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.

Canada Not-for-profit Corporations Act

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

Madam Speaker, I listened with interest to my colleague's speech, especially in light of the fact that I was industry, science and technology critic when this legislation was first introduced a few years ago. The drafting of a completely revised bill was delayed by elections. I believe it was urgent that it be done. Indeed, members of the committee did a good job and at this stage, the bill should be adopted as soon as possible.

However, as my colleague mentioned, bills can always be improved. This bill does not contain a classification system for existing types of organizations. This means that a charitable organization whose purpose is to provide services to non-members will be in the same situation as a mutualist organization that provides services to its own members. Under this bill, all not-for-profit organizations covered by the act will belong to the same general category. The Canadian Bar Association sees that as a weakness in the bill.

Could my colleague tell me if he thinks this situation should have been rectified? Was this noted in committee and did the committee decide to leave the bill as is? It seems to me that the current updating of the act, which had not been done in a very long time, may require further adjustments in three, four or five years to take the size of not-for-profit organizations into account.

I would like to know my colleague's point of view on this to ensure that the maximum has been done already so that the act is perfectly adapted to the new realities of the 21st century.

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

Madam Speaker, I thank my colleague from the Bloc for his very pertinent question which was thoroughly presented by his colleagues who were members of the committee.

The classification of not-for-profit organizations was presented as the member did in his question. However, after listening the Bloc members' arguments, the committee decided not to proceed with a classification of not-for-profit organizations for the moment.

[Keith Martin, Liberal, Esquimalt—Juan de Fuca, BC]

Madam Speaker, many citizens in our communities are in dire need, particularly during the economic downfall that has happened in our country and around the world.

There have been a number of very constructive solutions from the non-profit sector. One of those has to do with tax credits, in that non-governmental organizations should receive the same tax benefit as political parties. Why on earth do donors to political parties receive a much higher tax benefit than donors to NGOs, which many of us would argue are certainly more worthy of receiving money for helping those most in need?

Does my colleague think that is something we may want to consider? Does he have any other ideas? Madam Speaker, I know that this is a big interest of yours.This is one of the prime responsibilities of government. The government has really failed to help those most in need. In the city of Victoria, there are 1,400 people living on the street. The absence of a credible platform dealing with housing is a huge problem. No matter what other issues an individual may have, that individual will never be able to deal with those issues unless he has a roof over his head.

It is important for the government to work with other parties and sectors outside the House to have a credible housing strategy. Realtors have some very constructive suggestions, one of which would be changes within the revenue act to include a tax rollover provision. This provision would enable people to sell assets they currently have and roll that money over if they purchase, rebuild or refurbish a new structure within one year. The government could make it a quid pro quo. If a person selling an asset to buy an asset accessed the rollover strategy, the person would be obligated to spend some of that money on affordable housing.

Does my hon. friend have any comments on these issues? Perhaps he could provide other solutions given his vast experience.

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

Madam Speaker, my hon. colleague from Esquimalt—Juan de Fuca is always thinking broadly in terms of policy in an incredible number of different areas dealing with government business.

During our deliberations in the three months that we saw witnesses, the issue of tax benefits did not come up. Like the hon. member, I certainly agree that people in the not-for-profit corporations, and I am an honorary patron of one myself, devote an incredible amount of their personal time to good causes, without remuneration. The great majority of not-for-profit corporations are made up of volunteers, and they do wonderful things.

The idea of recognizing the enormous contribution they make through some form of tax benefit is certainly appropriate, and perhaps it should be brought up at a future time. For the purposes of Bill C-4, it was not an issue that was raised specifically within the context of the law itself.

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

Madam Speaker, I have a question for the member.

As he said in his speech, he met various witnesses during the study of the bill. I will ask two questions. First, some would want to impose more controls on the role of directors of not-for-profit organizations. Does the member think that the people who will sit on the boards of the new not-for-profit organizations will be better informed of their roles and responsibilities because of the new structures?

My second question relates to the eligibility for charitable organization numbers which has been creating a problem for a few years. Many charities or advocacy groups, for example, would like to get charitable organization numbers and be able to issue tax receipts. That has been more difficult for some years now. Was the issue raised during the study of the bill? Does my colleague believe that the fact that there is absolutely no classification of not-for-profit organizations will allow the government to issue more of those charitable organization numbers?

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

Madam Speaker, I would like to thank my colleague for his question.

The issue of a charitable registration number has not been raised during debate this time, but it was raised in the past when I was not yet sitting in the House of Commons. The question was not raised again during these discussions and meetings with the witnesses.

We know there is another department involved when it comes to charitable organizations, the Canada Revenue Agency. At this point, there is a consensus among the members of the committee, who believe it is important to keep these two areas, not-for-profit organizations and charitable organizations, in their own niches.

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

Madam Speaker, a number of NPOs will undoubtedly be very happy to see that Bill C-4 is moving ahead and that there is a common desire to modernize Quebec and Canadian corporation laws.

For some years, a number of stakeholders, including experts, public servants and not-for-profit organizations, have been asking the government to modernize the legislation. Starting early in this decade, some people have participated in consultation sessions, while others have sent briefs to Industry Canada calling for speedy modernization of the Canada Business Corporations Act. It does seem that after several vain attempts, Bill C-4 may finally pass. It would seem to be very obvious that there is a common desire on both sides of the House to modernize the Canada Corporations Act, particularly given that the bills introduced by previous governments have many similarities.

We will recall that the Liberal Party introduced a bill in 2004. Then, several years later, in 2008, the Conservative government also introduced a bill with a different number, but that contained essentially the same points and same clauses as were in the bill introduced at the time of the Liberal government. Had it not been for the election, I believe that the bill presented by the Conservative government in June 2008 would have been accepted. Today, we are at the third reading stage for Bill C-4. Even though this is third reading, I think it is important to provide a summary of this bill.

The primary objective of this bill is to propose a new Canadian not-for-profit corporations act that will provide those organizations with a more modern and transparent framework. To that end, the NPO operational framework will base its corporate governance model on the one in the Canada Business Corporations Act. The new act will gradually repeal the Canada Corporations Act and replace Parts II, III and IV of that act. This transition period will be spread over three years. Although the bill is complex, the new framework that will govern not-for-profit corporations should greatly simplify and clarify the role of NPOs in our society, both for their members and directors and for the general public.

During consideration of Bill C-4 in committee, a number of witnesses explained to us how important it was to enact it. Although some groups had suggestions to make regarding the document, the message from the witnesses was practically always the same.

We strongly support Parliament’s objective of providing a modern, transparent and accountable framework for governance in the not-for-profit sector in Quebec and Canada.

Recognizing the important role that not-for-profit organizations play in our society, the Bloc Québécois is convinced that Bill C-4 should pass. According to the testimony we heard at the Standing Committee on Industry, Science and Technology and what the groups I met on the Hill had to say outside of the committee, this bill will be beneficial.

There are several reasons why the Bloc is in favour of this bill at third reading. As I said in a previous speech, Bill C-4 will considerably improve the efficiency and transparency of the process for incorporating not-for-profit organizations.

Not-for-profit organizations are currently required by law to keep itemized accounts of their activities, but they are not required to make the accounts public. These organizations are ultimately responsible, though, to the public. It is only natural for organizations which raise funds to be transparent and for the financial statements they submit to the government director—who supervises or collects all the information—to be available to the public and any citizens who want to know about the funds that were raised.

The legislation in Bill C-4 would require not-for-profit organizations to open their financial records to their members. That is very important. This information is often controlled by a particular member and is not available to other members because of procedures or obstruction. The government administrator and manager as well as the director—it is important that this should be the government—would make this information public. Above all, the information should be available to the grassroots of the organization. The effect will be to help directors and officers manage their organizations and agencies better and enable members to follow the financial situation of the organization between annual meetings to ensure that the funds really are being used for the stated purposes and objectives.

This framework is necessary for transparency and for the free flow of information within organizations outside of the annual meetings. These meetings are only once a year, of course, and information should naturally circulate the rest of the time as well.

When this bill was being studied in committee, one of the main points that kept returning, in addition to the objective of being modern and transparent, was improving the efficiency of not-for-profit organizations, especially by replacing the letters patent system by an as of right system of incorporation. This makes it much easier to establish not-for-profit organizations.

The current system of discretionary approval by the minister is eliminated and the process for granting incorporation is simplified, which helps organizations that could benefit from increased flexibility. In addition, the new process is less costly for both not-for-profit organizations and the government.

Another change that will facilitate the process for these organizations is the fact they will no longer be required to get their by-laws approved by the director or the government agency for not-for-profit organizations. As a result, they will have the flexibility they need to develop by-laws that reflect their particular needs. All this will increase public confidence in not-for-profit organizations and enhance their credibility.

During committee review of the bill, the Bloc Québécois felt that there were some minor flaws in the legislation that we would have liked to fix. However, none of the amendments that we proposed—and that were rejected by committee members—justifies rejecting Bill C-4. There is no classification system for NPOs in the existing act, and Bill C-4 still does not include a mechanism to change that. The need for such a mechanism was not recognized and was not supported by a majority on the committee, but I think that over time the importance of a NPO classification system will be recognized.

Government officials told us that the new legislation does not need a classification system because the framework is permissive and flexible, allowing organizations to choose how to apply many provisions.

As well, section 154 of the Canada Corporations Act currently stipulates that the federal minister may grant a charter of incorporation if the corporation thereby created pursues:

...objects to which the legislative authority of the Parliament of Canada extends, of a national, patriotic, religious, philanthropic, charitable, scientific, artistic, social, professional or sporting character, or the like objects.

This is like a big funnel, because if a corporation asks to be incorporated as a not-for-profit organization and fits in that broad range, it can be recognized as such and thus have the right to operate as a not-for-profit organization.

We would have liked to amend clause 3 of the new legislation, which does not require NPOs to state their purpose in their articles of incorporation, thus sidestepping the whole notion of specifying what action an organization can take in accordance with its objects.

This is an important issue, considering that the federal Parliament has jurisdiction over only those organizations that do not pursue provincial objects.

Finally, we proposed an amendment to clause 181, dealing with public accountants. Based on the testimony heard, public accountants already meet all the qualifications required under a provincial act or regulation, depending on the province, to perform their duties under clauses 189 to 192. Most provinces have regulations to monitor the accounting profession. That provision seemed a little redundant to the Bloc, particularly because a public accountant who provides accounting services must already meet the requirements imposed by his association, whether these requirements are related to a matter of law or practice. The required monitoring level is adequately covered by other clauses in Bill C-4.

Again, despite the fact that we proposed amendments to the committee, and that these amendments were not accepted, we feel that this does not justify rejecting Bill C-4. The issues that the Bloc Québécois raised in committee were legitimate. Public officials presented arguments that reassured committee members. As for us, we wanted to examine the matter thoroughly, so as to avoid any potential conflict between the provinces and the federal government.

Not-for-profit organizations have been waiting a long time for changes that will modernize the Canada Corporations Act. In the light of the testimony we heard, and in the interests of transparency, effectiveness and fairness, the Bloc continues to believe that these changes are legitimate and essential. Those involved with not-for-profit organizations deserve to be able to work with a Canada Corporations Act that will effectively meet their needs.

Since I have a little time left, I will summarize the objectives of Bill C-4. This bill will, in a concrete way, simplify the establishment of not-for-profit organizations. We live in the age of speed.

In my view, the general public, and all those who work as volunteers, do not wish to be overly burdened by nitpicking regulations or forms that have to be filled out. Now we have something that would make their lives simpler.

The bill clarifies the duties and responsibilities of directors. When they belong to not-for-profit organizations that raise their funds from the public, I feel that directors must be aware of the duties and responsibilities that the role requires. Bill C-4 specifies those responsibilities.

The bill would establish means by which directors and officers could defend themselves in liability cases. Sometimes, members of the organization or of the public decide to sue an organization. In a previous career, I was a community recreation director in the city of Chicoutimi and I had an experience like that. Of course, it was not a federal organization, it was local. A conflict arose between a group and the organization responsible for certain activities. The citizens hired a lawyer and launched a legal attack on other volunteers—it was volunteers against other volunteers—with prosecutors and lawyers.

Bill C-4 would allow some protection when complaints are unfounded or groundless. This means that, when a complaint is made, it will have to be well-founded and serious.

Furthermore, the bill will provide members with increased rights to participate in the governance of their corporation. If a member decides he or she wants to see a list of members, can he or she consult it? Bill C-4 allows such consultations. Can he or she consult the accounting records? Bill C-4 also allows a member or director the opportunity to do so.

The bill will establish a better mechanism to oversee the organization's accounts. When doing the accounting or auditing the books, it is important that public accountants audit the books, especially in the case of a Canadian national organization.

Presentations have been made on the matter. We did not see the need to give too many explanations or details. We felt that Bill C-4 clearly states that it is sufficient to be recognized by a professional corporation in order to audit the books. Bill C-4 already includes that, but with a much more detailed definition of a corporation.

Those are the objectives. If I still have a little time left, I would also like to remind the House of the Bloc Québécois' position. I believe I have one minute left?

The Bloc Québécois is in favour of the principle underlying the bill and the overall wording of the bill, considering how outdated the current Canada Corporations Act is. Bill C-4 will modernize the act, encourage transparency and ensure accountability among those who are responsible, both on the board of directors and among the members of a corporation.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Madam Speaker, I listened with great interest to my hon. colleague's analysis of this bill and the plan by the Conservative government to try to actually deal with not-for-profit corporations.

Just over a year ago the government cancelled the program that was in place across Canada to support volunteers and the important work they do in our communities. There was very little funding to support the volunteer networks that existed. Yet the government clearly decided that it was not a priority. I do not know what my hon. colleague found in his communities, but in mine the voluntary sector suffered a great deal because of that loss.

While looking at a bill to help the non-profit sector in this country, we in the NDP were certainly hoping that we would see some leadership and a plan that would actually ensure that we have strong, stable and vigorous non-profit sectors, because they do so much of the grassroots work.

It seems this is a bill that tinkers with the regulatory framework. There are 170 pages of complex regulations. It might work if we were protecting corporate assets, but certainly the people who are supposed protect corporate assets never did that job no matter how many pages of regulations there were.

When we are looking at 170 pages of regulations for the non-profit sector, it seems to me we are excluding many people, average lay people who might want to help a local organization and want something simple, like the Robert's Rules of Order, a simple set of rules. Yet the regulatory framework that the government is imposing on the non-profit sector will certainly make it much more difficult to encourage people to participate in the non-profit sector and volunteer work in our communities, because of the onerous levels of regulations that are being imposed.

I would like to ask my hon. colleague what he thinks about this level of regulation on the volunteer sector by a government that is notorious for saying it thinks regulation on the financial sector and every other sector should be lessened.

[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.

[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, 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.

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

Madam Speaker, I would like to ask my colleague a question following his excellent speech here in the House.

One of the things that the Bloc Québécois wanted to see in this bill was a better system for classifying organizations according to their missions and goals. Why did some members of the committees and some departmental officials say no to that? What impact does this lack of classification have? For example, what is the impact of that policy on an economic organization, which is not the same as a volunteer or charity organization?

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

Madam Speaker, we wanted a classification system. There are so many different kinds of organizations. Any organization that meets set criteria, whether it is charitable, political or social, is placed in the same category.

We think that it would have been easier to classify organizations according to type. For example, an organization involved in minor hockey in Canada would be in the sport category. It would be distinct. Sports-related organizations and charitable organizations would have different criteria.

Time will tell, but we think that this kind of classification would have been a good thing for organizations. Maybe there should be criteria enabling organizations to get recognition or to be granted a charter in their field.

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

Madam Speaker, I do have some concerns with regard to this bill. I just want my colleague to explain this a little bit more.

This bill is not going to improve the way that voluntary sector organizations do their business. It may improve their accountability and transparency, which is, of course, important to members and the public. However, it does nothing to address the broad concerns of the sector, such as securing long-term, stable financing, clarifying and improving the terrible status process, and addressing advocacy needs.

Could he explain to me whether he has these same concerns? Maybe he can try to give me one point as to why I should be supporting this bill.

[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.