Industry Committee on March 12th, 2009

[David Stevens]

It's a very good question. When we debate it as lawyers, that's what we wonder: what is the essence of a non-share capital corporation? That's been the problem in drafting the legislation since the beginning of the century, both in Canada and the U.S.

The approach that's taken in this legislation we think is a good one. It has two components. It doesn't appear in the definitions section, but it's part of the basic architecture of the law. It's two rules. One, the corporation itself cannot make any distributions of any of its assets to its members while it exists. Second, at the end of the corporation's existence, when it's liquidated, it can't make a distribution to its members if it's charitable. If it's not charitable, it can make a distribution to its members.

It's those two parts—distribution of property during the existence of the corporation and distribution of the corporation's property at the end—and really just one rule: no distributions during the existence of the corporation. That prohibition means that the corporation has to be pursuing something other than the benefit of its members, therefore the non-profit goal.

The other approach is to identify—this is what the Canada Corporations Act does—a list of purposes that could be pursued through a non-share capital corporation. The trouble with that approach is that you're never going to get them all. You would have to capture them under a general expression--i.e., non-share capital purposes, or non-profit purposes, such as religion, charity, etc.

We think it's a good approach not to have a definition in the statute, but the definition is there. It's part of the architecture of the statute all the way through. Then the idea is that individuals will choose this legislation versus the share capital legislation, depending on how they want to answer that question: should there be distributions during the existence of the corporation? No, because we are pursuing together a non-share capital or non-profit purpose.

So they'll choose this statute if that's their mentality. If they want to operate a business and make distributions of dividends during the course of the business, they'll choose the Canada Business Corporations Act federally.

[The Chair, Conservative, Michael Chong]

Mr. Gray, did you have something to add?

[Wayne Gray]

I have just one supplemental point on that.

We must remember that Saskatchewan has had the same type of act in force since 1997--about 12 years of experience--and they've not had any definition. No problems have been reported.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Gray.

Thank you, Mr. Bouchard.

Mr. Lake, would you like to ask some questions?

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Thanks, Mr. Chair.

Thank you all for coming to see us today.

I was looking at the 14-page executive summary and thinking it was kind of ironic; you were talking about simplification. But there's good stuff in there. Obviously it's a very long act, so there's a reason why there has to be so many points in there.

That said, it is pretty long. There are a lot of different points in this. You went to the recommendations and just quickly skimmed through this, but there are quite a few individual recommendations made under your part III.

The first question is in terms of the overall bill. If the choice were to pass it or not pass it as it is, in its current form, would it still be an improvement over what we have right now?

[Wayne Gray]

Absolutely. I would pass this in a heartbeat.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Okay.

What about from the CGA group's standpoint?

[Carole Presseault]

Same thing.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

All right.

Now, you've suggested a lot of changes, and it's kind of difficult to wade through them. I won't attach a number to this, but if you were to highlight a small number of the most crucial changes, what would they be?

[Wayne Gray]

The ones we discussed--our “top ten” list.

[Voices]

Oh, oh!

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Can you narrow it down? You have a summary of recommendations that is--

[Wayne Gray]

Well, we listed them in order of priority. If you want it to stop at recommendation 5, you can stop at 5.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Or if you want to stop at 71, you can stop at 71.

[Voices]

Oh, oh!

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

I mean, you say in here, “The CBA Sections recommend that the provisions set out in Schedule B to its detailed submission be reintegrated”, and so on. My previous life was with the Oilers, and I have to say, I think the guys I was working with would listen to this and wonder what in the world I was thinking when I changed careers.

[Wayne Gray]

I think there's a misunderstanding. When I referred to the top ten list, I was referring to the executive summary.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Right. But I'm looking at the recommendations in the executive summary, and there are 71 recommendations in part III of the executive summary.

In your opening statement, you didn't really touch on the 71 recommendations. You kind of ran out of time, so I do understand; I just wanted to give you the opportunity to highlight—

[Wayne Gray]

Those 71 recommendations refer to the larger original submission that we had, the more comprehensive submission. A lot of those are drafting issues. They didn't make it to the top ten.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

So they're sort of on top of the big ten.

[Tamra Thomson]

Essentially, it's part II of the executive summary.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Okay, perfect.

[David Stevens]

I can give you the top three items.

Item 1 in the executive summary is just taking out a chunk of sections, just removing them. Item 2 is taking out part 7, trust indentures; it's just taking a bunch of sections and removing them. Item 5 is soliciting corporations; it's just tightening up the definition of that very important regulatory concept.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Okay.

[David Stevens]

Those are pretty simple.