Industry Committee on April 21st, 2009

[Coleen Kirby]

You do the first part. I don't mind doing the second part.

[The Chair, Conservative, Michael Chong]

Mr. Charland. Allons-y.

[Roger Charland, Senior Director, Corporate and Insolvency Law Policy and Internal Trade Directorate, Department of Industry]

Yes, thank you.

Firstly, as indicated in a previous committee hearing, we believe that the bill as drafted already respects existing frameworks and does not encroach upon the various jurisdictions.

However, this amendment would have an impact on the whole issue of the continuity of corporations which already exist. Several of them were incorporated under the previous regime. Such a provision would make the transition of those companies to the new regime problematical. This could lead to orphan companies during the transition.

Although we believe that the bill as drafted respects areas of jurisdiction and does not encroach upon them, we feel that the amendment would create that problem.

[The Chair, Conservative, Michael Chong]

Merci, Monsieur Charland.

Is there any further debate? Madam Coady, go ahead.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

May I ask a question to determine if there is any harm by putting this in? Is it just a clarification?

[Coleen Kirby]

The fundamental problem right now would be that we have all kinds of corporations that are only operating in one province. Under this bill they would be ineligible to continue under the new act. They cannot continue under any provincial act because no provincial act allows continuance. They would be dissolved when the act came at the end of the transition period, and all their assets would vest in the crown.

[The Chair, Conservative, Michael Chong]

Thank you, Madam Kirby, for that answer.

Monsieur Vincent.

[Robert Vincent, Bloc, Shefford, QC]

Thank you.

What we want to accomplish through this amendment is essentially to catalogue the organizations, and so those that fall under the federal legislation would continue to do so, and the provincial ones would also continue to fall under provincial jurisdiction.

We are not changing the essence of the act, we are not attempting to modify it; we are trying to clarify it so that those who are affected by this act will understand how it will operate. It says in the amendment that “its objects are under the legislative authority of the Parliament of Canada;” we agree on that. I think that is clear.

May we agree on the fact that the bill falls under the federal Parliament?

[The Chair, Conservative, Michael Chong]

Mr. Charland.

[Roger Charland]

Yes, I understand the intention.

For our part, we want to raise the issue of the transition and the fact that at this time, under the federal regime, there are a certain number of companies that are incorporated, pursuant to the Canada Corporations Act. Those companies will no longer have a framework. This act is being abolished, a new regime is being created and we must raise the whole issue of continuity and of the transition, which becomes a problem, as Ms. Kirby pointed out.

Moreover, we continue to believe that shared jurisdiction allows for the respect of areas of jurisdiction. Companies and corporate entities may still decide to incorporate under the provincial system if they wish to do so.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Charland.

Mr. Garneau, and then Mr. Bouchard...

Mr. Vincent.

[Robert Vincent, Bloc, Shefford, QC]

Mr. Chairman, I was wondering about something.

In the amendment, they suggest adding to subclause (5): “No corporation may be incorporated under this act unless [...]”. The issue of transition is not even raised. The bill before us introduces a new system, a new way of doing things, and no one is talking about transition on either side.

Concerning the corporations incorporated under the current act, it says that:

(a) its objects are under the legislative authority of the Parliament of Canada; or (b) it carries on business in more than one province [...]

This is where it becomes interesting: if the organization is present in more than one province, it may have a new identity based on the fact that it only exists at the provincial level.

You mentioned earlier that an organization may be incorporated in a province, but we don't know what scope that corporation has to take on in order to come to fall under the federal jurisdiction. Had you understood it in that way or considered it from that angle?

[Roger Charland]

Yes, but you could ask Ms. Kirby for a clarification, because I am not...

In order to transfer from one system to the other, the corporations that are currently incorporated under federal law must be able to continue to exist under the new system. This type of provision, which states that an entity may not incorporate unless it meets certain conditions, will create this transition problem.

Among some 19,000 currently incorporated non-profit corporations, many could find themselves in a situation where they did not meet the requirements, or would have to prove that they meet them, and would thus become orphan entities to which no system would apply. They could not be transferred to a provincial system because the current act does not allow it. Nor would provincial legislation allow it.

Which brings us to the scenario suggested by Ms. Kirby. That is the practical concern that such a provision raises.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Charland.

Mr. Garneau.

And then we will hear from Mr. Bouchard.

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

I was wondering whether it would settle the issue to say that these requirements will apply to companies created after the adoption of this legislation, while those that already exist and must go through the transition would be exempt.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Garneau.

Madam Kirby, do you have any comment on that?

I think that as chair, maybe I could clarify things a little bit.

There are many entities that are incorporated at the federal level that operate in only one jurisdiction or one province. As an example, I believe the National Hockey League Players' Association is a not-for-profit entity. I believe it's federally incorporated, although I'm not certain of that. If it is federally incorporated, this amendment would not allow it to exist, because as far as I can recollect, it only operates in the province of Ontario, in Toronto specifically. Is that a correct assumption?

[Coleen Kirby]

That would be the basic issue. A fair number of companies would operate in only one province. They may have a national element, but they may not actually be conducting business anywhere except in one province. They would be precluded from going under the federal legislation.

[The Chair, Conservative, Michael Chong]

Thank you, Madam Kirby.

Monsieur Bouchard.

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

Mr. Garneau's suggestion seems interesting to me.

Could we allow entities incorporated under the current rules to transition to the new legislation, even in those cases where provincial or local entities are concerned? All new companies, however, would have to meet requirements with regard to provincial and federal jurisdictions.

[Coleen Kirby]

For over 90 years not-for-profits have been given a choice of going either federal or provincial. We would now radically change the system that's been operating in this country. Even if we grandfathered in those that are currently under our act and allowed them to stay federal, it would prevent new not-for-profits, it would take away their choice on whether they want to go federal or provincial.

The way the law is currently set up with respect to modernizing not-for-profit law, Saskatchewan is the only province with a particularly modern statute. We are trying to do one. Quebec, Ontario, and B.C. are considering it. None of the other provinces has a modern statute. In fact, most of their statutes are as old as ours currently is. Most of this was done back in the early part of the 20th century.

You would be precluding them, small or large, from having a choice of whether they wanted the more modern regime through federal law and telling them that they have to use whatever the provincial regime is, even if it is very out of date and doesn't give them the flexibility they need to operate.

[The Chair, Conservative, Michael Chong]

Thank you, Madam Kirby.

Mr. Vincent, do you have a question?

[Robert Vincent, Bloc, Shefford, QC]

In Quebec, the act is in the process of being amended. I think it would be simpler to include these points in the current act rather than waiting for the amendments to be made.

In section 298, corporations and restructuring are mentioned, but applications for continuance are also referred to. In this regard, it states that body corporates have three years to apply for a certificate of continuance. This means that companies have three years to ask for it. According to this wording, if a company wants to immediately go to the federal jurisdictional level, it submits its request, but if it is under provincial jurisdiction and wants to change that because things are developing in other provinces, it may use that argument alone rather than asking for a continuance under section 298.

It seems it would be simpler to proceed in that way rather than having to go through all sorts of detours to get to the same point.

[Coleen Kirby]

In all cases, when a corporation makes a decision on whether they are going to go federal or provincial, whether it's a share corporation or non-share corporation, there are a lot of different factors any corporation is going to consider. It's not just a matter of which has the simpler form to file. The fees are obviously different, and there are differences in how often you have to register and where you're conducting business. There are tax issues. There are issues on how you want to conduct business. It's a fairly complicated decision for any set of incorporators to make, and that's why it has never been obvious for not-for-profits whether they should choose to go provincial or federal. It's a decision we can't make for them. It has to be a decision you make when you consider all the aspects of how you want to conduct business.

[Robert Vincent, Bloc, Shefford, QC]

Don't you think it would be clearer and simpler to proceed in that way rather than having to check the law to then determine whether section 298 authorizes that procedure? If we include that provision straightaway, it will not be necessary to go through the act from beginning to end. In fact, it would not change the spirit of the law. It would make it more focused.

[Roger Charland]

I would like to avoid all confusion. Section 298 talks about the three-year transition period for continuances under the new system.

I would like to add a comment to what Ms. Kirby said. On day one, when a company incorporates as a non-profit corporation, it has a plan. It does not engage in activities here and there; it begins with something very modest, with a national level development plan. This is the type of consideration that becomes problematical if one includes this additional requirement.