Industry Committee on March 12th, 2009

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

Thank you very much.

I have one very quick question. What's the downside risk if we delete parts 6 and 7, as you suggest? Is there any?

[Wayne Gray]

There's none at all.

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

Thank you.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Gray.

Mr. Bouchard, do you have a question?

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

Yes, Mr. Chair.

We know that the Canadian Constitution gives powers to the provinces, including Quebec, respecting the incorporation of not-for-profits. Bill C-4 is designed as a framework for legislation on corporations to be created throughout Canada.

I'd like to know whether there is a harmonization of powers for creating not-for-profit organizations at the provincial and federal levels. Is there any overlapping or infringement? I'd like to know your opinion on this subject.

[Wayne Gray]

A series of House of Lords decisions at the turn of the 20th century established that there was both concurrent jurisdiction federally and provincially, generally, in the area of corporations. So it is possible to choose either incorporation under federal or provincial law, essentially--except for banks, of course, which are federal. In most other areas it's concurrent jurisdiction.

Once you are under one particular statute, you know what the rules are, and in most statutes, such as the CBCA, you can move into the statute or move away from the statute. One exception is Quebec. Quebec does not allow you to export the corporation out of Quebec.

This new act, I believe, will have a substantial harmonizing effect on the provinces. As we saw in the case of the CBCA, nine out of the 13 jurisdictions subsequently adopted versions of the CBCA as their provincial business corporations act. Saskatchewan has already adopted a not-for-profit corporations act that's based roughly on the CBCA.

So this is going to be extremely influential for those reasons and also because, in my view, the provinces can't really deviate that much from the federal model.

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

I didn't understand the term you used. I heard "homogenization." Do you mean by that that Bill C-4 will not encroach and that there is harmonization between the powers of Quebec and the other provinces and the powers that will be granted to the federal government when not-for-profit corporations are created? You don't see any infringement?

[Wayne Gray]

I don't see any specific infringement other than what I've specified. For example, I think part 6 does infringe on provincial jurisdiction over securities transfers. That already exists at the provincial level. So it's not necessarily taking the power away from the province; it's an overlap with the province that's already regulated at the provincial level.

Securities regulation is generally a provincial matter. Until there is a federal regulator, it is provincial jurisdiction.

For example, in regard to the publicly issued debt obligations of a federal not-for-profit corporation, it's a little bit hard to imagine this happening, but if there was a federal not-for-profit corporation issuing debt under a trust indenture, it would be covered by part V of the Ontario Business Corporations Act, because it covers any type of issuer that issues its securities in Ontario. So this is an overlap to some extent. British Columbia has it. Other provinces don't regulate trust indentures at all.

In the United States, it's based on where the issuer is issuing its securities. In other words, the jurisdiction is based on whether you are raising money in that jurisdiction, not on the jurisdiction of your incorporation.

So yes, I think there are some places where there is a little bit of an encroachment on provincial jurisdiction. Those are the two that I would highlight.

I would also mention directors' liability for unpaid employee wages. Generally most not-for-profit corporations are not federal undertakings, and their labour laws are governed by provincial law, not federal law, not the Canada Labour Code. Protection of employee wages is a matter of provincial law. This is an overlap. This law, by imposing liability on directors, overlaps with the provinces where the employees have provincial employment standards legislation covering them.

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

I haven't read all your recommendations. Has the Canadian Bar issued a recommendation with a view to eliminating this infringement, to improving this aspect or making a clarification?

[Wayne Gray]

Yes, we've made recommendations on all of those points.

[The Chair, Conservative, Michael Chong]

Thank you very much.

Thank you to the witnesses for your testimony and for your comments today. I think they've been quite helpful.

[Proceedings continue in camera]