and Bill C-21. As such, our party supports its intent, for sure.

I would have one question for the honourable member. Is she satisfied that this bill does not conflict with any provincial or territorial laws dealing with not-for-profit corporations?

[Diane Ablonczy, Conservative, Minister of State (Small Business and Tourism)]

Thank you, Mr. Chair and colleagues.

This is actually my very first time, as a junior minister, or any other kind of minister, appearing before a parliamentary committee. I'm very pleased that it's with you all. I'm also very pleased that it's about a bill we very much want to finally get into law. So thank you for this opportunity to address you on Bill C-4.

Bill C-4 has a gripping title. I know that you're going to be on the edge of your seats. It's an act respecting not-for-profit corporations and certain other corporations. We can say that this is a bill whose time has definitely come. It represents the eighth time, colleagues, the third time in the past year alone, that a Canadian government has attempted to reform a statute. This statute was first brought into law in 1917, and of course you can appreciate that it no longer serves the needs of its principal stakeholders.

As I said when the bill was introduced in the House, not-for-profit organizations are a crucial part of Canada's economic structure. There are more than 160,000 not-for-profits, of which some 19,000 are federally incorporated. They accounted for over $136 billion in revenues in 2003 and employed some two million people.

So this is what the core of Bill C-4 is about. We have before us an opportunity to update and modernize an important marketplace framework statute that has not been substantially amended in over 90 years, which is older than any of us, fortunately. In that time, the world in which not-for-profit corporations operate has changed dramatically. In 1917, when the concept of a not-for-profit corporation was added to the general corporations statute, most such corporations were very small, self-financing entities that provided much-needed local services and that operated in a non-electronic world. Such small local organizations still exist, of course, but they share the landscape with huge national, even international, organizations with annual budgets in the hundreds of millions of dollars.

The trick in modernizing legislation of this kind is to balance the needs of the small with the large, the local with the national, the member-financed mutual aid society with the organization that solicits public money. That is not easy. Business corporations typically have interests that are largely homogenous: consistent profits, good public relations, keeping shareholders and other stakeholders happy. Not-for-profit corporations and other corporations without share capital, by contrast, have the most divergent interests imaginable.

The proposed legislation would apply to churches and other religious organizations, industry associations, charities, foundations, special interest groups, political parties, and sporting organizations, to name a few. What the proposed act does, then, is establish broad rules for setting up a not-for-profit corporation, or one without share capital, to ensure that it operates in a fair and transparent manner before its members and the public and to allow for an orderly dissolution of the corporation if circumstances warrant.

The proposed act definitely does not address the granting of charitable status or taxation policy of any kind. That is the role of the Canada Revenue Agency. Nor does it deal with the question of funding for federal not-for-profit corporations. This is a bill that simply proposes broad ground rules for modern not-for-profit corporations. That is all it does and all it is intended to do.

One area I want to deal with right at the outset is the apparent size and complexity of the proposed legislation. I can easily imagine how anyone looking at a 170-page bill with some 373 sections could question how this could possibly make life easier for not-for-profit corporations. In fact, the bill does exactly that. Let me explain in detail.

What the new statute proposes is to clarify areas that are not now currently addressed in the federal not-for-profit law. It would do so without imposing any significant burden on small or medium-sized corporations while at the same time ensuring that they are covered by a modern corporate governance framework.

For most not-for-profit corporations, the regulatory burden will be minimal. At the initial incorporation stage, an applicant will have to fill out relatively simple forms, file their articles, and pay the incorporation fee. That's it.

Annually, most corporations will have to complete financial statements, which they would have to do anyway for tax purposes, and send that financial information to members. Soliciting corporations, those that receive money from governments or the public, will also have to file these with Corporations Canada.

Additionally, corporations will be required to convene an annual meeting and file an annual return. This is not new. Corporations are required to do this now. But the new act will allow almost unlimited flexibility in how corporations do this. They will be able to communicate, hold meetings, and file documents with Corporations Canada electronically if they so choose. This represents a significant reduction in the regulatory and paper burden. The new audit requirements represent a potential further reduction of the regulatory and paper burden on smaller corporations.

Under the current statute, all corporations are required to have their financial statements audited. As members well know, this can cost several thousand dollars, potentially representing a sizeable portion of the budget of small corporations. The new provisions provide a graduated audit requirement based on the source of a corporation's funding, whether it's from members or whether from the public or governments, and the amount of its gross annual revenue. Under the new rules, soliciting corporations, those that derive their revenue from donations or government grants, that have revenues of less than $25,000 can dispense with audits entirely. This is also the case with non-soliciting corporations with revenues of less than $1 million. Of course, this represents an immediate and very substantial cost saving, especially for small soliciting corporations operating on shoestring budgets.

Most of the rest of the proposed act establishes rules of good corporation governance or provisions that address contingent situations. The corporate governance rules include provisions dealing with areas such as directors' liabilities, members' rights, and responsibilities of directors, officers, and the auditor. These are all areas familiar to the legal and professional communities, and the principles in the bill are just good, modern corporate business practice. I know that the not-for-profit sector will welcome clear and understandable corporate governance standards. Charities and other soliciting corporations that compete for limited donor dollars will find them especially useful.

Finally, there are the provisions that deal with the contingent situations, which for most corporations will probably never arise. These include, for example, provisions for corporate reorganizations. Most corporations will never amalgamate with another corporation, but it is incumbent upon the government to provide clear, fair, and transparent rules for those corporations that choose to do so.

What these contingent rules do is establish procedures, in some cases by filling in holes that exist in the current law. For example, an amalgamation of two or more corporations under the current act can actually take years with untold legal and accounting costs. Under the proposed statute, a short-form amalgamation would take days at most, with minimal costs. While as I said, most corporations will never amalgamate, this represents real streamlining for those that will.

The flexibility and clarity built into the act is why we decided that a classification scheme under the act was necessary; that is, we chose not to regulate different types of corporations differently. Rather, we chose to provide a framework that will allow corporations the maximum flexibility to organize themselves in a manner that works best for them.

A classification system establishing different rules for different categories of corporations would cause an admittedly complex piece of legislation to be even more complicated. By necessity, some rules, such as those related to directors' liability, would have to apply to all corporations, while other rules would apply to only one corporation. Added to this would be the difficulties in classifying some corporations. There are some organizations that would easily fit within several categories. For example, a corporation could be a mutual benefits society, such as a religion-based community club, but it could also collect funds for sending children to summer camp, operate a shelter for homeless individuals, and also engage in family counselling. So what classification is it? What rules would apply if there was a conflict in interpretation?

Instead, much like the Canada Business Corporations Act, this act provides for a system of self-regulation and self-enforcement. This is done by allowing corporations the maximum flexibility in writing their own articles and bylaws, and providing for civil remedies in the event of internal disputes. This would allow federal not-for-profit corporations to devote their time, energies, and money to fulfilling the purpose for which they organized in the first place.

Members of the committee, it is time that this bill be examined and passed as expeditiously as possible. Not-for-profit corporations have been waiting for a new governing statute for literally years, and they have been extremely disappointed every time it has died on the order paper.

Let me close by saying that I'm happy to have had the opportunity to be here with you today, and I also want to introduce the Industry Canada officials here today: Roger Charland is a senior director for the corporate and insolvency law policy and internal trade directorate--I think he gets paid by the words in his title. Also we have Wayne Lennon, who is a senior project leader on the not-for-profit file, and he's done all the heavy lifting on this bill. And Coleen Kirby is here; she's the manager of the policy section at Corporations Canada, and is especially knowledgeable about all the regulations.

We look forward to responding to any questions or concerns you may have about this bill.

Thank you very much, Mr. Chairman.

Canada Not-for-profit Corporations Act

[Serge Cardin, Bloc, Sherbrooke, QC]

Madam Speaker, I would first like to congratulate my colleague for her heartfelt and relevant speech. I would like to ask her a question since she is very involved with these community organizations and not-for-profit organizations.

In July 2000, Industry Canada published a consultation document entitled “Reform of the Canada Corporations Act: The Federal Not-for-Profit Framework Law”. After releasing this document, the department held a series of round tables in cities across the country to look at the ideas in the document. And so Bill C-4 was born.

Given that she is involved with these community organizations, I would like to know if she was kept up-to-date on or knew if any round tables took place in her area. If so, does she know if the organizations were allowed to participate and bring their ideas to flesh out, in the most ideal way possible, this legislation that concerns them? And knowing this, does she think it would be relevant to not only have the bill studied in committee, but to also consult community organizations of all sizes, so that the bill would be adaptable to any situation?

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Madam Speaker, today we are talking about Bill C-4, An Act respecting not-for-profit corporations and certain other corporations. It is clear that, on the surface, this bill seems to be a good one. The Bloc Québécois will vote in favour of the principle underlying this bill.

I listened to the preceding comments. This bill provides a framework for organizations and helps them get organized. It updates an archaic law. Our community organizations need more money, but we do not recognize their true value any more than we do that of not-for-profit organizations. If every not-for-profit organization and every volunteer ceased operations or quit tomorrow, our society would crumble. They keep our social fabric intact. That is why it is a good idea to update the legislation governing them.

This bill is at second reading. I hope that it will get to the committee stage so that the members who are on committees can study it in great detail to ensure that, on the one hand, directors of not-for-profit organizations can enjoy a certain degree of flexibility and openness, and that, on the other hand, the administration of these organizations is transparent.

Bill C-4 modernizes the current Canada Corporations Act. It will consider the financial means and the size of the organization in determining management standards. As the minister said, it will also provide a flexible framework for financial reporting and the establishment of internal bylaws for the organizations it governs.

Not-for-profit organizations need to be more efficient and transparent. We also have to consider the fact that, when a not-for-profit organization asks the minister to be recognized as such, there is a great deal of discretionary power. It looks like this bill eliminates the minister's discretionary power, and that is something we really need.

There is a reason the new Bill C-4 was drafted. Over the past few years, many not-for-profit organizations, as well as the Canadian Bar Association, have examined the problems the archaic law created for not-for-profit organizations. They wanted legislation that was more consistent with the needs of modern not-for-profit organizations. They asked the government to rewrite the legislation, so now we have Bill C-4.

The goal of this bill, according to the minister, is to establish a more modern and transparent framework for these organizations. The operational framework for not-for-profit corporations would be similar to corporate governance under the Canada Business Corporations Act. That is not a bad thing. Quite often, having an archaic piece of legislation regarding not-for-profit organizations means that we have not listened to their requests and priorities.

In more concrete terms, this bill will simplify the incorporation of not-for-profit organizations; clarify the rights and responsibilities of directors, which is an excellent thing itself; and will establish defences for officers and directors in the event of liability. Today, directors, who are quite often also the employers in not-for-profit organizations, are subject to all sorts of grievances and to all sorts of laws that employees or suppliers can use to get them into serious trouble. It is good that they can have more solid defences.

The bill will provide members with increased rights to contribute to the governance of their organization. Perhaps the committee should focus more on this point. That would respond to the requests from some of my colleagues who have said that organizations and their members must have a little more power. The bill will establish a better mechanism to oversee the organization's accounts, leading to transparency.

However, and I would like to draw the House's attention to this point, according to the Canadian Constitution, management of the social economy, volunteerism and community activities fall under provincial jurisdiction. It is important to note that the federal government only has jurisdiction over organizations that do not have provincial purposes. The committee must examine this aspect in order to discern if this bill oversteps its area of jurisdiction and infringes on provincial jurisdictions, namely those of Quebec. At present, the section of the Canada Corporations Act states that the federal minister may grant a charter of incorporation if the corporation thereby created pursues objects of a national, patriotic, religious, philanthropic, charitable, scientific, artistic, social, professional or sporting character, or other. However, these activities must be under the authority of the Parliament of Canada.

We note that clause 4 of the new act does not require a non-profit to state its intended purpose in its articles of incorporation. Thus, it is important that the non-profit's purpose and specific mandate be clearly identified in its articles of incorporation in order to ascertain whether the organization is involved in the jurisdictions of Quebec or of other provinces. It is extremely important and the committee will have to examine that issue.

I am only going to discuss a few clauses of the bill, those that, in my mind, apply to the day-to-day operations of community organizations.

First, part 1 of the bill provides for the incorporation of organizations without share capital for the purposes of carrying on legal activities. That is what the current law permits; there is not much difference. It defines the concept of a soliciting organization as one that solicits funds from the public or a government or any organization that receives private donations or government grants. That is found in part 1.

Part 4 requires organizations to prepare and maintain accounting records. That is very important. I was saying earlier that this bill provides a clear framework for managing a non-profit organization.

Quite often, not-for-profit corporations that have been established for many years must suddenly hold an annual general meeting and change directors. Then the director wants to change certain aspects of the organization's mandate and objectives. The bill establishes a framework in which books must be kept, directors named, and membership lists made available. Thus, there is an obligation for transparency.

With this, transparency is mandatory. First of all, books must be kept, along with a list of the members and directors, and people must be able to access those documents. Quite often, in a not-for-profit corporation, such as an MS society, for example, people are overseen by directors who themselves have MS. Sooner or later, however, their strength will decline. The organization will have to change directors or will no longer have a director. Then what will happen?

The members of such organizations must be known, so that they can be called upon and consulted when it is time for someone else to take up the torch.

Part 5 permits organizations to borrow funds, issue debt obligations and make investments as they see fit. Some not-for-profit organizations have money for research and other purposes. For instance, if a fundraising event is organized for a spinal cord foundation and $200,000 is raised, can that foundation take that money and invest it in research? This gives them a guarantee. It opens a door for them. It gives them both transparency and freedom.

Part 9 stipulates that the organizations must have at least one director and, in the case of soliciting corporations, three directors. That is the minimum. That ensures honesty within the organization and also gives people who support the cause and give money to the organization much greater confidence in the directors. As a result, people will know that there is not just one individual who knows the books and could pocket the corporation's money.

The bill also clearly sets out the obligations of directors and organizations as well as the due diligence defence. I mentioned that earlier. Due diligence clearly states the duties, obligations and responsibilities of the general directors of a not-for-profit foundation or organization. It also gives them a safety net. At present, anyone could suddenly accuse directors of lining their pockets. Directors are not protected from that. And it could just as easily be either true or false. Imagine the ordeal those people have to go through if it is false. They cannot defend themselves; that opportunity does not exist. This measure will afford them a certain amount of security.

Directors and officers of NPOs are currently exposed to numerous liabilities under the provisions of certain pieces of legislation including liability for environmental damages, liability for unpaid salaries, fiduciary duty, and liability for their own negligent actions.

There are many kinds of not-for-profit organizations. Some of them demand huge numbers of hours, huge amounts of energy and listening skills from their volunteers, officers and directors. Quite often, these people are tired and are subject to all sorts of weaknesses and they can be subjected to all sorts of allegations.

Often they work with people who are ill, as well, so they need an established or set management framework for their own protection. As well, not-for-profit organizations cannot always afford lawyers to help or advise them in certain cases. A framework gives them some security.

Another extremely important aspect of this bill is part 10, which provides that an organization's by-laws must set out the conditions of membership. I am talking not just about all the rules for being a member of a not-for-profit organization, but also the rules for holding meetings of the membership.

As I said, often, these people work in difficult environments, and they are not as procedurally oriented as we are here in this House, so they need some guidance. They want to do everything they can, but they do not always have accountants or lawyers to help them. Part 10 lays some ground rules, which are good to have.

Part 11 provides that an organization must make its financial statements available to its members. This is extremely important. When organizations are transparent and open and make their books available, they are less likely to be criticized, and people often have questions about an organization's financial situation, whether there is money to carry on or invest, or simply what the organization is doing. It is only natural that organizations, especially NPOs, should disclose what they have.

In my opinion, part 12, which pertains to financial reviews, has to do with to confidence in the directors. Small not-for-profit organizations cannot afford to pay an auditor, so they will often work with accountants who provide their services free of charge as a way of giving to the organization. It is their way of helping the organization. Of course, large organizations like the United Way—which raises $8 million, $10 million, $15 million, $20 million or $100 million, I would imagine—must be audited, but their situation is different.

Part 14 describes the process for liquidation and dissolution of a corporation incorporated under this legislation. That is very important. Once, in my little corner of the world, in my region, a local organization had to close its doors when a regional organization took over. What is to be done in a situation like that? I should point out that not-for-profit organizations do not necessarily have the means, the physical resources, or the staff needed to liquidate or dissolve the corporation. This bill provides guidelines for that process.

Part 16 covers protection and security. It sets out the offences and penalties imposed in case of an infraction, particularly with respect to false and misleading statements and the misuse of information from a list of members or other register kept by the organization. Every NPO administrator must inform the organization's members, administrators or shareholders, as the case may be, of this provision. Members' names must not be given to other organizations, such as businesses, that might misuse them.

This bill is very important. The committee will have to examine this matter as well as the constitutional issue with respect to encroachment on provincial jurisdiction.

The committee will have to examine whether this bill provides enough flexibility and permissiveness to not-for-profit organizations to allow them to grow transparently and accountably in the best interest of the people who use the services.

[Glenn Thibeault, NDP, Sudbury, ON]

Madam Speaker, I agree wholeheartedly with what the member is saying.

As I mentioned earlier, I had the opportunity to be the executive director of the United Way in Sudbury for five years. Every time government programs or government funding was cut, the request to the United Way increased dramatically. There was a direct correlation. We always used to say that if the government only knew how this would impact the not-for-profit sector, when it makes these decisions, that we could move forward and make the positive changes it needed.

When I heard of Bill C-4, I truly was excited at the opportunity of knowing that we could make some great changes to help the organizations that are doing the work that is so important to so many of us. What ends up happening? We give them more regulation and more hoops to jump through, and that is not helping.

We recognize that we are in this economic downturn and we hear about stimulus packages and all of these great things, but ultimately the not-for-profit and charitable organizations are the ones that will be supporting the individuals who need the help the most during this downturn. What are we doing? We continue to handcuff them. That is not right. I say shame.

We need to move forward, make the right choices in this legislation, get some consultation from these organizations, and then present the bill to ensure that it moves us in the right direction.

[Glenn Thibeault, NDP, Sudbury, ON]

Madam Speaker, I first want to thank the hon. member for Niagara West—Glanbrook for sharing his desk with me. It makes my life a little easier to speak today.

I stand here today to speak to Bill C-4. It is important to note that I oppose this legislation, as do all New Democrats, as it appears today. We need to recognize the work that not-for-profit organizations and charities do. It is something that we all benefit from.

This legislation ensures that our country's not-for-profits and charities, organizations that look after our most vulnerable, help educate our children, support our seniors and help the disabled, will become bogged down with legislation rather than doing the work they are there to do.

Regulatory reform would be a minor improvement for the not-for-profit sector. This is certainly not its main priority. The bill only addresses one aspect of many that were raised during the voluntary sector initiative through consultations with not-for-profit organizations over the last decade. Special attention should also be paid to strengthening the privacy of members' information and lists and minimizing the regulatory burden imposed on not-for-profits by the copious amounts of legislation.

Canada's voluntary sector was not hoping for 170 pages of legislation of Robert's Rules of Order. Over years of consultations, this sector hoped there would be more important issues like securing stable, long term financing, clarifying and improving the charitable status process and advocacy needs that would be addressed.

I believe that if the government had been willing to spend as much time dealing with issues important to this sector as they have on regulating it, we could have had a stronger voluntary sector. This bill would tend to exclude lay people from starting or running not-for-profits.

I had the distinct honour and privilege of working for the United Way Centraide in Sudbury and district for five years. This year, with great volunteers like Jim Thompson, chair of the campaign, and Paul Gomirato, Abbas Homayed and Robert Keetch, just to name a few, and the staff, Michael Cullen, Vicky Lafond, Tiffany Sutton Taylor and others at that office, they raised a staggering $2.43 million this year. A huge congratulations needs to go out to the United Way of Sudbury because that $2.43 million is a new record. It is continuing to help fund programs in Sudbury. Over 60 programs were funded last year and I am sure it will be funding more programs in my community this year.

However, it is legislation like this that will inhibit the great work of organizations like the United Way Centraide in my riding. It would inhibit the great work of the YMCA in Sudbury and the efforts of John Schmitt, the executive director there. He, along with his staff, created a great program called “Building Strong Kids”. It identifies the programs that children need and puts them into those specific programs to ensure they get the services they need. They can do this thanks to the United Way and the work that the United Way board of directors can do through their its campaign chair and volunteers to offer services to people in my riding. By doing that, they are able to help thousands in my community, which is great news for us in Sudbury.

However, what is worrisome about this legislation is that it will take people away from doing what they are very good at doing, which is raising the funds my community needs. Once they are able to raise the funds, the money is put into these great programs. If we are bogged down in legislation and having to jump through loopholes and red tape, it will slow down the work that organizations like the United Way can do.

It would also inhibit the great work that the CNIB and Paul Belair, the executive director in Sudbury, are doing to help vision impaired people in my riding. I can keep going with Maison Vale Inco Hospice and Leo Therien; the Human League; the Red Cross; The Corner Clinic; Big Brothers Big Sisters; and Elizabeth Fry. All of those organizations are doing great work but there is some fear that legislation imposed by Bill C-4 will slow them down in doing what they are best at doing, and that is providing the services to the people in my riding.

This legislation would also inhibit the great work of the Social Planning Council of Sudbury. Janet Gasparini, its executive director, has provided great progress in providing reports on poverty reduction. We have done such a great job in Sudbury. We have identified the poverty reduction strategy. It has been endorsed by my Chamber of Commerce which is something I am very proud of. It has also been endorsed by the health unit. It has seen the importance of creating a poverty reduction strategy and the work we are putting forward into this through the not-for-profits and charities. Again, there is some fear that Bill C-4 would not help it address the needs it is talking about.

This legislation does nothing but provide a minor improvement in regulatory reform, but at a time when charities and not-for-profits need to focus on staying afloat in this economic downturn, they are being hit with new regulations. We have heard about the unfortunate layoffs at Xstrata over the last few days. This happened on Monday. Xstrata has been a great contributor to my community through the United Way, at the YMCA, and many other charitable organizations and many other not-for-profits. Its employees and the union, CAW Mine Mill, have actively been involved in the community.

The loss of 700 jobs in my community through Xstrata will actually inhibit the company and the union from providing the donations to many of these organizations that provide the services that they now will actually need. So, it is a Catch-22 in that sense, they are going to be using the services of the United Way and other organizations but at the same time these organizations are going to be struggling for dollars.

What does this mean for great organizations like the United Way and the YMCA? Regulations will not help recruit new board members. It will just scare them away from the copious amounts of legislation they must learn just to volunteer. One of the great things that the United Way does in Sudbury is it offers what is called a leadership development program. This program takes individuals between the ages of 18-29 and teaches them about the rules and regulations and about being a member on a board. We know that we need young people on more boards of directors across the country, especially in my riding. When we can train young people and give them the skills necessary to sit on a board of directors and become a member of a board of directors after one year, that is something we all should be embracing.

Right now this new legislation could inhibit this great program. It will actually have to reformat its whole way of teaching this legislation to its students. This program has done such a great job that it expanded into what we call community leaders on board. So now it is open to everyone of all ages within the community to get engaged in the voluntary sector, into not-for-profits, into charities to make sure that we have enough people, to ensure that the work that needs to be done in our community is getting done through the not-for-profit sector.

We have more regulations in this legislation for not-for-profits regarding transparency than is required by huge industry and big business. That is a shame. The increased regulatory requirements for not-for-profits are likely to result in higher costs for not-for-profits and the federal regulator alike. Despite assurances to the contrary, with no plan or assistance to help not-for-profits or charities in the bill, I do not see how we can continue to support this.

If this is now going to committee, it is important to look at what we can do to ensure we are actually going to make this a better bill. The legislation regarding not-for-profits and the charitable organizations right across the country needs to ensure that we can continue to help the most vulnerable, to help our seniors. But not-for-profits do more than just help our most vulnerable. I know our colleges and universities are not-for-profits. We have airport authorities that are not-for-profits, our Legions. We cannot let the same legislation guide an airport and then guide a Legion.

It is time that we oppose this legislation. We want to ensure that we put the right legislation in place to help these organizations in the future.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Madam Speaker, I thank my colleague from Sherbrooke for his explanations of Bill C-4. His activities in his previous life contributed a lot to his understanding of this bill.

I have a question for him. The minister introducing the bill would seem to be saying that the bill would promote transparency and require not-for-profit corporations to be accountable. I would ask my colleague to explain how this bill achieves the objective set by the minister.