Bill C-42

An Act to amend the Canada Business Corporations Act and to make consequential and related amendments to other Acts

This enactment amends the Canada Business Corporations Act to, among other things,
(a) require the Director appointed under that Act to make available to the public certain information on individuals with significant control over a corporation;
(b) protect the information and identity of certain individuals;
(c) add, or broaden the application of, offences and provide the Director with additional enforcement and compliance powers; and
(d) add regulatory authority to prescribe further requirements in certain provisions.
It also makes consequential and related amendments to other Acts.

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

Thank you, Mr. Chair.

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

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

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

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

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

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Minister.

To start this discussion on Bill C-42, I'll turn it over to Mr. Vis for six minutes.

The floor is yours, Mr. Vis.

[François-Philippe Champagne, Liberal, Minister of Innovation]

Thank you, Mr. Chair.

Good afternoon, colleagues.

Allow me first to express my thoughts for the people of Clova, in my community and the riding I represent in northern Mauricie, whose town has been overwhelmed by fire.

It's a pleasure for me to appear before the committee today to discuss Bill C‑42.

As you can see, I am accompanied by Mark Schaan, who will also be with you to answer more detailed questions in the next hour.

As colleagues would know, our government is committed to a robust and effective regime that will combat money laundering and tax evasion, improve Canadians' trust in the marketplace and make Canada a leader in corporate transparency.

I'm pleased to note, Mr. Chair, that I've heard that in principle all the parties are in agreement that this is the way forward for the country.

I think that Canadians who are watching us today would agree that a creating a free, public and searchable registry of beneficial owners of federally regulated Canadian corporations will increase corporate accountability and improve public trust in corporate institutions.

I'm delighted that all the opposition parties support the principle of Bill C‑42, and I'm satisfied that, based on our discussions and those that the committee has had with the experts, we can find a consensual path on which to move forward together.

In that regard, I thought I would use my limited time today to underscore a few characteristics of the bill that are likely of particular interest to the members of this committee. The first point I would like to make is that the amendments proposed in Bill C‑42 are based on the amendments made to the Canada Business Corporations Act, or CBCA, in 2018, 2019 and 2022.

Corporations already gather information on their beneficial owners. What we want to do today, Mr. Chair, is increase the amount of data that will be collected and ultimately published.

What we are doing is ensuring that the information is transmitted to the government and that a limited and reasonable amount of that data is published for transparency purposes.

The definition of control under the CBCA, which is 25% of voting rights—I know that committee members have discussed this from several angles and that the issue has also been raised in the House of Commons—stems from these previously made amendments, and it is entirely consistent with Canadian statutory provisions on money laundering, but also with the registries adopted around the world, particularly in the United Kingdom, the European Union, the United States and even Quebec.

The amendments proposed in Bill C-42 will require the CBCA corporations to collect and send additional information about their individuals of significant control in the form of residential addresses and citizenship.

Bill C-42 will also require Corporations Canada to make publicly available a portion of this information. It is important to note that individuals will continue to have the option to provide an address for service. When they do so, it is that latter address that will be made public.

Citizenship, like the date of birth, will be available to law enforcement, but, to protect the privacy of Canadians and to prevent fraud and discrimination, it will not be made public.

The bill also introduces an exemption regime for certain at-risk individuals. These exemptions are required to ensure our regime is charter compliant, targeted and, importantly, limited to public disclosure.

I want to be clear to all Canadians watching today that law enforcement will have full access to all the data collected.

Among other things, Bill C‑42 contains very strict compliance provisions, and sanctions for simple non-compliance, whether due perhaps to ignorance or forgetfulness, for example, are consistent with other similar penalties provided for under the Canadian Business Corporations Act. However, penalties for willful non-compliance—and I emphasize the word "willful"—to conceal other offences, for example, will be among the most severe in the world.

Bill C‑42 also provides for effective administrative sanctions and whistleblower protections.

Finally, Mr. Chair, the government has committed to making the beneficial ownership registry searchable and scalable to allow access to beneficial ownership data held by the provinces and territories that agree to participate.

In that vein, I'm happy to report to this committee that the Minister of Finance and I wrote to the ministers of finance for the provinces and territories this morning, asking them to join in this big endeavour so that we can cover as many corporations in Canada as possible. We have a long history of pan-Canadian collaboration on beneficial ownership transparency. Through this collaboration, we are looking to maximize coverage and ensure that the registry reaches its full potential. We will notably do so through the adoption of an international data standard that will facilitate interoperability.

Thank you, Mr. President.

I'm now ready to answer questions from my colleagues so we can proceed as quickly as possible to adopt this bill.

[The Chair, Liberal, Joël Lightbound]

Good afternoon, everyone.

I call this meeting to order.

Welcome to meeting No. 78 of the House of Commons Standing Committee on Industry and Technology.

Today's meeting is taking place in a hybrid format, pursuant to the House order on June 23, 2022.

Pursuant to the order of reference of Thursday, June 1, 2023, we are beginning our study ofC‑42, An Act to amend the Canada Business Corporations Act and to make consequential and related amendments to other Acts.

I would like to welcome today's witnesses. First, we have Mr. Champagne, Minister of Innovation, Science and Industry, who is back before the committee.

Welcome, Mr. Champagne.

He is accompanied by Mark Schaan, Senior Assistant Deputy Minister, Strategy and Innovation Policy Sector.

Thank you very much for being with us, Mr. Schaan.

Without further ado, Minister, I give you the floor for five generous minutes.

[Mark Waddell]

To my understanding, the preponderance of corporations that are found within all fisheries nationally are registered within their provincial area of jurisdiction. They would be registered under provincial law. There has been a heightened effort across the country, with a number of jurisdictions undertaking work on beneficial ownership and establishing or seeking to establish beneficial ownership registries akin to what is pursued through Bill C-42.

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

That sort of begs the question, are you going to become familiar with Bill C-42? In light of the recommendations that came out of the 2019 report, and in light of the conversation we've had today, would DFO be prepared to wade into a committee study or debates on Bill C-42 to see if it needs amendments to be more effective?

[Mark Waddell]

I am wracking my brain as to the extent of knowledge I hold on Bill C-42, which is not sufficient to address the question that you're putting to me, I'm afraid.

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

I know. It's getting onerous, Mr. Chair.

Mr. Waddell or Mr. Davis, I wonder if you're aware of Bill C-42, which would amend the Canada Business Corporations Act to basically require beneficial ownership in Canadian corporations to be identified.

Canada Business Corporations Act

[The Speaker, Anthony Rota]

It being 3:13 p.m., pursuant to order made on Thursday, June 23, 2022, the House will now proceed to the taking of the deferred recorded division on the motion at second reading of Bill C-42.

Call in the members.

The House resumed from May 31 consideration of the motion that Bill C-42, An Act to amend the Canada Business Corporations Act and to make consequential and related amendments to other Acts, be read the second time and referred to a committee.

[Ed Fast, Conservative, Abbotsford, BC]

Mr. Speaker, I am thankful for the opportunity to engage in this debate.

The reason I find this so important is that I am from the beautiful province of British Columbia and from the city of Abbotsford, which is nestled between majestic Mount Baker, at 10,500 feet high, and, on the other side, the mighty Fraser River. We live in a wonderful community in a wonderful region of the country. However, one of the challenges we have had over the years is that Canada, and more specifically British Columbia, has become the locus, the very heart, of money laundering in our country.

Just so Canadians understand what money laundering is, I will note that it is not benign activity engaged in by Canadians who want to avoid taxes or something like that. Money laundering is about taking the proceeds of crime, channelling them into what appears to be a legitimate business or a legitimate asset and trying to make those proceeds seem legitimate. It is a great way for criminals to hide the proceeds of crime. The last thing I believe Canadians want to do is aid and abet criminals to commit their crimes in our country, yet that is what has been happening for many years.

This legislation is not the be-all and end-all. Bill C-42 is simply a part of the solution. What it would do is establish a beneficial registry, an ownership registry, that would allow Canadians to see who actually owns the companies into which money might be directed from the proceeds of crime. This is not going to solve the whole problem of money laundering. Our police have their hands full in trying to track these criminals down, trying to identify the proceeds of crime and trying to get convictions.

Here is another problem. Money laundering has contributed significantly to the inflationary impacts on prices of land, real estate and homes that Canadians want to buy. These criminals know that if they can get money channelled into a house, it will be less likely for the police to identify that asset as being a proceed of crime. They also channel these proceeds of crime into legitimate businesses, like small and medium-sized enterprises. They channel this money into hard assets. They may be boats or expensive cars. At the end of the day, this costs Canadians big time.

There is another reason this is important to British Columbians. It was in British Columbia that the Cullen commission was established to investigate this very challenging problem to our criminal justice laws and to the broader issue of how much money laundering costs the average Canadian.

The Cullen commission made a long list of recommendations, most of which implicated the provincial government. It called upon the provincial government to act. However, there was one recommendation that stood out, which was that the federal government establish a pan-Canadian beneficial ownership registry for corporations. I believe Justice Cullen really intended for this to cover all companies in Canada. The problem is that the criminal justice law is federal law, so we as a Parliament have jurisdiction over it. Here is the problem: The large majority of Canadian companies are incorporated not at the federal level but at the provincial level, implicating every one of our 10 provinces and our territories.

How do we cobble together a pan-Canadian foreign ownership registry program with all of these different players at the table? The bill would, at least in the immediate term, establish a corporate beneficial ownership registry for federally incorporated companies, which is a good start. However, I believe the Cullen commission's intent was for the Liberal government to engage the provinces and territories to expand this to include the provincial regimes in federal legislation so that we can go after the money launderers in every corner of our country.

There is a reason this has come to our attention as lawmakers. Back in 2016, the Panama papers exposed how vulnerable Canada was to money laundering. Those papers made it clear that Canada was a laggard on the international stage when it came to addressing money laundering and interdicting the criminals who were taking proceeds of crime, filtering that money through legitimate enterprises and assets and then getting away with their crimes.

In 2017, it was the Liberal government's finance minister, Bill Morneau, who said we needed a beneficial registry to help combat money laundering in our market to determine the true source of funds and ownership in the acquisition of firms. He was right at that time, and that was 2017.

What happened in the intervening years? Nothing. From 2016 to 2023, we had eight years of inaction on the part of the Liberal government. This is pretty shocking, since the government, through its finance minister, at the very least had become aware that this was a very important issue for Canadians and nothing was done.

I will say that I am pleased that at least this has now come before us as Bill C-42, and it looks like we will see a beneficial ownership registry passed and implemented in our country. However, as the bill goes through committee review and comes back to the House, we are going to be asking a lot of questions. For example, how will this registry protect Canadians' privacy rights? We want to interdict criminals as they try to undertake their criminal enterprises, but we also want to make sure that the privacy of Canadians is protected.

I do not have great confidence that the government will actually protect our privacy, and here is why. We recently debated Bill C-27 in the House, which is all about privacy rights. We have been asking the government to actually include privacy as a fundamental right in Canada that Canadians can depend on. Sadly, Bill C-27 did not include that, so we have a right to be concerned.

We also want to ask who will have access to the information in the beneficial registry. Is it the police? Is it the ordinary citizen? It is business people? None of that is clarified in this legislation. We need to know that. Will the bill give law enforcement the necessary tools to combat money laundering and terrorist financing?

To conclude, I believe there is all-party agreement, so I am asking for unanimous consent to request a recorded vote on Bill C-42.

[Mel Arnold, Conservative, North Okanagan—Shuswap, BC]

Mr. Speaker, it is an honour to rise today as the member for North Okanagan—Shuswap, one of the most beautiful areas in the world at any time of year, and especially as we turn from spring to summer.

I rise today to speak to Bill C-42, an act to amend the Canada Business Corporations Act and to make consequential and related amendments to other acts. I would like to thank the member for Langley—Aldergrove for splitting his time with me and for his thoughtful intervention.

The government has stated that the objective of Bill C-42 is to protect Canadians against money laundering and terrorist financing, deter tax evasion and tax avoidance, and make sure Canada is an attractive place to conduct business. One has to ask why the Liberal-NDP coalition has taken so long to act, when it has been evident for years that change is needed.

While I believe there is support for the concept of a national public registry of beneficial owners of companies, I also believe we may need to look at extending the transparency of beneficial ownership of other assets. For example, at the Standing Committee on Fisheries and Oceans, or FOPO as it is known around Parliament Hill, we have been hearing testimony from witnesses who are extremely concerned about the purchase and control of fishing licences and quotas by foreign entities, and even unknown entities. That is right: unknown entities. Let me take us back in time to explain what I am referring to. In 2019, the FOPO committee tabled a report titled “West Coast Fisheries: Sharing Risks and Benefits”. This report was the result of a study initiated partly out of concern at that time, over four years ago, over the situation of local fish harvesters unable to compete with unknown entities bidding higher prices for access to Canada’s fisheries resources, a common property resource for the benefit of Canadians. Now, over four years later, can members guess what is being studied at FOPO, the Standing Committee on Fisheries and Oceans? It is foreign ownership and corporate concentration of fishing licences and quotas.

I will go back to my earlier question about why the Liberal-NDP coalition taken so long to act. Here we are; it is four years after that report, and even longer into the government’s mandate, since the concerns were first raised by stakeholders. Here we are, restudying almost the same issue, hearing that the same issues and concerns still exist, and the government has failed to take steps to ascertain that Canadians are the primary beneficiaries to access to Canada’s common property resource, Canada’s fisheries. It was somewhat shocking to hear testimony over four years ago, and now to hear similar testimony over recent weeks, that there is no real method of tracking beneficial ownership of fishing licenses, quotas and possibly vessels on Canada’s west coast. Although some have tried to track beneficial ownership, in some cases the web becomes so tangled that no one can clearly identify who owns what.

The 2019 report I referred to contained a number of recommendations to the government. In fact, there were 20. However, there were a few key recommendations related to foreign ownership that the government should have acted on, but it has been slowly dragging its feet, with almost no response. I will refer to some of the recommendations quickly, and talk about what should have been done and what has not been done.

Recommendation 2 from the report stated, “That based on the principle that fish in Canadian waters are a resource for Canadians (i.e. common property), no future sales of fishing quota and/or licences be to non-Canadian beneficial owners based on the consideration of issues of legal authority, and international agreement/trade impacts.” What has been done on this? Little to nothing has been done. There is nothing that the committee has been made aware of.

Recommendation 4 is somewhat similar. It states, “That, to increase the transparency of quota licence ownership and transactions, Fisheries and Oceans Canada determine and publish, in an easily accessible and readable format, a public online database that includes the following”. Has that been achieved? Certainly not.

Recommendation 5 states, “That Fisheries and Oceans Canada prioritize the collection of socio-economic data for past and future regulatory changes and make this information publicly available.” Again, there has been no action that the committee is aware of.

Recommendation 14 states, “That Fisheries and Oceans Canada develop a new policy framework through a process of authentic and transparent engagement with all key stakeholders". For example, some of the key stakeholders are:

Active fish harvesters (or where they exist, organizations that represent them) in all fisheries and fleets including owner-operators, non-owner-operators, and crew;

First Nations commercial fish harvesters (or where they exist, organizations that represent them);

Organizations representing licence and quota holders that are not active fish harvesters, including fish processing companies.

The last recommendation was a key one, and there has been very little action by the government that the committee restudying the same issue has been made aware of.

I am going to cut my time a little shorter today to make sure there are opportunities for other members to speak, but I will repeat what I said earlier. We have heard from some who are most impacted by the potential of foreign investment and foreign ownership of our common property resources here in Canada, yet there has been little or no action with respect to who the beneficial buyers and owners are.

I will close by saying that there is merit in a registry of individuals with significant control of corporations in Canada. If this is done, it must be done in ways that protect personal privacy and also protect the common resources for the benefit of Canadians.

I look forward to following the debate on Bill C-42 as it goes through the process, to see if it accomplishes the stated objectives without unintended consequences.

[Tako Van Popta, Conservative, Langley—Aldergrove, BC]

Mr. Speaker, that is a good question. It goes right to the very heart of what the problem is and what this bill is trying to tackle and remedy.

I agree with the member's analysis that snow washing and pumping money into the Canadian economy is forcing up real estate prices for the people who want to get into a home. We already have a housing affordability crisis. This is making it so much worse, and it needs to be tackled. It is a complex problem, and the solution will be multi-faceted. Bill C-42 is a step in the right direction. We need to deliver this for Canadians.

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

Mr. Speaker, Bill C‑42 is unquestionably an important step forward in terms of greater transparency and in knowing who really owns businesses registered in Canada. However, there are limits to that. Perhaps my colleague could speak about that.

For instance, if a company registered in Barbados, in a tax haven or in any other country in which the laws do not require the same transparency around the beneficial ownership of businesses, transparency ends when there is no transparency. If the business is held in a location where there is no transparency, that ultimately limits the possibility of obtaining all the information.

Does my colleague have any ideas about what could be done to resolve this problem in the future?

[Tako Van Popta, Conservative, Langley—Aldergrove, BC]

Mr. Speaker, I am here today to talk about Bill C-42, an act to amend the Canada Business Corporations Act, to create a beneficial ownership registry to combat money laundering.

I have the honour today of sharing my time with my friend and colleague, the member for North Okanagan—Shuswap.

Canada has a big problem with money laundering, and nowhere is that more evident than in metro Vancouver where my community of Langley—Aldergrove is located. Now, this is well known around the world. People have given Canada's very accessible money laundering streams a special name. They call it “snow washing”.

Generally speaking, Canada is known to have a stable government and economy, and to be a safe place to invest, so honest people make assumptions that money coming from or going to Canadian-registered corporations must be legitimate, but sadly that is not always the case. We need to work hard to maintain that favourable impression that the world has of us. It is easy to ruin one's reputation. That is sadly what is happening.

According to a 2017 analysis by Transparency International, Canada is tied with South Korea for the weakest corporate transparency rules among G20 nations. That is why I welcome this legislation, Bill C-42, which is going to create a beneficial shareholder register so that crooks cannot hide behind a veil of secrecy, complexity and confusion. We want things to be transparent. We want to know who owns what.

B.C. has been taking the lead in building transparency rules to combat money laundering. In March 2019, in a report entitled “Combatting Money Laundering in BC Real Estate”, an expert panel appointed by the B.C. government had this to say about the problem of money laundering. It focuses on British Columbia, but of course it applies right across the country. It reads:

Money laundering significantly damages our society and causes ongoing harm, not limited to the real estate sector or other economic sectors. Money laundering is a contagious, corrupting influence on society...It facilitates other criminal activities, contributing in particular to drug trafficking and the violent crime and opioid deaths that result, as is sadly so evident in [British Columbia].

The report goes on to say that, given the secret nature of money laundering, it is very difficult to estimate how much damage it is doing to our economy, but they do estimate that somewhere around $50 billion in dirty money is pumped into our national economy every year. This activity is estimated at 5% of real estate prices in British Columbia, feeding into the housing unaffordability crisis.

The expert panel recommended several anti-money laundering tools, starting with implementing a land ownership transparency register, which is in effect at the moment in British Columbia. They were of the opinion that transparency in real estate would be the single most effective tool in the anti-money laundering arsenal, but they also acknowledge that money laundering touches on more than just real estate transactions.

I think it is informative to understand what money laundering is. It is effectively the process of making illegally gained proceeds appear to be legitimate. These proceeds can come from monstrous activities like fentanyl trafficking, for example, but sometimes it is much less nefarious than that. For example, it could be legally earned and obtained money which has been brought illegally into Canada by evading the originating country's arbitrary capital controls.

All of this activity is illegal. Actors become very creative in hiding their trails by creating layers of complexity, but it all follows the same basic process. It is usually done in three phases: first of all, placement; second, layering and third, integration.

Placement is the introduction of cash into the legitimate payment system. Layering is conducting multiple levels of complexity for no purpose other than to hide the paper trail. Integration is working the money back into the legal system. Money properly laundered, and I use the term loosely, can be very difficult to trace.

One of the layering tools that professionals like to use is secret trusts. This is where somebody owns something, but that is the front person. They are the registered owner, but they are not the real owner. They are holding it in trust for somebody who is working in the shadows. The real owner is invisible to law enforcement agencies.

Today we are talking about amendments to the Canada Business Corporations Act to create a share ownership transparency register to eliminate this layering tool that professionals like to use. How can this be beneficial? Let us take a look at what some provinces have done.

British Columbia is really taking the lead. It bears to note that every province in Canada has its own corporate registry, as there is a federal registry, so it is very important that the provinces and the federal government work together. There needs to be a pan-Canadian approach. Otherwise, we would be encouraging forum shopping among professional crooks. They are going to go to the province with the most relaxed and most permissive laws. I am happy to say that Bill C-42 at least attempts to tackle that.

British Columbia has implemented a requirement that all British Columbia-registered companies keep a beneficial owners register at their corporate records office. This is an early version of a beneficial shareholder register and it is a good start, but it is not enough, and that is recognized. It is not a very useful tool for law enforcement because it does not allow law enforcement agencies to work undercover. The register is not free. It is not publicly accessible. It is not centralized, and it is too bureaucratic. It is also too difficult for law enforcement agencies to use and therefore it needs to be amended.

I am happy to say that is in the works. By 2025, there should be a centralized register in British Columbia that is readily searchable by law enforcement agents without the police coming to the registered office and saying they want to see their corporate records, which gives too much notice to the crooks. Quebec and Ontario are following a trajectory similar to British Columbia's.

The United Kingdom is really taking the lead with its people with significant control register for all registered companies in that country. It is free, and it is publicly accessible, but so far it is presenting only mixed results in being an effective tool for law enforcement. Bill C-42 needs to go past second reading to go to committee, where it needs to be studied in detail. I hope that we would have witnesses coming from United Kingdom to tell us what is good about their system and what is lacking so we can learn from their successes and their mistakes.

Bill C-42 is the federal government's attempt to tackle money laundering, tax evasion and other illegal activity. The minister, in his speech when he introduced this legislation, said, “Simply put, increasing beneficial ownership transparency will enhance Canada's good international reputation as a safe, fair and competitive place to do business and provide even greater legitimacy to law-abiding Canadian businesses.” Those are all very laudable objectives, which I support.

This bill should go to committee where it could be studied in detail. I will be looking there for efficiencies and effectiveness, and how adaptable it would be so that provinces can adopt it as well. As I said, the solution needs to be pan-Canadian.