Finance Committee on Nov. 5th, 2018

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you. I'll stop there.

[The Chair, Liberal, Wayne Easter]

Does anyone else have any further questions?

Mr. Fergus.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

I might as well go for broke here.

I know that it's not in our framework at the federal level, but this is sort of a pan-Canadian approach. I just want to get a sense of the temperature of the pool with the provinces and territories.

Is there any discussion about how we try to get at the beneficial ownership of foreign owners?

[Mark Schaan]

There's obviously quite a bit of international co-operation among authorities, particularly on the tax side. They're in a better place to be able to speak to some of that shared information on the legal enforcement side, as are some of our national security and national enforcement folks.

We're simply trying to make sure that the statute has the information being held by the corporation, which then can be utilized by competent authorities in both their respective domestic and international investigations.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Thank you for that.

I'm certain you're anticipating our report with great interest.

[Mark Schaan]

Absolutely.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

It should be forthcoming.

[The Chair, Liberal, Wayne Easter]

This week....

Mr. Kmiec.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

I will continue Mr. Fergus's line of questioning because the committee has been taken with this issue. In the U.K. experience they talked about one of the problems with their registry being the verification of the data.

I see here there's only one provision asking corporations to update once a year. Was there any other thought given to perhaps putting the onus on them to update when their material changes? That should be reported.

Have I just missed it in this omnibus budget bill?

[Mark Schaan]

They have to update it at least once per year. In terms of any material changes they would still stay in the registry.

I will turn to Darryl.

[Darryl C. Patterson, Director, Corporate, Insolvency and Competition Policy Directorate, Marketplace Framework Policy Branch, Department of Industry]

There's also an obligation. If the corporation comes into possession of information that needs to be put onto the registry, they must do so within 15 days.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

For this registry, is there any...again, I don't see it in here, so maybe there is.

Is there a reason why the data verification side of it is not legislated? The U.K. registry suffers from a lot of inaccurate information or just errors. There have been reports that you can basically make a circular loop in it—that you could register things being owned by other corporations. You follow the lead and it leads back to the same corporations, so corporations are owning themselves. Is there—in law, in here—a method or a process to stop it, or is that just going to be a procedural process thing?

[Mark Schaan]

No. We got around that by requiring the corporation to list in their registry of shareholders the natural person at the end of the chain.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Where is that in here?

[Mark Schaan]

It's the individual. “Individual” is defined in the act. In proposed subsection 2.1(1), then, we identify “an individual”, and then in the individual....

Go ahead, Darryl.

[Darryl C. Patterson]

We got around this by creating a new term: “individual of significant control”. It is defined in the thresholds that have been created here. At every subset it's an individual. That individual is a natural person. We couldn't use the word “person”, because “person” incorporates more than a natural individual.

[Mark Schaan]

That's the way we got around the challenges of the loop.

In terms of the verification of the information, the corporation is required to make best efforts to populate their registry of beneficial owners. There are penalties for failure to maintain that.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Right. On the penalties, under proposed subsection 21.1(6), it says, “A corporation that, without reasonable cause, contravenes this section is guilty of an offence and liable on summary”.... It's a fine “not exceeding five thousand dollars.”

Why $5,000?

[Mark Schaan]

It's consistent with the other penalties in the statute. There is a penalty, though, for the individual. This is under “Penalty”, in proposed subsection 21.1(5):

A person who commits an offence under any of subsections (1) to (4) is liable on summary conviction to a fine not exceeding $200,000 or to imprisonment for a term not exceeding six months, or to both.

In terms of the burden—

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Please slow down right there. On 21.1(5), it says here “Disposal of personal information”, unless I'm reading it incorrectly.

Do you mean proposed subsection 21.4(5)?

[Mark Schaan]

I'm sorry. I think it's 21.4(5).

A person who commits an offence under any of subsections (1) to (4) is liable on summary conviction to a fine not exceeding $200,000 or to imprisonment for a term not exceeding six months, or to both.

On the burden, the corporation has a consistent penalty for the statute as a whole, which is to do due diligence and maintain a registry of shareholders. Individuals who knowingly seek to prevent themselves from being disclosed to the corporation face much higher penalties.

[The Chair, Liberal, Wayne Easter]

Go ahead, Tom.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Again, forgive me if I've missed it. Are there any provisions here for exemptions for personal security? The register will have your name, date of birth, last known address, each individual with significant control, and jurisdiction of residence. It's pretty specific.

Is there a mechanism for those individuals who would be listed here for whom there's a personal safety issue to seek an exemption and not to have their address listed? If I have a bunch of kids and I'm the CEO and official owner of a bunch of companies, and I have received death threats, here's a really easy way to find where I live. Is there a mechanism by which that could be blanked out, or is there no personal exception for safety?

[Mark Schaan]

I'll say two things.

One is that the information is only available to competent authorities—to the director of Corporations Canada or to a fellow shareholder of the entity. Also, it's only available at the premises of the corporation.

The second is that there is an access affidavit provision that does indicate shareholders and creditors—

[Ian Wright]

Appropriate use....