moved that Bill C-25, An Act to amend the Canada Business Corporations Act, the Canada Cooperatives Act, the Canada Not-for-profit Corporations Act, and the Competition Act, be read the second time and referred to a committee.
Mr. Speaker, I rise to speak to Bill C-25. This government is making innovation a priority. That means means helping Canadian companies drive growth and create jobs that strengthen the middle class. It also means growing companies that can compete in the global marketplace.
The government's inclusive innovation agenda is a plan to drive economic growth through innovation. As legislators, we have a responsibility to set the ground rules for doing business, and we have the means to create the winning conditions for people and companies to innovate and thrive.
It is no accident that our innovation agenda has the word “inclusive” attached to it.
This government recognizes that our country is at its most prosperous when everyone has a fair chance to succeed.
Bill C-25, which I present to the House today, makes important adjustments to the framework laws that govern the Canadian marketplace. These laws set out how corporations are organized.
They also promote investor confidence and a competitive marketplace. These conditions support long-term investment and economic growth, and this bill would make it easier for Canadian companies to harness their innovation to succeed. It would also position businesses to operate in the global and digital marketplace.
Before describing these changes in more detail, I will speak to the global context in which these framework laws operate.
Today's marketplace is complex and changing rapidly. Global companies are becoming local companies and competitors, and new technologies are providing companies with vast amounts of information to make decisions.
Technology also allows transactions to happen quickly across the global, and the global marketplace is more interconnected then ever before. A disruption or discovery in one part of the world can have profound consequences in another.
To remain competitive, companies must understand how their partners, suppliers, competitors, and customers do business. Our government is committed to making Canada a global innovation leader.
This means enabling businesses to grow, increasing our country's productivity, and creating well-paying jobs for the middle class. It also means Canada's marketplace framework laws must be updated to reflect a global and digital economy.
These laws must be updated to enhance investor confidence, foster competition, and contribute to an inclusive economic growth agenda. These laws should also support investment and innovation without unduly burdening businesses.
The amendments I have tabled today would provide the foundation for a 21st century marketplace.
They will align Canada’s framework laws with best practices in jurisdictions around the world.
The bill sets out measures to modify the way corporate directors are elected. The bill also contains measures to improve diversity on corporate boards and in senior management level positions.
The goal is to attract the best and brightest from as wide a talent pool as possible. This is how Canada can make full use of the competitive advantage granted to us by this extraordinary diversity of our population.
Additionally, Bill C-25 would improve corporate transparency.
It will eliminate outdated instruments of commerce and modernize shareholder communications. These changes will reflect the new norms and practices of a digital economy.
The bill would increase business certainty and flexibility as well. It would allow Canadian businesses to focus on what makes them most productive, efficient, and innovative. The laws being amended in this bill include the Canada Business Corporations Act, or CBCA.
This statute sets out the rules that facilitate the interaction among shareholders, directors, management, and other interested parties involved in corporate decision-making. In 2015, there were approximately 270,000 companies incorporated under the act. The CBCA serves as a model for other governance laws.
The Canada Cooperatives Act is the framework legislation for federally incorporated non-financial co-operatives. The Canada Not-for-profit Corporations Act is the framework law for non-share capital corporations. In 2015, there were more than 19,000 federally incorporated not-for-profit corporations under the act.
The Competition Act is a law of general application that addresses anti-competitive business conduct. It examines and seeks to address the activities of firms that may be harming competition in the marketplace. By improving and clarifying the rules under which our firms operate, we are positioning them for long-term growth.
We are also aligning Canada’s practices with international best practices in corporate governance.
October is Women's History Month. This is a time when we celebrate the women who have shaped Canada's history as leaders, entrepreneurs, scholars, artists, and trailblazers in all spheres of life. Let me address what the bill does for diversity.
As I have said before, I firmly believe it is our moral duty to promote diversity and inclusion.
Under-representation of different segments of our population is not only a question of fairness, it affects the bottom line. In the boardroom, as in life, taking into consideration viewpoints from a variety of perspectives can lead to innovative thinking and better performance. Innovation requires fresh ideas, new ideas, and the best ideas can come from anyone, anywhere.
We live in an age when anyone with a smartphone can connect, create, collaborate, trade, and sell, regardless of distance. Because the tools to create knowledge and value are now available to everyone, a teenager can start her own technology company.
A university student can launch a social-media platform that becomes a global sensation overnight.
The broader the talent pool, the greater the potential for the next great app to emerge.
Our government is committed to doing all we can to unlock the full potential of Canadians, especially those who are under-represented in certain sectors of today's economy. I know that all parliamentarians support this goal as well.
Earlier this year, this Parliament unanimously passed, and this was a point of pride, Bill C-11, which allowed Canada to become the first G7 country to adopt the Marrakesh Treaty. I was proud to announce this piece of legislation in the House and see it receive the support of all parliamentarians.
The Marrakesh Treaty benefits three million Canadians who are visually impaired or print disabled. As a result of the treaty, they will have better access to books and other copyrighted materials. As a result of better access to knowledge, these Canadians will be able to fully participate in the economy. That is how our government's commitment to diversity allows Canadians from all walks of life to become productive members of society.
Bill C-25 builds on that commitment to innovation and prosperity through diversity.
As part of the reforms to the CBCA, corporations would be required to disclose to shareholders the composition of their boards and senior management. They would also be required to make public their diversity policies. Those corporations without a diversity policy would have to explain why they do not have one.
This amendment will complement existing measures already adopted by most provincial securities regulators.
It would apply to all publicly traded CBCA corporations, regardless of which securities regulator they reported to.
By taking into account the composition of boards, investors could make informed choices when they exercised their voting rights.
These reforms are designed to facilitate a conversation between shareholders and corporations on how they are promoting diversity.
The goal is to encourage corporations to consider a broader range of candidates and skill sets among their senior leaders.
The second set of amendments contained in Bill C-25 aims to promote greater shareholder democracy. The goal is to ensure that the voting process allows shareholders to have their voices heard in a meaningful way.
The bill would make three key reforms to the process of electing corporate directors. These reforms would affect publicly traded CBCA corporations and publicly traded co-operatives incorporated under the Canada Cooperatives Act.
First, the bill would require the prescribed corporations and co-operatives to hold annual votes for the election of corporate directors. Currently the law permits directors to hold office for up to three years before a vote is required. The entrenchment of company boards can hamper innovative thinking.
Ensuring that shareholders can make changes more often is a step in the right direction.
Second, directors under the CBCA would be elected individually, not as a slate or a group of candidates. An all-or-nothing approach prevents voters from meaningfully exercising their democratic rights and bringing in the board they want.
Third, the bill would permit shareholders to vote explicitly against a candidate in an uncontested election, that is, when the number of candidates was the same as the number of board positions to be filled. Even when there was no competing candidate, a prospective director would still need enough votes in support of her candidacy to make up a majority of the votes cast to be elected.
Of course, there is more to shareholder participation than simply voting. Transparency and clarity are important to shareholders as well.
The bill would modernize shareholder communications to align practices with how businesses are conducted today. The bill would permit CBCA corporations and co-operatives incorporated under the Canada Cooperatives Act to provide their shareholders or members with online access to relevant documents related to an annual meeting. This notice and access system would reduce costs, conserve resources, and increase business efficiency.
In addition, the bill would simplify the deadline for shareholders to submit proposals to directors so that they could participate in meetings more often and effectively.
The fourth amendment would make it clear that CBCA corporations and federal non-financial co-operatives would be prohibited from issuing share certificates and share warrants in bearer form. Much like cash, a bearer share is owned by whoever holds the physical stock certificate. The issuing firm neither registers the owner nor tracks any transfers of ownership, and when these instruments are issued in blank form, they can be used as a vehicle for money laundering or terrorist financing. That is because they are easily transferrable and untraceable.
This amendment would require all shares to be registered. It is a preventive measure that would be particularly relevant to law enforcement.
It will ensure that Canada aligns its rules with the recommendations of the international Financial Action Task Force.
The bill would also amend the Competition Act to broaden the understanding of what makes one business entity affiliated with another. Currently, because of its outdated definition, there is a risk that business between affiliates could be viewed under the law as a joint action with competitors.
The existing law does not fully account for non-corporate structures, such as sole proprietorships, partnerships, or trusts. This uncertainty could lead to companies being needlessly exposed to sanctions under the act, and re-organization among affiliated companies could be interpreted as a merger of competing firms.
That process could require notifying the Commissioner of Competition. It could also incur a fee and a significant amount of paperwork. There is also the risk that a collaborative project between two affiliated companies could be treated as an arrangement between competing firms. It could be misrepresented or misinterpreted as harmful competition or outright collusion.
To address this legislative gap, the bill would update the Competition Act's rules on affiliation and would make the rules business-structure neutral. This update would ensure, clearly and explicitly, that businesses that are engaged in joint ventures with their affiliates are not subjected unwittingly to the act's enforcement provisions.
This amendment will create certainty and replace an outdated framework that can cost businesses unnecessary time and resources.
One of the key features of this bill is that it positions Canada among world leaders in corporate governance. For example, most member states of the European Union have implemented gender diversity legislation. Both the United Kingdom and Australia have required disclosure, including a comply or explain model in the latter case, which saw significant improvements in terms of board representation.
In the United States, publicly listed companies have adopted policies on majority voting for corporate directors. Even in Canada we have seen provincial securities regulators adopt similar rules that promote greater shareholder participation and corporate diversity.
These amendments are an important step forward.
They would modernize corporate governance laws to align with today's technological realities and support business efficiency. They would promote greater transparency, accountability, and public confidence in the marketplace and give investors the information they need to make informed decisions about their investments.
Above all, these amendments recognize the great asset that is our country's diversity. Canada's business community would have a crucial role in promoting diversity. Some have already done so, and I know that others will step up to show that they are committed to growing our economy by tapping Canada's full potential. By modernizing our ground rules and aligning with international standards, Canada can position itself for the inclusive innovation and growth that would propel this country going forward.
I am proud to be launching this important initiative today on behalf of the Government of Canada.