Mr. Chair, and honourable members, I'll take the remaining time to go through items 5, 6, 8, 9, and 10 in our executive summary.
Just picking up on my friend's submission, both the charity side and the business side of the Canadian Bar Association think this is an excellent piece of legislation that is long overdue.
Most of our submissions today are about making it simpler and easier to use.
The first item that I want to take you through is number 5 in the executive summary, dealing with the concept of “soliciting corporation”. This is a regulatory concept in the statute. “Soliciting corporation” is brand new to the statute; we don't have any experience with it in other statutes in Canadian or U.S. law in the non-profit sector. We looked at it very carefully, and we agree that it's actually a good concept for dealing with an interesting and necessary topic. The issue is to what extent should corporations who receive funding from the public, either as donations or government funding, or from other corporations who receive funds from the public, be regulated?
The concept of soliciting corporation is used in the statute to regulate soliciting corporations. Our only complaint is about the definition. We would like the definition to be improved. The way it is currently worded, a corporation could fall into that classification inadvertently during the course of the year, and because of that, it would then pick up all of the consequences of being a soliciting corporation—possibly not even knowing it had fallen into that classification. So we're suggesting that the definition be applied once a year when the corporation issues its financial statements and is in a position to know that it has fallen into that regulatory category and, therefore, when it is in a position to bring itself into regulatory compliance.
Item 6 in our executive summary deals with protecting directors and officers from unfair liability. Several jurisdictions in the U.S., and two jurisdictions in Canada, have legislation to protect non-share capital corporations' directors from liability for misfeasance, or negligence, from violations of the business judgment rule. We think that is a good idea and that this legislation should adopt the same kind of protection. There is statutory language currently available in the Saskatchewan Non-profit Corporations Act that could be incorporated into this statute. What it essentially does is to say that if you're a director of a non-share capital corporation, yes, you should be responsible for things that are caused by your own dishonesty or fraud; but, no, you should not be exposed to liability for mistakes in judgment.
Currently that type of error is covered in this legislation, and in commercial corporation legislation, by indemnity provisions and insurance provisions. What happens now is that the commercial corporation will promise the director that it will indemnify the director against the consequences of this kind of liability—and probably, or typically, also obtain insurance for that director against that kind of liability. Those two solutions, we think, aren't sufficient for the non-share capital sector. We want to go a step further and say, let's make those directors immune from that kind of liability, and let's save the non-share capital corporation the expense of insurance. Let's save that director the aggravation of defending against the claim for a period of time. Let's just give them immunity—but not from fraud or dishonesty, just from failures of business judgment.
Item 8 deals with amending bylaws. The point is a simple one. The constitution of the non-share capital corporation is stated either in the articles—which are basically entrenched—or the bylaws. Section 7 of the legislation says you must have items 1, 2, 3, 4, 5, 6 in your articles; however, all the other constitutional provisions you can put in your articles or your bylaws. The incorporators know that going into the regime, and they know how articles are changed, that is, by a two-thirds vote by special resolution; and they know how bylaws are changed, that is, the directors propose a change, there is interim validity, and then the members confirm it. So it is an easier regime for bylaws than for articles.
Our suggestion is that this basic regime—that is, having one regime for articles and one regime for bylaws—be used in this proposed statute. Without getting into the details, there is a provision in the statute with a hybrid constitutional change regime. We think it is an interesting idea, but in the end, it just confuses things. So this is another suggestion for simplification.
Item 9 in our executive summary refers to a provision in the current Canada Corporations Act that's been carried forward into this bill, requiring non-share capital corporations to file their articles or bylaws with the minister. Lots of people in the sector have never thought that it served a useful purpose. There are 19,000 of these non-share capital corporations in Canada. We don't know if the minister has enough room in his office to take all of these bylaws. What is the minister going to do with all these bylaws that are coming in? And to what extent are people going to comply?
Probably the utility of that kind of rule is that the sector is a bit informal in the way it operates, so let's make them send their bylaws to Ottawa, and 10 years from now when they can't find them, they can go to Ottawa to find them. The question is, though, is that actually going to work?
Secondly, if they don't send it in, what happens to that bylaw? Is it invalid because it hasn't been sent in? Under the current Canada Corporations Act, it's invalid. We suggest that there not be a requirement to send it in.
In our final submission, submission 10, I won't go into the details because our time has expired. Our submission is simply that the remedies available under the statute be rationalized a little bit more. Again, that's a simplification.
Our message is that this is an excellent piece of legislation. It's a huge improvement for the sector. We recommend that it be passed, but we also think it can be improved.