Industry Committee on June 5th, 2023

[The Chair, Liberal, Joël Lightbound]

Good afternoon, everyone.

I call this meeting to order.

Welcome to meeting No. 78 of the House of Commons Standing Committee on Industry and Technology.

Today's meeting is taking place in a hybrid format, pursuant to the House order on June 23, 2022.

Pursuant to the order of reference of Thursday, June 1, 2023, we are beginning our study ofC‑42, An Act to amend the Canada Business Corporations Act and to make consequential and related amendments to other Acts.

I would like to welcome today's witnesses. First, we have Mr. Champagne, Minister of Innovation, Science and Industry, who is back before the committee.

Welcome, Mr. Champagne.

He is accompanied by Mark Schaan, Senior Assistant Deputy Minister, Strategy and Innovation Policy Sector.

Thank you very much for being with us, Mr. Schaan.

Without further ado, Minister, I give you the floor for five generous minutes.

[François-Philippe Champagne, Liberal, Minister of Innovation]

Thank you, Mr. Chair.

Good afternoon, colleagues.

Allow me first to express my thoughts for the people of Clova, in my community and the riding I represent in northern Mauricie, whose town has been overwhelmed by fire.

It's a pleasure for me to appear before the committee today to discuss Bill C‑42.

As you can see, I am accompanied by Mark Schaan, who will also be with you to answer more detailed questions in the next hour.

As colleagues would know, our government is committed to a robust and effective regime that will combat money laundering and tax evasion, improve Canadians' trust in the marketplace and make Canada a leader in corporate transparency.

I'm pleased to note, Mr. Chair, that I've heard that in principle all the parties are in agreement that this is the way forward for the country.

I think that Canadians who are watching us today would agree that a creating a free, public and searchable registry of beneficial owners of federally regulated Canadian corporations will increase corporate accountability and improve public trust in corporate institutions.

I'm delighted that all the opposition parties support the principle of Bill C‑42, and I'm satisfied that, based on our discussions and those that the committee has had with the experts, we can find a consensual path on which to move forward together.

In that regard, I thought I would use my limited time today to underscore a few characteristics of the bill that are likely of particular interest to the members of this committee. The first point I would like to make is that the amendments proposed in Bill C‑42 are based on the amendments made to the Canada Business Corporations Act, or CBCA, in 2018, 2019 and 2022.

Corporations already gather information on their beneficial owners. What we want to do today, Mr. Chair, is increase the amount of data that will be collected and ultimately published.

What we are doing is ensuring that the information is transmitted to the government and that a limited and reasonable amount of that data is published for transparency purposes.

The definition of control under the CBCA, which is 25% of voting rights—I know that committee members have discussed this from several angles and that the issue has also been raised in the House of Commons—stems from these previously made amendments, and it is entirely consistent with Canadian statutory provisions on money laundering, but also with the registries adopted around the world, particularly in the United Kingdom, the European Union, the United States and even Quebec.

The amendments proposed in Bill C-42 will require the CBCA corporations to collect and send additional information about their individuals of significant control in the form of residential addresses and citizenship.

Bill C-42 will also require Corporations Canada to make publicly available a portion of this information. It is important to note that individuals will continue to have the option to provide an address for service. When they do so, it is that latter address that will be made public.

Citizenship, like the date of birth, will be available to law enforcement, but, to protect the privacy of Canadians and to prevent fraud and discrimination, it will not be made public.

The bill also introduces an exemption regime for certain at-risk individuals. These exemptions are required to ensure our regime is charter compliant, targeted and, importantly, limited to public disclosure.

I want to be clear to all Canadians watching today that law enforcement will have full access to all the data collected.

Among other things, Bill C‑42 contains very strict compliance provisions, and sanctions for simple non-compliance, whether due perhaps to ignorance or forgetfulness, for example, are consistent with other similar penalties provided for under the Canadian Business Corporations Act. However, penalties for willful non-compliance—and I emphasize the word "willful"—to conceal other offences, for example, will be among the most severe in the world.

Bill C‑42 also provides for effective administrative sanctions and whistleblower protections.

Finally, Mr. Chair, the government has committed to making the beneficial ownership registry searchable and scalable to allow access to beneficial ownership data held by the provinces and territories that agree to participate.

In that vein, I'm happy to report to this committee that the Minister of Finance and I wrote to the ministers of finance for the provinces and territories this morning, asking them to join in this big endeavour so that we can cover as many corporations in Canada as possible. We have a long history of pan-Canadian collaboration on beneficial ownership transparency. Through this collaboration, we are looking to maximize coverage and ensure that the registry reaches its full potential. We will notably do so through the adoption of an international data standard that will facilitate interoperability.

Thank you, Mr. President.

I'm now ready to answer questions from my colleagues so we can proceed as quickly as possible to adopt this bill.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Minister.

To start this discussion on Bill C-42, I'll turn it over to Mr. Vis for six minutes.

The floor is yours, Mr. Vis.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

Thank you, Mr. Chair.

Thank you, Minister. Thank you for being here today.

I read over your speech during question period today. You did reference interoperability with the provinces quite regularly in that speech when we debated each other.

What I'm concerned about is not just my concern; I know that members of the Liberal Party have raised it as well. You mentioned today that you're asking for the provinces to opt in. Are there tools available at the federal level whereby we could compel provinces and territories to participate in a pan-Canadian registry?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

First of all, I want to say thank you for the question, because you're right that it is very key.

As you know, there are about 500,000 corporations under the Canada Business Corporations Act, representing about 15% of all corporations operating in Canada. Our objective is to have a free, publicly available, searchable and pan-Canadian beneficial ownership registry.

The way we have approached it for now—let me just say it's for now—is to write to colleagues across the country. Quebec, as you know, has already put their registry in place, I think as of March of this year, and so has British Columbia. Based on past practices in terms of beneficial ownership, it seems that colleagues around the country would be willing to join in this big endeavour, because I think that should be the ultimate objective.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

Thank you.

One question that came up quite regularly during the debate was related to the threshold comment you made. As we all know, under the amendments to the CBCA under this bill, only an individual or a corporation with 25% of significant interest in a corporation would be covered.

Given that we all acknowledge money laundering as a problem, and given that there are only 500,000 corporations incorporated under the federal government, would it not be beneficial to consider amendments to lower the threshold of significant interest for the purposes of having more corporations covered under the legislation to improve Canada's capability to fight money laundering?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

That's a very good question. I want to say thank you to my honourable colleague, because that's something that made even me pause when we presented that.

The reason we went with 25% is that this is the threshold we have in law for money laundering and also for combatting the financing of terrorism.

That's one thing. The second thing, which is probably more relevant, is that if we want to ensure interoperability with other jurisdictions around the world, north of 120 jurisdictions around the world—if my memory serves me well—have agreed to have beneficial registries. We decided to meet and exceed the standards that have been put by the Financial Action Task Force of the G20. The reason is that if one jurisdiction changes the threshold, you can't compare the data. It won't be comparable with other jurisdictions.

On balance, to be consistent with the laws we have in Canada on money laundering and combatting the financing of terrorism, and also to be in line with the international standard, we decided that 25% was the right threshold. Otherwise, we'd have the issue that we'd be the only jurisdiction with a different threshold. For the record, it's quite important that when you search foreign ownership, you have something that allows you to compare apples with apples. If we start changing the threshold domestically, it won't be comparable with other jurisdictions and their own beneficial registries.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

I'll look into that a little further. I see your point, but I still think that there's something more we can do.

What I'm concerned about is stacked corporations, people going around the 25% threshold through the arrangements of their businesses. I just think, given that only 500,000 business are covered under the federal business act, that we could be doing more. The effectiveness of this registry will largely, therefore, fall upon provinces' opting in, but we have no guarantee that provinces are going to opt in as of right now. That's the grey area in whether this bill will actually be effective in combatting money laundering, in my opinion.

Mr. Chair, how much time do I have remaining?

[The Chair, Liberal, Joël Lightbound]

You have a minute and a half.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

My next question—

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

Do you want me to comment on that?

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

In 30 seconds or less, yes.

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

I would say that I think there's an inclination of provinces to follow suit, and on the 25%, even if corporations were to stack, I would say that the obligation on the directors and officers of the company is to identify the individual of significant control—an actual person. Even if you're stacking to various shell companies, you still have a positive obligation under Canadian law to identify the physical person who ultimately is the beneficial owner of the company.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

In my province of British Columbia, we have the Vancouver model. Money laundering is a real and serious threat. The provincial government has put forward numerous commissions, as has been referenced in the House of Commons during this debate. I'm wondering, with respect to citizenship requirements, whether we could consider an amendment whereby information on all corporations under the CBCA that are owned by a foreign individual, a non-Canadian citizen, could be made available or be reported as well.

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

We did look at the B.C. model. I want to thank you, because B.C. also looked at the land registry in terms of beneficial ownership. I think that's a very good initiative, by the way.

I would say, with respect to citizenship, that there are two things that come to mind. One is around dual citizenship, and as you know, that could create issues. The second one would be—as you've seen with the European Court of Justice, which struck down the beneficial ownership registry publication, at least in Europe—that we have to make sure that we strike the right balance with the charter so that the information with respect to citizenship and birthright will be available to law enforcement but that only the name and address will be available to the public.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

Do we need to be concerned about the charter and its implications for non-Canadian citizens?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

I would say that it's a matter of balance. When we look at the European Court of Justice's decision, we don't want to fall into that. To your point, I think Canadians want us to try to strike the right balance so that, on one hand, if you're a bad actor, law enforcement will get access to all of that, and we'll find you. However, in terms of public disclosure, we thought that the balance to make sure that we don't have a challenge under the Charter of Rights and Freedoms was the right balance to strike. Therefore, the information is available to law enforcement, but what we made public is the address and the name of the individual of significant control.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Vis.

We'll go to Mr. Van Bynen for six minutes.

[Tony Van Bynen, Liberal, Newmarket—Aurora, ON]

Thank you, Mr. Chair.

It's a pleasure to have you attend the committee again, Minister.

We've heard about what we're trying to accomplish, but we haven't talked about why. Why are we putting this bill forward now to this extent?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

I want to say thank you to my esteemed colleague.

There are probably three things we're trying to achieve.

The first one is to dissuade corporations from hiding assets. Certainly I think those who engage in an illicit activity—whether money laundering, terrorist financing or tax evasion—should be concerned, because we're going to put light on the type of corporation they may try to use in order to achieve that.

The second thing is to improve, I would say, the tracing and freezing of financial assets. There is more legislation that calls for us to take action, for example, to combat terrorism. I think the fact that north of 120 countries in the world have agreed to create such registries tells us that the world is going in one direction. We want to make sure Canada is at the forefront and leading, because we were one of the few nations that created the Financial Action Task Force of the G20.

The third one is to improve corporate accountability and to make sure that Canadians have trust when they're dealing with corporate institutions.

For me, it's dissuading corporations from hiding assets, improving trust, and improving the tracing and freezing of financial assets when we need to do so.

I would say more generally, for Canadians watching us, that it's for Canadians to be able to search online to see who owns a particular company. I think that would be relevant, and I would say that for the vast majority of corporations and small and medium-sized companies, what we're asking is not going to be a large burden, because they already have annual reports for which they already collect a number of pieces of information. They already collect the names and the date of birth. Now they'll have to provide the residential address and citizenship.

On the one hand, we're improving transparency. On the other hand, we're very mindful that the vast majority of all businesses in Canada are law-abiding. This is really to target the bad actors and make sure that in the case of those bad actors, we have more information and we can identify them and go after them if they are breaking any law.

For the vast majority of Canadian corporations and small and medium-sized businesses, I would think that this is not an extra burden. They already do an annual report and they already have to report when they have a change in directorship. I would say it's really balanced.

We want to make sure that Canada stands out in the world as one of these countries, which really means making sure that we have all the tools available to dissuade money laundering, terrorist financing and tax evasion, and I think this is going to go a long way towards that.

[Tony Van Bynen, Liberal, Newmarket—Aurora, ON]

You mentioned that there are 500,000 Canadian corporations, and we're hearing conversations here that for it to be really effective, we need to engage the provinces. Can you speak to me a little more about the scalability of this registry?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

Thank you very much for that question.

I think colleagues have alluded to that. Something we have done, which is really crucial, is to adopt what we call the beneficial ownership data standard. That's a standard across the country to make sure that our registry would be interoperable with the one in British Columbia and the one in Quebec, and also that the data we would be collecting would also be consistent with that of the Financial Action Task Force of the G20.

You can see that there is a lot of value, going back to the stacking issue and foreign ownership that some colleagues have pointed out. We want to make sure that we have the registry first and that other provinces and territories can jump in and that it could eventually cover, for example, trusts. I think there might be a question about trusts and other forms of incorporation. Obviously this is dealing with Canadian business corporations. We all know that trusts are under provincial jurisdiction, but the day a province would, for example, adopt legislation in that regard, that could be added to the registry of beneficial ownership. It's an open-source kind of framework to make sure that the more we do together, the more information will be available, and that it will also be publicly searchable.

There's a lot of benefit to aligning with international standards—going back to the 25% that the colleague raised—and at the same time to having the beneficial ownership data standard, which is really going to help to make sure that whoever has a registry in Canada will have something that is interoperable.

At the end of the day, the final objective is to have a pan-Canadian beneficial ownership registry in which we have all the information so that CRA, law enforcement agencies, banks, journalists, Parliament and everyone can go and search it. If there are things to identify, people will have the information.

[Tony Van Bynen, Liberal, Newmarket—Aurora, ON]

How much time do I have, Mr. Chair?

[The Chair, Liberal, Joël Lightbound]

You have 45 seconds.

[Tony Van Bynen, Liberal, Newmarket—Aurora, ON]

What kind of measures will the government put into place to ensure compliance and the accuracy of the registry?