Thank you, Mr. Chair and colleagues.
This is actually my very first time, as a junior minister, or any other kind of minister, appearing before a parliamentary committee. I'm very pleased that it's with you all. I'm also very pleased that it's about a bill we very much want to finally get into law. So thank you for this opportunity to address you on Bill C-4.
Bill C-4 has a gripping title. I know that you're going to be on the edge of your seats. It's an act respecting not-for-profit corporations and certain other corporations. We can say that this is a bill whose time has definitely come. It represents the eighth time, colleagues, the third time in the past year alone, that a Canadian government has attempted to reform a statute. This statute was first brought into law in 1917, and of course you can appreciate that it no longer serves the needs of its principal stakeholders.
As I said when the bill was introduced in the House, not-for-profit organizations are a crucial part of Canada's economic structure. There are more than 160,000 not-for-profits, of which some 19,000 are federally incorporated. They accounted for over $136 billion in revenues in 2003 and employed some two million people.
So this is what the core of Bill C-4 is about. We have before us an opportunity to update and modernize an important marketplace framework statute that has not been substantially amended in over 90 years, which is older than any of us, fortunately. In that time, the world in which not-for-profit corporations operate has changed dramatically. In 1917, when the concept of a not-for-profit corporation was added to the general corporations statute, most such corporations were very small, self-financing entities that provided much-needed local services and that operated in a non-electronic world. Such small local organizations still exist, of course, but they share the landscape with huge national, even international, organizations with annual budgets in the hundreds of millions of dollars.
The trick in modernizing legislation of this kind is to balance the needs of the small with the large, the local with the national, the member-financed mutual aid society with the organization that solicits public money. That is not easy. Business corporations typically have interests that are largely homogenous: consistent profits, good public relations, keeping shareholders and other stakeholders happy. Not-for-profit corporations and other corporations without share capital, by contrast, have the most divergent interests imaginable.
The proposed legislation would apply to churches and other religious organizations, industry associations, charities, foundations, special interest groups, political parties, and sporting organizations, to name a few. What the proposed act does, then, is establish broad rules for setting up a not-for-profit corporation, or one without share capital, to ensure that it operates in a fair and transparent manner before its members and the public and to allow for an orderly dissolution of the corporation if circumstances warrant.
The proposed act definitely does not address the granting of charitable status or taxation policy of any kind. That is the role of the Canada Revenue Agency. Nor does it deal with the question of funding for federal not-for-profit corporations. This is a bill that simply proposes broad ground rules for modern not-for-profit corporations. That is all it does and all it is intended to do.
One area I want to deal with right at the outset is the apparent size and complexity of the proposed legislation. I can easily imagine how anyone looking at a 170-page bill with some 373 sections could question how this could possibly make life easier for not-for-profit corporations. In fact, the bill does exactly that. Let me explain in detail.
What the new statute proposes is to clarify areas that are not now currently addressed in the federal not-for-profit law. It would do so without imposing any significant burden on small or medium-sized corporations while at the same time ensuring that they are covered by a modern corporate governance framework.
For most not-for-profit corporations, the regulatory burden will be minimal. At the initial incorporation stage, an applicant will have to fill out relatively simple forms, file their articles, and pay the incorporation fee. That's it.
Annually, most corporations will have to complete financial statements, which they would have to do anyway for tax purposes, and send that financial information to members. Soliciting corporations, those that receive money from governments or the public, will also have to file these with Corporations Canada.
Additionally, corporations will be required to convene an annual meeting and file an annual return. This is not new. Corporations are required to do this now. But the new act will allow almost unlimited flexibility in how corporations do this. They will be able to communicate, hold meetings, and file documents with Corporations Canada electronically if they so choose. This represents a significant reduction in the regulatory and paper burden. The new audit requirements represent a potential further reduction of the regulatory and paper burden on smaller corporations.
Under the current statute, all corporations are required to have their financial statements audited. As members well know, this can cost several thousand dollars, potentially representing a sizeable portion of the budget of small corporations. The new provisions provide a graduated audit requirement based on the source of a corporation's funding, whether it's from members or whether from the public or governments, and the amount of its gross annual revenue. Under the new rules, soliciting corporations, those that derive their revenue from donations or government grants, that have revenues of less than $25,000 can dispense with audits entirely. This is also the case with non-soliciting corporations with revenues of less than $1 million. Of course, this represents an immediate and very substantial cost saving, especially for small soliciting corporations operating on shoestring budgets.
Most of the rest of the proposed act establishes rules of good corporation governance or provisions that address contingent situations. The corporate governance rules include provisions dealing with areas such as directors' liabilities, members' rights, and responsibilities of directors, officers, and the auditor. These are all areas familiar to the legal and professional communities, and the principles in the bill are just good, modern corporate business practice. I know that the not-for-profit sector will welcome clear and understandable corporate governance standards. Charities and other soliciting corporations that compete for limited donor dollars will find them especially useful.
Finally, there are the provisions that deal with the contingent situations, which for most corporations will probably never arise. These include, for example, provisions for corporate reorganizations. Most corporations will never amalgamate with another corporation, but it is incumbent upon the government to provide clear, fair, and transparent rules for those corporations that choose to do so.
What these contingent rules do is establish procedures, in some cases by filling in holes that exist in the current law. For example, an amalgamation of two or more corporations under the current act can actually take years with untold legal and accounting costs. Under the proposed statute, a short-form amalgamation would take days at most, with minimal costs. While as I said, most corporations will never amalgamate, this represents real streamlining for those that will.
The flexibility and clarity built into the act is why we decided that a classification scheme under the act was necessary; that is, we chose not to regulate different types of corporations differently. Rather, we chose to provide a framework that will allow corporations the maximum flexibility to organize themselves in a manner that works best for them.
A classification system establishing different rules for different categories of corporations would cause an admittedly complex piece of legislation to be even more complicated. By necessity, some rules, such as those related to directors' liability, would have to apply to all corporations, while other rules would apply to only one corporation. Added to this would be the difficulties in classifying some corporations. There are some organizations that would easily fit within several categories. For example, a corporation could be a mutual benefits society, such as a religion-based community club, but it could also collect funds for sending children to summer camp, operate a shelter for homeless individuals, and also engage in family counselling. So what classification is it? What rules would apply if there was a conflict in interpretation?
Instead, much like the Canada Business Corporations Act, this act provides for a system of self-regulation and self-enforcement. This is done by allowing corporations the maximum flexibility in writing their own articles and bylaws, and providing for civil remedies in the event of internal disputes. This would allow federal not-for-profit corporations to devote their time, energies, and money to fulfilling the purpose for which they organized in the first place.
Members of the committee, it is time that this bill be examined and passed as expeditiously as possible. Not-for-profit corporations have been waiting for a new governing statute for literally years, and they have been extremely disappointed every time it has died on the order paper.
Let me close by saying that I'm happy to have had the opportunity to be here with you today, and I also want to introduce the Industry Canada officials here today: Roger Charland is a senior director for the corporate and insolvency law policy and internal trade directorate--I think he gets paid by the words in his title. Also we have Wayne Lennon, who is a senior project leader on the not-for-profit file, and he's done all the heavy lifting on this bill. And Coleen Kirby is here; she's the manager of the policy section at Corporations Canada, and is especially knowledgeable about all the regulations.
We look forward to responding to any questions or concerns you may have about this bill.
Thank you very much, Mr. Chairman.