Essentially, Bill C-501 deals with three areas, all related to employee protection. Due to time constraints, we will not deal today with the third area, which relates to a change to the Canada Business Corporations Act to facilitate the processing of claims against directors.
Regarding the first area, the bill proposes that super-priority protection will be extended to any arrears of special payments. To the extent that this is the change that is contemplated, we would support such a change, as we see no substantial public policy reason that would justify a different treatment between the normal cost arrears and special payment arrears, and it could be accommodated with reasonable efficiency in insolvency proceedings.
However, to the extent that the intent is to create protection for the entirety of the pension deficit, CAIRP has identified a number of significant issues that would materially negatively impact companies sponsoring defined benefit pension plans. These issues are set out in detail in CAIRP's paper, but the net effect of these can be summarized as, firstly, to reduce by a potentially significant amount the credit available to all companies that have or are viewed as having defined benefit pension plan deficits. It may also make it impossible for an insolvent company to borrow to finance its operations during a restructuring.
Secondly, it could cause downgrades in the credit rating and/or in increased interest rates for such companies. Thirdly, it could accelerate the probability of insolvencies for such companies due to reduced availability of both secured and unsecured credit. Fourthly, it could make insolvency proceedings lengthier and more costly.
Finally, it could decrease the possibility of achieving a successful restructuring. In our view, this would be counterproductive to the interests of many stakeholders, such as current employees, suppliers, customers, and investors, as experience tells us that restructurings return more value to creditors and preserve jobs.