Industry Committee on March 10th, 2009

[Susan Manwaring]

Thank you.

[Chris Warkentin, Conservative, Peace River, AB]

I don't know if there is anything more, because that seems to be what I'm hearing. Certainly there are other concerns with regard to educating the population and some other things. But that seems to be the only major sticking point I've identified from either of the testimonies in terms of actual changes to the bill.

Maybe I'm missing something; I know that there are other concerns, but I haven't heard them. I guess I've heard some contradictions in the testimony today.

[Susan Manwaring]

Between the two organizations, this may be the one consistency, I guess. But the other piece that there was some talk about was the soliciting corporation.

[Chris Warkentin, Conservative, Peace River, AB]

Right. As a matter of fact, there are very few times when an organization is not soliciting, so I guess most organizations just fall into the soliciting category.

[Susan Manwaring]

Unless they're very closely held.... There would be a few instances when they wouldn't, but the way it's broadly worded, it appears most would. So why do we need both?

[Chris Warkentin, Conservative, Peace River, AB]

I think there's a desire to simplify things for that very small minority who find themselves in a non-soliciting situation. Obviously they have a lesser issue of taking resources from people or other organizations and utilizing them in a way that may be contrary to what the desire was. So they may have a different position of trust than the organizations that are soliciting. You can see that a small minority would have a different type of trust relationship with the general population or the funding population.

[Susan Manwaring]

If it's a public benefit organization, a charity, those assets are public; they're not yours. You're supposed to be accountable to the public whether you're a soliciting corporation or not.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Warkentin.

Mr. Maloway.

[Jim Maloway, NDP, Elmwood—Transcona, MB]

Thank you, Mr. Chairman.

I'd like to make some observations. Probably 30 years ago people sat on non-profit boards and it was easy in those days to recruit people to sit on boards. Nobody even knew about directors' liability insurance in those days. I started hearing about people 20 years ago refusing to sit on boards unless the directors' liability policy was in effect. So non-profits went looking for them, and they were astounded when they realized how much they cost and how many hoops they had to go through to get them.

Very few insurance companies sell them, to begin with. Deductibles are $5,000. You have to submit financials every year. That goes well when the insurance markets are reasonably priced, but every three to five years the insurance markets get themselves into big trouble and your premium can turn in the space of just one year from $5,000 to 20,000. You tell me how a small non-profit is supposed to pay for these things. It's totally impossible.

So we have to find a way to limit the liability of non-profits. I don't know how possible that is, but we should certainly look at that option. We're going to be scaring people off. People will not sit on the boards.

Compliance costs are also a big issue. We've run into this even in our own province of Manitoba in our election laws. We practically strangled ourselves with compliance costs of the parties, trying to get it right. The laws had to be brought in, but this is one of the realities of bringing in these types of laws. So we saddle you with compliance costs that almost shut you down, and we're not really accomplishing what we want to do.

I'm familiar with a non-profit fiddlers club from Ontario that had 83 members and a couple of thousand dollars in the bank. They were senior citizens. They were having a meeting of their fiddlers society and one of them tripped and fell walking out of the building. That person hired a lawyer. The lawyer decided they were going to sue all 83 members of the fiddlers club, and that's what they did. They had to go to their home insurers and collect.

Most people don't know about these issues, but when they do hear about them it certainly scares them.

I'd also like to ask the members whether anybody made an effort to contact these 161,000 charities. Were letters sent out to let them know about this? The witness mentioned that a lot of small charities wouldn't even be aware that we are going through the third version of this bill.

I'd like to address it to Mr. Reid, because he was talking about the directors' and officers' liability issue.

[Alan Reid]

Perhaps I can first touch on the consultation issue. Industry Canada did run a very extensive consultation process, not with 160,000 corporations, but with a representative group of corporations over a period. I don't know how you would consult with 160,000. I guess you can send them a letter saying this is coming down the tubes.

In terms of insurance, yes, insurance is a big issue. A corporation such as the Canadian Red Cross can afford that. We don't like to have to pay the insurance, but it's part of our operation; within the budgets we have, it's just an operational expense we have to bear.

I don't know whether you've done a survey, Cathy, of the percentage of corporations that do have insurance.

I'm sure there are many not-for-profits in this country that operate without directors' liability. I personally sit on the board of one that doesn't have directors' and officers' liability, but that doesn't keep me awake at night because of the nature of the activity. I think many not-for-profits operate in activities that probably have very limited risk, but with others, of course, there's greater risk. Insurance is available, but at a cost, and not everybody can afford it.

Yes, that's a problem, but it's not a problem that is created by this bill.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Reid.

Before we go to the next member of the committee, Madam Barr, do you have any comments on Mr. Maloway's question?

[Cathy Barr]

I would only say that, certainly, our experience shows that insurance is a huge issue and liability is a huge issue. I would say it's a growing issue. Many charities operate without it because they can't afford it, which puts their directors and officers at risk.

[The Chair, Conservative, Michael Chong]

Thank you, Madam Barr.

Mr. Van Kesteren.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you, Mr. Chair, and thank you, witnesses, for appearing before us.

I wanted to just finish up Mr. Warkentin's question. His last question to you, Susan, was on why you want extra burdens for non-soliciting organizations, corporations. That was his last question before he was cut off, before his time expired.

[Cathy Barr]

Right.

I don't think we do. We just want one system so that all charities aren't saddled with trying to figure out which they are and which they aren't. As it stands now, charities are going to have to decide...and a given charity or not-profit might be classified as a soliciting corporation one year and a non-soliciting the next year, depending on how they get their money.

It seems very straightforward, but in practice it could be very complicated. Every year a charity will have to look at it and decide.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

The act is a pretty lengthy, complicated piece of legislation, and it usually is when the politicians...not the politicians, the bureaucrats, put together something. Has anybody seen the original document? What does the original document look like? Is it as lengthy as this one, the original act, the one that was drafted in 1917?

[The Chair, Conservative, Michael Chong]

The research analyst has informed me that the original statute from 1917 is a lot shorter, but it's also been supplemented with 90 years or so of common law and other jurisprudence.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Maybe we'll have to talk to the analyst about whether this is just a culmination of those additions and such.

But my question would follow, then, to all of the organizations. Were there portions of the act that you thought really had to be changed, something you saw as being just so strenuous, just impossible? Or were you pretty much satisfied with the act as it was drafted up to this point--the current act that you're under?

That's for anybody.

[The Chair, Conservative, Michael Chong]

Perhaps you want to start with that, and then maybe Ms. Manwaring.

[Alan Reid]

We've lived with it for quite a while and we've adjusted. I certainly wouldn't say it doesn't work, but I think some of the things I identified in my brief are things that would work, or certainly would work better. Even electronic telecommunications--I think that's one of the things I mentioned.

There have been efforts through the policy people in Industry Canada to facilitate that kind of thing, working within the existing legislation, but I think it's better if there is a legislative recognition of that. So it would be things like that.

I think the indemnification has been a particular issue with us. I really welcome the changes that are made there.

So there are particular things that I think work better with the new legislation, but you work with what you have.

[The Chair, Conservative, Michael Chong]

I think Madam Manwaring has something to add to this.

[Susan Manwaring]

This is history before my time, but I believe the original act was actually designed to govern all types of corporations. What's cumbersome about it is that some of that was taken out when we passed for-profit corporation legislation. We now have a statute of which only some parts apply and you have to figure out what sections apply, where, and how it works.

It's incredibly impractical. The average person cannot read and figure it out. Getting a new statute that clearly applies to non-share capital corporations that can be used for non-profit purposes is a very worthwhile objective and initiative.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Your organization represents a number of non-profit organizations. Would you have the number of organizations that you represent that fall under the faith groups?

[Cathy Barr]

I wouldn't say faith groups are a particular member category of Imagine Canada, no.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

There are none that you represent, then?