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House of Commons Hansard #30 of the 38th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was chair.

Topics

Order in Council AppointmentsRoutine Proceedings

10 a.m.

Beauséjour New Brunswick

Liberal

Dominic LeBlanc LiberalParliamentary Secretary to the Leader of the Government in the House of Commons

Mr. Speaker, I have the honour to table, in both official languages, a number of order in council appointments recently made by the government.

Federal-Provincial Fiscal Arrangements ActRoutine Proceedings

10:05 a.m.

Eglinton—Lawrence Ontario

Liberal

Joe Volpe Liberalfor the Minister of Finance

moved for leave to introduce Bill C-24, an act to amend the Federal-Provincial Fiscal Arrangements Act and to make consequential amendments to other acts (fiscal equalization payments to the provinces and funding to the territories).

(Motions deemed adopted, bill read the first time and printed)

Remote Sensing Space Systems ActRoutine Proceedings

November 23rd, 2004 / 10:05 a.m.

Eglinton—Lawrence Ontario

Liberal

Joe Volpe Liberalfor the Minister of Foreign Affairs

moved for leave to introduce Bill C-25, an act governing the operation of remote sensing space systems.

(Motions deemed adopted, bill read the first time and printed)

Canada Border Services Agency ActRoutine Proceedings

10:05 a.m.

Eglinton—Lawrence Ontario

Liberal

Joe Volpe Liberalfor the Minister of Public Safety and Emergency Preparedness

moved for leave to introduce Bill C-26, an act to establish the Canada Border Services Agency.

(Motions deemed adopted, bill read the first time and printed)

Committees of the HouseRoutine Proceedings

10:05 a.m.

Liberal

Paul Steckle Liberal Huron—Bruce, ON

Mr. Speaker, I have the honour to present, in both official languages, the first report of the Standing Committee on Agriculture and Agri-Food.

In accordance with its order of reference of Friday, October 8, the committee has considered votes 1, 5, 10, 15, 20, 25, 30, 35 and 40 under Agriculture and Agri-Food in the main estimates for the fiscal year ending March 31, 2005 and reports the same, less the amounts granted in interim supply.

PetitionsRoutine Proceedings

10:05 a.m.

Conservative

Jay Hill Conservative Prince George—Peace River, BC

Mr. Speaker, as has become a pattern here, it is a privilege to present yet another petition on behalf of our military families.

The petition was sent in by citizens of Borden, Levack, Onaping and Schreiber, Ontario. As with the previous petitions, the petitioners wish to draw to the attention of the House that the Canadian Forces Housing Agency does provide our military with on base housing. However many of those homes are substandard to acceptable living conditions and are subject to annual rent increases.

Therefore the petitioners call upon Parliament to immediately suspend any future rent increases for accommodation provided by the Canadian Forces Housing Agency until such time as the Government of Canada makes substantive improvements to the living conditions of housing provided for our military families.

PetitionsRoutine Proceedings

10:10 a.m.

NDP

Nathan Cullen NDP Skeena—Bulkley Valley, BC

Mr. Speaker, I would like to present a petition today on behalf of the residents of Queen Charlotte Islands, Haida Gwaii who are not currently considered sufficiently isolated to claim full northern residence deduction through the federal Department of Customs and Revenue.

Therefore the petitioners call upon Parliament to enact legislation that calls on the federal Department of Finance to immediately review the classification of the Queen Charlotte Islands and restore the full northern residence deduction to the residents of the islands.

Questions on the Order PaperRoutine Proceedings

10:10 a.m.

Beauséjour New Brunswick

Liberal

Dominic LeBlanc LiberalParliamentary Secretary to the Leader of the Government in the House of Commons

Mr. Speaker, I ask that all questions be allowed to stand.

Questions on the Order PaperRoutine Proceedings

10:10 a.m.

The Deputy Speaker

Is that agreed?

Questions on the Order PaperRoutine Proceedings

10:10 a.m.

Some hon. members

Agreed.

Bill C-21. On the Order: Government Orders

November 15, 2004--The Minister of Industry--Second reading and reference to the Standing Committee on Industry, Natural Resources, Science and Technology of Bill C-21, an act respecting not-for-profit corporations and other corporations without share capital.

Canada Not-for-profit Corporations ActGovernment Orders

10:10 a.m.

Fredericton New Brunswick

Liberal

Andy Scott Liberalfor the Minister of Industry

moved:

That Bill C-21, an act respecting not-for-profit corporations and other corporations without share capital, be referred forthwith to the Standing Committee on Industry, Natural Resources, Science and Technology.

Canada Not-for-profit Corporations ActGovernment Orders

10:10 a.m.

Chatham-Kent—Essex Ontario

Liberal

Jerry Pickard LiberalParliamentary Secretary to the Minister of Industry

Mr. Speaker, it is my honour and privilege today to come before this House and speak to Bill C-21, an act respecting not for profit corporations and other corporations without share capital.

The legislation, which would enable the governance regime for federally incorporated not for profit organizations, is a long overdue replacement of the present Canada Corporations Act, or CCA. The CCA, which, to this point, has set the rules for some 18,000 organizations, was first enacted in 1917 and has not been substantially changed since.

Needless to say, the CCA no longer responds to today's needs for the not for profit sector. For example, it is silent on major elements of modern corporate governance which creates uncertainty in the public mind.

Second, it is an administrative burden on the sector and the government.

Finally, it fails to provide adequate protection for men and women who manage or operate these corporations.

In the years since the CCA was originally enacted, the world has changed dramatically and the not for profit sector faces governance challenges that cannot be dealt with under the existing legislation.

In response to these challenges, the government has taken a measured and reasonable approach to addressing the urgent need to reform the not for profit statute. It has looked at the Canada Business Corporations Act as a model of worldclass corporate statute. It then built on the provisions of the CBCA to reflect the requirements of the not for profit sector. It utilized, where appropriate, examples found in provincial not for profit statutes.

Finally, it was benchmarked against similar legislation in the United States. As a result, the new act will be one of the most modern statutes of its kind, measuring favourably against the best features of similar statutes throughout North America.

It may be asked: why now? Why has Parliament not addressed this in the last 80 years? In fact, there have been four previous attempts to reform the CCA but, for a variety of reasons, members of this House or our partners in the other place have never been able to complete the necessary scrutiny of previous bills before they died on the order paper.

We are now presented with an opportunity to bring this legislation up to date and to position federal not for profit law as the new benchmark for other jurisdictions.

The development of a new not for profit corporations act has been a long journey. It began with a commitment under the voluntary sector initiative in June 2000, followed by two rounds of cross-country consultations with shareholders.

The not for profit sector plays many important roles in Canadian society and our economy. It mobilizes citizens and creates a sense of community, enhances democracy, fosters community participation and strengthens our ties to one another. From national corporations created to fight disease to local sports associations, from faith organizations to facilities that provide job training and education to new Canadians, the sector touches most aspects of Canadian life. It is essential to our national identity and to our economy. Many are important government partners in providing services to Canadians.

The Government of Canada recognizes the importance of strengthening Canada's social economy and the thousands of entrepreneurial enterprises that form its backbone. These organizations are not only the key to social economy, but they are also an important pillar of the economy as a whole.

Research indicates that there may be up to 160,000 not for profit organizations creating opportunity in this country. When universities and hospitals are included in these figures, the revenue of the sector is estimated up to $112 billion a year.

The not for profit sector is one of the country's largest employers, employing more than 2.2 million people, with payroll expenditures as high as $64.1 billion. Most of these corporations are incorporated provincially. However more than 18,000 are federally incorporated and many are among the largest and most influential not for profit corporations in Canada.

The proposed new statute would demonstrate the government's commitment to strengthening its partnership with the sector. Current federally incorporated organizations include national charities such as the United Way of Canada and the Heart and Stroke Foundation of Canada. It includes umbrella organizations such as the Canadian Centre for Philanthropy and the Consumers' Association of Canada and several national businesses. It includes religious groups such as the Canadian Jewish Council.

There are health and community based organizations, environmental organizations, and cultural and heritage societies. Also included are transport related organizations such as airport authorities and small harbours. There are also many private foundations that pursue philanthropic objectives to the benefit of Canadians. Each of these and thousands of other small and large organizations perform an important function for their members, their communities, the recipients of the services and, collectively, all Canadians.

Replacing the CCA with a new framework law was a commitment made and reaffirmed many times over the last years. Fulfillment of this commitment would ensure that federally incorporated enterprises are governed by a modern legislative framework that is flexible enough to meet the needs of both small and large organizations while providing the accountability and transparency necessary to secure the support of the Canadian public.

The proposed new act provides a perfect example of smart regulations. It would reduce the administrative burden by making it easier and faster to incorporate and develop internal arrangements that suit the needs of the organization. It would promote good governance by emphasizing accountability and transparency to members and self-regulation more generally. At the same time, it would enhance the scope of governmental and public oversight by requiring greater financial disclosure requirements for organizations that solicit funds from the public or receive government funding.

The act is good for Canadians. It is good for them as individuals and it is good for our communities. I urge all members of the House to support the legislation.

Canada Not-for-profit Corporations ActGovernment Orders

10:15 a.m.

The Deputy Speaker

As this bill is being referred to committee before second reading, we will have 10 minute speeches and no questions and comments.

Canada Not-for-profit Corporations ActGovernment Orders

10:15 a.m.

Conservative

James Rajotte Conservative Edmonton—Leduc, AB

Mr. Speaker, I understand that I have 10 minutes with no questions or comments, with no actual real debate in the House today.

I rise today to speak to Bill C-21, an act respecting not-for-profit corporations and other corporations without share capital. The bill would also commonly be known as the Canada Not-for-profit Corporations Act.

I want to begin by addressing the new practice of the Liberal government of sending bills such as Bill C-21 to committee before second reading. Bill C-21, like the other industry bill before the House, Bill C-19 on competition policy, which we addressed a week ago, has been referred to committee for study.

In theory, the purpose of sending a bill to committee before second reading is to allow the committee members to introduce a broader scope of amendments to the legislation. The committee is allowed to propose changes that are outside the principle of the bill, which is what we debate at second reading: the principle of the bill.

In my view, however, the government is abusing this process. Eleven of the 23 bills that have been introduced by the government have gone or are going to committee before second reading. Debate in the House on this issue is limited to 180 minutes instead of the unlimited debate that would occur under regular second reading rules. Thus, through the back door, the government is limiting debate on this and 10 other bills. We are limited to 10 minute speeches with no time for questions and comments and no time to question the minister on the bill.

The fact is that a reference to committee before second reading is a handy scapegoat for a minority government. Rather than giving each legislative initiative careful thought and defending it, the government can tell Canadians that if they do not like the bill they can take their concerns to committee. This is also a very effective way and a strategy of this government to tie up a committee's time. A committee is supposed to be the master of its own house, to debate and deliberate policy on its own.

The Standing Committee on Industry, Natural Resources, Science and Technology has a bigger mandate in this Parliament with the addition of the combination of natural resources and industry. This is a minority government and the opposition wants to discuss issues like smart regulations and energy policy, as advanced by the member for Kelowna, but the fact is that those issues then get pushed to the back because we are studying these complex bills that are introduced one week before.

I just want to touch upon the process here. This bill was introduced last week. It is about 152 pages long with well over 300 clauses. A briefing was set up for the opposition last week. The member for Kelowna--Lake country went to the briefing. The briefing for Liberal members was extended so the briefing for Conservative members was essentially cancelled. Finally a briefing by the department was set up again for yesterday. The bureaucrats were late, by the way, so my colleague from Kelowna and I sat there twiddling our thumbs waiting for the government bureaucrats. They came in with an eight page briefing, in size 20 font, and here now are some of some of the wonderful things those officials told us.

They said the bill is complex and technical; well, that really indicates to us what is in the bill. They said information kits will provide essential elements; we are still waiting for these information kits. They also said that the bill was expected by stakeholders and some of them will seek to participate in the committee review process. Of course they will. This is the most common, basic information. Of course people interested in the bill will appear before the committee. Did we need a briefing to tell us that?

That was what we were told at the briefing on this very complex bill that the government wants sent to committee before second reading to tie up the committee because the government does not want to actually debate the issue in the House. Quite frankly, with respect to the minister and his staff, I have dealt with four industry ministers in a row and I have to say I am very disappointed with the way they have dealt with the opposition, particularly in a minority government. If the government is interested in passing this legislation, perhaps it ought to pass it over to us and give us maybe a week to prepare for it.

The government could tell us what it likes in the bill and what it thinks we should support about it because “we as a minority government recognize that we need at least one other party, in some cases two other parties, to support our legislation”. That is what it could say. Instead, the government is introducing Bill C-21 without debate, sending it to committee before second reading and frankly, in my view, avoiding the entire legislative process.

Having gone on that tirade, I do want to touch briefly upon the actual substance of the bill. I do not know if I will have time within the 10 minutes allotted, but I do want to also state publicly that the Conservative Party does not support sending this bill to committee before second reading and we are also not supportive of the substance of the bill at this time.

We have some concerns about this bill, the first under monitoring and enforcement. The fact is that Industry Canada has drawn up a very complex set of regulations and laws for record keeping, conflict of interest within these corporations, communications with membership, and financial reporting, to name just a few issues. But there will be no one at Industry Canada who will police or monitor the not for profit corporations' struggles with these requirements.

This is similar to the Elections Act. The government is setting up a huge bureaucracy and yet Industry Canada will not have someone who will actually assist all of these not for profit organizations across the country in terms of trying to fulfill all these requirements. Instead of setting up an arbitrator to help these organizations, most of whom I think rely on volunteers, this legislation would force disputes directly to the courts.

Having a lawsuit, either criminal or civil, because both are possible under this bill, would cost a not for profit organization time and money. In terms of the cost, there would be a larger financial burden on not for profit corporations in trying to meet the legislative requirements to change their bylaws and constitutions, to hire auditors and for liability insurance, to name a few areas. If the House passes this bill, a federally registered not for profit corporation would be required to make the transition to the new act within three years of the new act coming into force. Failure to do so would result in the director of not for profit corporations at Industry Canada taking action to dissolve the corporation.

In terms of the issue of how complex this bill is with respect to regulations, when someone is stalled in getting an organization up and running quickly by government inaction or by government regulatory burdens, the fact is that it costs the organization money and it delays what the organization does and what its purpose is. Frankly, the government has paid a lot of lip service, as the parliamentary secretary just did, to smart regulation when in fact it has failed to implement its own government committee on smart regulation, which came out just this year.

In addition to the bylaws contained in this bill that must be adopted by not for profit organizations in order to be allowed to exist by Industry Canada, there is a regulatory package that accompanies this legislation.

Under the proposed regulations, the degree of financial reporting is divided into five classes. For example, the type of financial report a not for profit corporation is required to submit to Industry Canada depends on the revenue of the not for profit corporation. The more revenue earned, the more formal the reporting requirement. There are no exceptions, so if a corporation has an exceptional fundraising year, the reporting responsibilities would increase as would the costs of the corporation for possibly redoing their books and paying for a more professional audit.

The regulations outline a very strict schedule for issuing notices of meetings. The minimum notification for a meeting of members is 14 days. This is in the actual legislation. This bill would make it illegal to call an emergency meeting within less than 14 days, thus removing some of the flexibility that smaller organizations rely upon to resolve important local issues.

The regulations do allow for some exemptions, such as the publication of membership lists if, for instance, the not for profit corporation is a battered women's shelter. One could apply to the director at Industry Canada not to have that membership list published. However, this application for an exemption would have to appear in the Canada Gazette and Industry Canada estimates that it would take at least 18 months for this process to be completed. It seems rather pointless to have to wait two years for an exemption if they only have three years to comply with this legislation in the main.

I do want to touch upon one other aspect, which is the whole issue of membership lists. It is a concern. What this legislation would allow is that if someone is a member of a not for profit corporation, that person would be able to access the entire membership list of that not for profit organization. The concern there obviously relates to privacy. Many members join these groups, but they do not feel they should have their personal contact information shared with anyone else who happens to be a member of that group.

The answer we were given by the people who gave the briefing was about how what if they want to contact these people in advance of the annual general meeting to advance one of their issues or to discuss something at the AGM and they want to inform people ahead of time. That may be a legitimate point, but should there not be another way to do that other than allowing an entire membership list of that organization to be eligible to just one person who signs up for a membership for $10 a year or something like that? Therefore, we do have some serious privacy concerns as well.

We also have some concerns with respect to liability. Many directors in the not for profit sector are volunteers. However, under this new scheme they will be liable for the actions of the not for profit corporation. I think organizations across Canada should read that section carefully.

Under the new standard of care, directors will have to act honestly and in good faith with a view to the best interests of the corporation, exercise the care, diligence, and skill that a reasonably prudent person would exercise in comparable circumstances, and comply with the act, articles, bylaws, and any unanimous member agreements. My concern is that this type of liability will deplete the pool of volunteers in the small, local, not for profit corporations that are simply trying to help their communities.

I could go on, Mr. Speaker, but I assume my 10 minutes are up.

Canada Not-for-profit Corporations ActGovernment Orders

10:25 a.m.

Bloc

Christiane Gagnon Bloc Québec, QC

Mr. Speaker, I share my Conservative colleague's frustration over the short and even non-existent briefing session offered on the new bill before us today.

Last Thursday, we were invited to a quick briefing session on a bill which is extremely complex. It is 150 pages long and is divided in 20 parts. We would really need more than the 10 minutes we had this morning if we are to be able to debate this bill and explain the purpose of the bill to the public and the organizations concerned.

Bill C-21 is a new piece of legislation on not-for-profit organizations. It purports to give these organizations a more modern framework, a more centralist governance system. It would repeal parts I, II, and III of the Canada Corporations Act in order to rely more on the Canada Business Corporations Act.

The bill before us will help ensure the long-term strength and vitality consolidation of the voluntary sector and of organizations in the social economy industry.

More specifically, this bill facilitates the constitution in bodies corporate of not for profit organizations, NPOs, thereby speeding up the process. It sets out standards of diligence and specific responsibilities for administrators and gives them better protection against civil proceedings. As well, the bill reinforces the rights of members of non for profit corporations to governance of these bodies. Finally, it makes closer surveillance of these organizations' finances possible.

There are, as I have said, 20 parts to the bill. We in the Bloc Québécois are in favour of the underlying principle, but feel that reference to a committee is necessary to clarify certain questionable points. I will try to summarize the problems we find very briefly, since we have only 10 minutes to debate the matter this morning.

As we know, in the 2004 Speech from the Throne, the government restated its position and made a commitment to encourage the social economy and the numerous activities relating to the not-for-profit corporations.

What is more, in its 2004 electoral campaign, and the reason we are in favour in principle this morning, the Bloc Québécois made a commitment to re-examine the federal government's economic support packages in order to make them more appropriate to the specific needs of the corporations in the social economy, as well as to ensure that such corporations can enjoy enhanced access to permanent sources of capital and other funding that suit their characteristics.

I will set out the context of the reform, although I realize that the Liberal member who has just spoken has done that to some extent. In recent years, certain community stakeholders have expressed concerns about how dated the act has become, and how it is no longer a fit with the requirements of the not for profit sector. We are therefore calling for the act to be modernized in order to respond to the objectives.

There has been public demand from stakeholders for some time. In 1989, a task force on the voluntary sector was struck by the federal government. It called for improvements to the regulations governing the sector, with the Industry Canada proposal to modernize the legislation being part of the plan.

This is why we are here today looking at a new bill, and it is our hope that the reference to a committee will provide answers to the points being queried by the Bloc Québécois.

This new legislation has four goals: flexibility and permissiveness; improved transparency and accountability; higher efficiency; and fairer treatment of not for profit organizations.

With respect to the flexibility and permissiveness of the legislation, as in the case of the classification system for not for profit organizations in the Canada Corporations Act, Bill C-21 makes no changes in the new not for profit corporations act.

Nevertheless, we think that there is still a possibility of including a classification system, which is not provided in Bill C-21, because the government believes such a system could be established with broader categories. Such a system would further improve transparency in financial management.

The second objective after transparency is accountability. The Canada Corporations Act currently requires not for profit corporations to keep detailed accounts of their activities but does not require disclosure of these accounts. To permit administrators and managers to better manage and supervise the management of the corporation would be to make it possible to monitor the financial situation of the organization between annual meetings and ensure that funds are used only in the pursuit of the stated goals and objectives.

The bill also includes a provision to ensure a balance among transparency, accountability and privacy.

I know that there are other objectives beyond this concern for transparency but I cannot go into all the details. We will certainly have an opportunity for more debate here in the House and to hear witnesses in the committee.

Let us move on to the third objective, efficiency. The act provides for a system of letters patent. In this system, creating a corporation is not a right. That is where we think there may be room for improvement.

Anyone who wants to form a not for profit entity has to apply to the Minister of Industry for a charter creating a body corporate for the purpose of carrying on objects of a national, patriotic, religious, philanthropic, charitable, scientific, artistic, social, professional or sporting character, or the like objects.

This application has to be accompanied by draft bylaws. In a system where incorporation stems from right, it would happen automatically, provided the required bylaws were submitted to the Director of Corporations. This major change means therefore an approval process that is much simpler, more flexible, more efficient, enhanced and less expensive.

Once again, we will make a point of debating this issue when the various players concerned with one or other aspect of this bill testify.

With respect to fairness, the Canada Corporations Act does not set out the fiduciary responsibilities of directors. It does not contain any provisions concerning standards of care, whereas we know very well that the new legislation on not for profit corporations will provide for the establishment of such standards.

Hon. members can see how terribly complex this bill is. We in the Bloc Québécois wonder whether it is consistent with Quebec's laws or if it could, for instance, contravene certain provisions of our legislation. We are going to be very vigilant. We know very well that standardizing the management of not for profit corporations is beneficial, but it must be done in the respect of Quebec's jurisdictions.

For example, in the implementation of governance mechanisms, the new legislation would take into account the financial position and size of the organization. It provides a relatively flexible framework for the making of bylaws. Nevertheless, we are going to be vigilant because this could violate what we have in Quebec in terms of support for not for profit organizations.

Canada Not-for-profit Corporations ActGovernment Orders

10:35 a.m.

NDP

Brian Masse NDP Windsor West, ON

Mr. Speaker, it is a privilege for me to speak about the bill, but I also want to speak about the process of Bill C-21, an act respecting not for profit corporations and other corporations without share capital.

This is a process that has been very frustrating for opposition members. The government tabled the bill and did not even have briefings available before it introduced it in the House of Commons. The bill is 160 pages long and very thorough. It is described in a small summary by the government as complex and technical. There have not been the appropriate supports that are necessary to have the best debate possible.

There are 18,000 not for profit organizations that could be affected by the bill. It is very important that we have a good process that will allow questions and direction in debate in addition to amendments that are necessary to improve the legislation. I am disappointed in the government not doing that.

I am reserving judgment on whether or not I will be recommending support of the bill to go to committee at this point in time. A number of things are still waiting. There are information kits that are supposed to provide essential elements that are still outstanding. We have not seen them. We have not seen any regulations being prepared as well.

The bill is an update from the early 1900s. We would have expected at least some of those things to be completed if there was going to be this rush to get into the House of Commons and then into committee.

I will spend a little time talking about the bill and what it does and what it does not do. One of the key elements is that it will provide a framework that applies to not for profit organizations and corporations without share capital. In terms of the proposed framework, it deals only with the narrow scope of the broad regulatory concerns of the sector itself, that is, the voluntary sector which is so important to Canadians.

The bill does not deal with any of the broader concerns that the sector has expressed, for example, securing long term financing, clarifying and improving the charitable status process, and also addressing advocacy needs that were certainly expressed by the organizations during the voluntary service initiative. I was part of that initiative, participating in my local community and very much involved in that process.

The regulatory regime may well be outdated, but it is unlikely that many of the not for profit organizations wanted to see the Robert's Rules of Order cleaned up first as opposed to the other important initiatives that are facing the industry; that is, a lack of ongoing sustainable funding and accountability that has been issued through different changing practices required by them when funding becomes available with strings and conditions attached.

That is something I hear on a daily basis from not for profit organizations. It is the ability to carry out changes in government legislation, changes in regulations that they are supposed to be able to accommodate under the current budgets and financial constraints. I know my community and other communities across the country are increasingly under pressure to fundraise.

Some of these expectations, in terms of new Liberal requirements, can be very good in many respects, but if they do not have the appropriate resources for accounting as well as accountability and transparency then those organizations have to pull from their existing resource base which is very difficult to do. They would fundraise for people or an organization with a specific cause and then request that the money go to accounting or some other type of department that does not see the direct result of their dollars going to advance a particular social cause in their community.

That is the frustration that the sector has expressed to me on a regular basis and what I have seen myself working in the sector for 10 years.

The bill will incorporate not for profit corporations. They will be able to apply for incorporation and define the rights and responsibilities of directors, officers and members, report their finances and administrative processes and also propose new provisions of director liability. Those are the key elements of the bill. Once again, this came as part of the voluntary service initiative.

There are also clear rules around the director liability that provides a standard of care approach and provides for due diligence. For many organizations this is critical in being able to attract the appropriate directors that they see fit. At the same time, if they do not have the appropriate resources to meet the expectations of the government on these matters, then they are going to have to pull from their existing resource base and that is going to affect the services that they provide to people.

I would like to point out some specific organizations so that people understand what we are talking about. I mentioned at the beginning of my speech that there are 18,000 approximately organizations that would be affected by this bill. They include business and consumer associations, airport and harbour authorities, community based organizations, charitable organizations, private foundations and religious groups. All of those organizations would be affected by this legislation.

There does not appear to be a willingness by the government to provide the resources to those groups and organizations to deal with the changes that the bill is going to mandate. That is something of a concern. If we cannot get that in Parliament, it is hard to believe that those 18,000 organizations will get it themselves.

It gets very complicated because some of these organizations are very small. However, it does not matter if they are small or large, they will have to comply with these new rules. If they do not have the technical expertise, it will frustrate some of the smaller organizations that are important to social movements and that take care of people.

A specific example is a local legion would be required to vote on matters in the same prescribed way as that of the Toronto Airport Authority. Small anti-poverty groups would be required to pass resolutions and record them in the same way as the United Way. The Lions Club would have to maintain its membership lists in the same way as the Red Cross.

That again goes to the supports that we believe should be appropriately installed in this bill so the government has the resources to assist those organizations. This would ensure that they would not become frustrated or have problems in following the bill, which later on could lead to them having difficulty in attracting new leaders and new participants. If there is some due diligence that they cannot comply with or if they do not have the appropriate resources for that, it could make it very difficult for them to grow and move forward. When groups are supported, they flourish. They also make considerable contributions, whether it be in poverty, in social justice or in religious organizations. They need those necessary supports. I am not convinced the government is willing to do that. If it will not do it here, what type of guarantee do we have it would do it abroad or anywhere else?

I want to talk about a couple other parts of the bill. One thing the government seems obsessed with is the concept of smart regulations. It throws that term out continually. Smart regulations means something to the government in terms of what it wants to produce and get out for people. However, to people, it means regulation changes. When the government talks about smart regulations, it wants accounting practices that fit its agenda.

What smart regulations means to me is the ability for groups and organizations, whether they be a business or not for profits, to have the best accounting practices that meet their needs and to ensure that there is no duplication or conflicts with government legislations. Smart regulations require two parties. The government uses that jargon. It is obsessed with the terminology. However, it does not recognized that two partners are needed to make that type of structure work efficiently.

I want to touch on some of the things the bill does not address. I mentioned in my preamble that it does not deal with the reduced amount of funding. The government has brought forward a number of different programs with a lot of terms and conditions which also do not provide for adequate supports.

I worked for a number of years with Youth Service Canada projects, which were fantastic for the community. However, they always had to be renewed after six or seven months, and a lot of time was wasted. As opposed to having due diligence with organizations that were very accountable, we had to ensure that we accounted for all the dollars. However, we simply did not have enough so we had to seek out partners. We were very fortunate to have an over 90% success ratio for returning individuals to the workforce or to school, but we spent far too much time having to prove our case for ongoing funding.

I also want to talk about a healthy civil society. The different not for profit organizations have expressed to me their concern with the current 10% rule of the government in terms of advocacy and the vagueness around that. In my opinion there has been far too much political pressure put on organizations so they cannot advance their cause. It is very much a part of a healthy democracy. Those organizations that do speak up must have the ability to do so without intimidation and with the due respect necessary to ensure their causes do well.

A traditional institution that has done well, with strong advocacy, is the United Way, as well as other groups and organizations beneath it. When strong advocates speak out for social programs for Canadians, better solutions are found to some of the most difficult challenges we face.

I will conclude by expressing my disappointment that the government has proposed to move this bill forward in such haste, without due diligence and without respect for the members of the House of Commons. It also affects the legislation we could have on this important initiative. I believe it needs to have more than a particular focus. It needs to be full and broad ranged.

Canada Not-for-profit Corporations ActGovernment Orders

10:45 a.m.

Liberal

Don Boudria Liberal Glengarry—Prescott—Russell, ON

Mr. Speaker, I have some difficulty understanding how the debate is coming about in the way it is. We are discussing a bill respecting non-profit corporations and other corporations without share capital. We are discussing a bill that has to do with some 18,000 organizations that will be subject to it. There is a three years transition period. If that is not the right amount of time, the committee can deal with that.

A Conservative member said that the legislation was too detailed. That is opposite to the criticism we generally hear. Members normally complain that not enough is in the legislation and too much is in the regulation, thereby giving too much power to the ministers and civil servants preparing the regulations and not enough oversight by Parliament.

I am very disappointed in those who are saying today that the bill has been considered too quickly after it was presented to the House. The Conservative member for Edmonton—Leduc told us that the bill should have been presented and left on the order paper for at least a week.

The text of the bill it indicates that first reading was on November 15. According to the calendar in front of us, today's date is November 23. That may not be a week, but it is certainly seven days. The way I look at it a week or seven days are pretty much the same thing. The bill should stay on the Order Paper for at least a week and it has been there for seven days. Where I come from a week and seven days are the same thing.

The Conservative member for Edmonton—Leduc made a gratuitously remark about the officials who have been working tirelessly on this and several other issues for us. The member said he was unhappy with the quality of services provided by the officials. There was an initial general information session for hon. members that he did not attend. There was a second session for each individual caucus, which he attended, as did the hon. member for Kelowna—Lake Country. Both hon. members left before the end of the meeting and the briefing continued with the members' assistants. There is nothing wrong with that, but then there is no point saying that the information session was unsatisfactory after not staying long enough to hear what was said. I am referring to the briefing for the Conservative Party.

When an hon. member leaves in the middle of a meeting and says he did not receive all the information from the officials, this is a gratuitous accusation that should be corrected.

Canada Not-for-profit Corporations ActGovernment Orders

10:50 a.m.

An hon. member

The meeting started late.

Canada Not-for-profit Corporations ActGovernment Orders

10:50 a.m.

Liberal

Don Boudria Liberal Glengarry—Prescott—Russell, ON

I am quite prepared to believe that the meeting started five minutes late, because there was a briefing for another political party. I believe that. Members of the other parties also had the right to hear the information; it is their right.

However, to say that this gives members the right to criticize all those in the government who work on this bill because they wanted to leave before the end of the meeting is unfair. I say to my colleague that he ought to pay attention to what he says in this regard. I am not talking about the general briefing for all parties, but about the specific one for members of the Conservative Party of Canada.

As I said, there was a general meeting, and we agree on this, which representatives attended. There was a second individual briefing for each political formation. Some members decided to attend, others did not. It is their right. Of course, those who decided to go and to leave the meeting early and then criticize those who gave the briefing acted with a lack of sensitivity, to say the least. I will not say what I think otherwise about this.

The bill is good. It deserves the structure of the debate that is before us today. We will recall why there is a procedure to debate bills in this House before second reading.

We could go over the procedure that enables us to do that. Members will know that if a bill comes to the House after second reading, the usual rules apply in committee. A committee cannot increase an expenditure in the bill and it cannot levy or impose a tax. The committee is bound to the principle of what is known as beyond the scope of the bill. In other words, the bill cannot be widened in terms of its scope.

Members on all sides of the House, particularly the opposition, have clamoured for greater use of referring a bill to a committee before second reading. Why? Because the usual concept of not going beyond the scope of the bill does not apply. The restriction is only what we call the long title of the bill. Amendments can go beyond the scope of the bill, providing they do not exceed the parameters of what is known as the long title. That gives opportunities for members of Parliament to make considerable amendments to a bill because it was referred to committee before second reading. That is why this process is used and used more by the government because it enables members to participate more fully.

I listened to another critique of the hon. member for Edmonton—Leduc. He said that seven bills had been referred to committee, that the committees had too much and that they could not be masters of their own business. First, that is not how the rules work. It is the duty of committees to take, as first priority, legislation delegated to them by an order of the House. There is an order of the House for the committee to take care of a piece of legislation. Obviously, that has priority over things that the committee generates on its own.

Standing Order 108(2) specifies that a committee can undertake matters that are not referred by the House. That is not the same as saying that the orders of the House cease to exist because the committee can also undertake things outside of that. It is like saying that people do not have to work any more because they are entitled to their hobbies outside their working hours.

The issues that committees choose to do in addition to what the House has assigned to them is supplementary work, valuable work, interesting work, and I engage in that almost everyday. In five minutes from now I will be chairing a parliamentary committee doing some work in that regard, under Standing Order 108(2). However, that is not the same as saying that somehow the House does not have a right to refer issues to committee. It is the committee's duty once that work is assigned to dispose of the matter and send it back in a timely fashion for further study, at the next stage of the bill, in the House of Commons.

I thought I would give my opinions on some of the remarks made. Again, I hope the House will consider this legislation fully, provide the proper constructive amendment in cooperation with the volunteer sector that is doing such a great service for the citizenry of Canada.

Canada Not-for-profit Corporations ActGovernment Orders

10:55 a.m.

Conservative

Werner Schmidt Conservative Kelowna, BC

Mr. Speaker, it is a privilege to speak to Bill C-21. I cannot help but refer to the member who just spoke, the member for Glengarry—Prescott—Russell. He is a very experienced and knowledgeable person in the affairs of the House and how things operate in the House. I congratulate him with the knowledge and persistence with which he pursues his particular line of argument.

I am sure the hon. member for Edmonton—Leduc would be only too pleased to answer some of the criticisms that the hon. member for Glengarry—Prescott—Russell advanced in his particular speech. However, by the nature of the debate right now, it is impossible for the hon. member for Edmonton—Leduc to even begin to address some of the points that were made by the member for Glengarry—Prescott—Russell. I think that illustrates the difficulty with this kind of legislation. It is very technical and involved and deals with the business of not for profit organizations, many of which are very much oriented toward helping people who are less fortunate than others.

These charity organizations are very powerful. The United Way, for example, is one of those organizations. I know from serving on the board of directors of the United Way in Kelowna, for example, and continuing to serve with that group, it is an absolutely fantastic organization. United Way organizations do wonderful work in various communities right across Canada. However there are a whole host of other organizations, including private foundations.

I cannot help but also look at the Minister of Industry who is advancing this legislation. It has been a privilege to work with several other ministers of industry in the House and I have to suggest that the minister who is now presenting this bill could benefit from discussions with one of the previous ministers, the hon. John Manley.

Mr. Manley was a gentleman who was very concerned about doing what was right in legislation and in making sure that all the information that could possibly be gathered was put on the table. I think he honestly wanted to do what was best for the legislation.

I think what happened here is that we have legislation, which, as has been referenced, has had broad consultation over several years, but when I look at the various details and provisions in the bill I cannot help but wonder whether these organizations, for which the legislation is being proposed, recognize and know what the implications of the clauses in the bill mean to them as organizations.

I want to focus on a couple of the clauses in some detail. I was absolutely amazed. I know how some of the organizations operate and when I look at some of the provisions in the bill I wonder whether they will actually like them. I cannot help but ask myself to what degree there was a need expressed by the organizations to have a new bill written for their benefit.

I know the bill would replace parts I and II of the Canada Corporations Act, but I have to wonder whether there was a need expressed for those things to be taken out and that a completely new bill be written. I do not think there is any question that the act needed to be amended because that act, which was passed by the House in 1917, was quite old and a lot of things have changed in the meantime.

I think they had reason to believe that some updating and some modernization had to take place but I wonder whether the kind of modernization took place that they wanted. It removes the requirement of letters patent, for example, to be approved by the minister. All that has to be done is to have articles presented to the director. The director is appointed by the minister and the director then receives these articles. Once he receives them, that is good enough. Just like that, the organization is incorporated and recognized.

No real attempt is made to decide whether the organization is a bona fide organization. They simply submit the articles and they are accepted. It is very interesting that is all there is. The organizations are divided into three broad categories: small, medium size and large. Obviously, the United Way would be one of the large ones but there could be individual small community organizations like a curling club, for example, that has a few members. It, too, could be incorporated. If it were to do so, all it would have to do is send articles in. It only needs one director and that would be good enough.

As I go through the other analyses, members will recognize and want to know whether we really want that kind of power to be given to the director.

What are the advantages of being incorporated under the act or not being incorporated? It seems to me that every existing organization that is under parts I and II of the Canada Corporations Act has three years to transfer and be incorporated under the new act. If they do not do it in three years, they are dissolved by the director without any particular motion on their part. Having been dissolved by the director, does the existing corporation have the option then to continue to exist as a corporation? It is not clear. Could they immediately miss that one and then become incorporated with different articles within seconds of the other one? It does not speak about that at all.

What are the advantages and disadvantages of being incorporated under the act, vis-à-vis being registered under the Societies Acts of the various provinces? Many of these charitable organizations are part of the Societies Act and registered within each of the provinces. What is the advantage of going to this organization rather than being under the provincial Societies Act? It is not clear at all as to what the advantages would be under this particular act.

The bill contains a very interesting provision concerning complaints. We must remember that if a member of one of the organizations issues a complaint, the director then has the power to investigate, but he actually does not investigate it himself. He has the power to have the investigation take place. Whatever the results of that investigation are, he then has the right to dissolve that corporation.

I want to read clause 287 of the bill because it is rather an interesting provision. It states:

(1) In the prescribed circumstances, the Director may cancel the articles and any related certificate of a corporation.

(2) Before proceeding under subsection (1), the Director shall be satisfied that the cancellation would not prejudice any of the members or creditors of the corporation.

(3) In the prescribed circumstances, the Director may, at the request of a corporation or of any other interested person, cancel the articles and any related certificate of the corporation if

(a) the cancellation is approved by the directors of the corporation; and

(b) the Director is satisfied that the cancellation would not prejudice any of the members or creditors of the corporation and that the cancellation reflects the original intention of the corporation or the incorporators.

(4) On the application of the Director, the corporation or any other interested person, a court may--

I am just beginning. That was only one clause where the director could actually dissolve a corporation because somebody was complaining about how the corporation was running.

We have heard all kinds of talk about transparency and about meeting the objectives of the organization and yet if someone were to complain, there is no time schedule as to how the complaint would be handled. If there is a capricious complaint, where perhaps someone is dissatisfied or does not like the director, then, if it is a small or medium sized organization with one director, the organization can be dissolved. There is no clear-cut way of dealing with this.

The bill has not been properly studied and has not been given the kind of attention it should have been. I think the minister and the staff who support him are honourable people and they have tried hard but the bill is not ready to be referred to committee.

Canada Not-for-profit Corporations ActGovernment Orders

11:10 a.m.

Liberal

Brent St. Denis Liberal Algoma—Manitoulin—Kapuskasing, ON

Mr. Speaker, it is my pleasure and honour to participate in the debate on Bill C-21, an act respecting not for profit and other corporations without share capital.

I have listened to comments on the other side of the chamber and some of the ideas are very good and others need further discussion.

I am pleased to have the opportunity to contribute to the deliberations and to assist the House and later the committee to resolve some very important questions.

As has been noted, the act is a comprehensive restructuring of the old, outdated statute governing not for profit corporations. As a result, it would provide these important organizations with new tools, including modern corporate governance standards that would ensure their viability to Canadian individuals and communities for decades to come.

Some of the key elements of the new statute include a streamlined incorporation process, improvements to the financial accountability structure, specific rights and responsibilities for the directors and officers of corporations and an enhanced regime for members' rights.

The CCA, or Canada Corporations Act, currently uses a letters patent system of incorporation. This creates a significant burden on both applicants for incorporation and the government. It requires that the minister review applications for incorporation and improved bylaws and bylaw amendments.

The new act will replace this system with incorporation as of right. The new system will grant incorporation upon the filing of the articles of incorporation under a specified form and payment of a fee. This will greatly expedite the process of incorporation. What used to be done in a couple of weeks will now be done in a day or two, or even within a few hours since electronic filing will be allowed once the act is in force.

Not for profit corporations take many different forms. In particular, there are variations in size and in the manner in which they are funded. The act will separate corporations into two categories. A soliciting corporation is one that solicits donations from the public or receives government grants. A non-soliciting corporation is one funded directly by its members.

The financial oversight of these organizations will vary depending under which of these two categories they fall and on their revenue levels. The act sets revenue thresholds that determine whether the corporation requires a full audit or whether a review engagement, which is somewhat less rigorous and certainly less expensive, will suffice. For the smallest, non-soliciting corporations, members may, if they unanimously choose, dispense with any formal financial review altogether.

For those corporations that undertake either a review engagement or an audit, the new act will require that the corporation provide ready access to their financial statements for members, directors, officers and the director of corporations responsible for administering the act.

In addition, soliciting corporations will have to file financial statements with the government in order to allow the information to be available to the public. Disclosure of financial statements is one of the important tools to provide greater transparency and accountability to the millions of Canadians who make donations to charitable organizations.

One major shortcoming of the current law is its failure to indicate what standard of care directors are expected to meet. The new act will explicitly state the standard of care that directors must achieve. This will establish clear parameters for the director's responsibility and eliminate uncertainty. The standard of care will be a modern one, as is contained in the CBCA, or Canada Business Corporations Act, and other modern corporate law statutes. The standard will require that directors act honestly and in good faith and in the best interests of the non-profit corporation.

The new standard of care will provide improved protection for directors against unwarranted liability. A director who meets the prescribed standard of care will be protected by a due diligence defence. Therefore directors who do their best and do so honestly need not worry.

The new explicit standard of care and the due diligence defence that accompanies it are measures that the not for profit sector expects will reduce the uncertainty directors currently face regarding their personal liability and which should help to attract the qualified individuals needed to act as directors of non-profit corporations.

Members rights will be further protected and enhanced by the new act. Such protections will serve to promote active member participation and will encourage members to properly and effectively oversee the activities of the corporations' directors.

The measures that will now be available to members are the ability to access corporate records, including financial records; access membership lists; request meetings of members and make proposals at such meeting; use the oppression remedy and compliance orders to protect their rights; and use derivative actions to enforce the rights of the corporation.

In summary, the bill would promote good corporate governance and ensure proper levels of financial accountability. It would improve the public transparency of organizations that solicit funds from the public or receive government funding. It would improve the ability of members to take a more active and meaningful role in the corporation in which they have invested time, money or effort.

The new act would be important to the voluntary sector and could serve as a model for reform in other jurisdictions. Its subject would continue to gain importance in coming years. Its continued relevance must be ensured. With that in mind, the act would be reviewed in 10 years after coming into force to assess its operation and impact, and if necessary, address any issues that might develop.

There is widespread support for the reforms contained in the bill. Stakeholders strongly supported proposals for a new statute during a consultation process that included two rounds of national consultations between the fall of 2000 and the spring of 2002.

The Government of Canada is committed to ensuring the strength and success of the not for profit sector. This sector is the foundation for much of what is good about this country. Industry Canada is working to provide the necessary tools that would allow the not for profit sector to meet the challenges of the 21st century. One such tool is good corporate governance. Bill C-21, that we are debating today, is just such a law.

There is not likely one member present who does not have some connection to a not for profit organization. We or members of our family or our closest friends are all members or participants or patients or students or donors. Enhancing the ability of these corporations to do their necessary and valuable work is an issue that touches us all and one in which we can be proud to have been involved.

As chair of the industry committee and along with my colleagues, I look forward to seeing this legislation pass in the not too distant future.

Canada Not-for-profit Corporations ActGovernment Orders

11:15 a.m.

Bloc

Nicole Demers Bloc Laval, QC

Mr. Speaker, given his expertise, I would rather the hon. member for Glengarry—Prescott—Russell had shared his views on the relevance of Bill C-21. Since he preferred using his time to criticize members who spoke before him, I will have to rely on my own wisdom in considering this bill.

Allow me to voice my opinion on the part of this bill proposing a new Canada not for profit corporations act designed to place corporations within a more modern and more centralizing governance framework. This bill would amend parts II and III of the Canada Corporations Act and rely more on the Canada Business Corporations Act.

The point I wish to raise today is very similar to the one my colleague opposite just raised. It concerns fairness to the directors and officers of not for profit corporations.

Before coming to this place, I sat for years on the boards of many non-profit organizations. I did so because it had become increasingly difficult to recruit competent volunteer directors because of the load of responsibilities put on them.

These may include responsibility under the provisions of certain pieces of legislation with respect to environmental damages, responsibility for salaries or unpaid source deductions, civil liability for breach of fiduciary duty, and even responsibility for their own negligent acts. Being a volunteer director demands a great deal more than the recognition and support you get in return.

But the new not for profit corporations legislation provides for several levels of limitations on the liability of directors and officers. For example, incorporation limits liability by establishing a body corporate that can be held responsible; clearly defined standards of care do not hold responsible directors who act honestly and in good faith; directors may use the defence of reasonable diligence. They are provided with a remedy against unfounded complaints.

There are new provisions to indemnify directors against costs, charges and expenses incurred in respect of an unfounded proceeding or of incidents which the corporation believes to warrant indemnification.

One should be careful before enacting such a provision. Highly qualified officers who know the system well might exonerate themselves by invoking the due diligence defence and thus make the members of the organization pay collectively for their errors.

On the one hand, the Canada Corporations Act does not list the fiduciary responsibilities of directors and officers of not for profit organizations and contains no other provision on standards of diligence governing their behaviour and management. On the other, the Canada Business Corporations Act provides that every director and officer of a corporation in exercising their powers and discharging their duties shall act honestly and in good faith with a view to the best interests of the corporation and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

The new Canada not for profit Corporations Act provides that standards of care will be modeled on those in the Canada Business Corporations Act. A clear statement of the duties and responsibilities of the directors will facilitate the hiring and retention of qualified board members.

The proposed standards of diligence, which have been well defined by the courts, provide an extra tool to the not for profit organizations that have more objective standards and remedies. These objectives criteria streamline standards of diligence for directors of not for profit organizations incorporated under federal law across Canada.

When the bill was drafted harmonization with other Canadian acts was taken into account, but the acts that may differ, such as the Quebec Civil Code, and other provincial acts, should also be taken into account. The objective criteria of the standards of diligence afford protection to directors as well, by allowing them to cite due diligence as a defence. This provision was not in the Canada Corporations Act. It protects directors who have acted properly, but not those who might have acted improperly.

Obviously, any bill seeking to increase efficiency by allowing organizations to incorporate according to an as of right system and abolishing the letters patent system of incorporation is worth considering especially if it also abolishes ministerial discretion regarding the incorporation of an organization and, on top of that, makes it possible to hire competent directors and officers who will no longer be afraid of being unduly prosecuted.

Following the brief examination that we were able to do, the Bloc Québécois will vote in favour of the principle underlying Bill C-21. However, we must be diligent ourselves to ensure, first, that there will be no interference in Quebec's areas of jurisdiction and, second, that this legislation will be harmonized with the Civil Code of Quebec.

A standardization of the management of not for profit organizations is beneficial, respecting Quebec's jurisdictions, of course, especially since the new act would take into account, in the establishment of management mechanisms, the financial means and the size of the organization. Thus, it still offers a flexible framework to make these regulations.

However, referring the bill to committee for further study seems justified to us, because it will be possible to hear certain witnesses, namely stakeholders from the field and experts who will be able to enlighten us on certain controversial points or on questions.

Some provisions of the bill remain to be clarified, among other things, the issue of possible interference in Quebec's areas of jurisdiction in terms of the establishment of not for profit organizations whose activities come under Quebec's jurisdictions, for example, day care centres, as well as the harmonization with the Civil Code of Quebec, if such a bill is passed.

Also, even though the rules and responsibilities of directors are tightened, there is no real code of ethics with respect to the financial management of the organizations. This is a very important point. Organizations that do not establish a code of ethics do not understand the importance of being accountable to their members and of having a strict code of ethics that defines how they should conduct themselves vis-à-vis their members and their mandate. This is very important.

I hope that members of the House will vote to refer the bill to committee.

Canada Not-for-profit Corporations ActGovernment Orders

11:25 a.m.

Liberal

Lynn Myers Liberal Kitchener—Conestoga, ON

Mr. Speaker, I am pleased to add my voice in support of a new not for profit corporations act. Over the last few years corporate governance has become an issue that has attracted the attention of government, the press, business groups and indeed concerned Canadians. Most of the attention has been devoted to business corporations, but the basic principles of good governance and corporate governance apply and should apply to all corporations including not for profit corporations and other corporations without share capital.

The most important corporate governance features for corporations under this act are the new rules for financial review and disclosure. Financial disclosure, particularly for corporations who solicit money from the public or who receive grants from any level of government, is fundamental to ensuring public trust.

The financial disclosure requirements under this act strike the appropriate balance between ensuring that the public's trust in the not for profit sector is maintained and providing the necessary flexibility for corporations to adapt depending on their size and type.

For instance, it is essential to recognize that smaller corporations may not have the financial capability to undertake full audits. Likewise, corporations whose revenue is derived only from members do not have the same public profile than those corporations that solicit funds or receive government grants.

Under the old Canada Corporations Act, all corporations were required to place before their members an auditor's report, but there was no specific requirement that members had access to the financial statements of the corporation. There was certainly no requirement that these financial statements be made available to the public. Under this act, that would be changed. The new not for profit corporations act significantly improves the level of required disclosure and for the most part ensures that the broader public interest is served.

The act would provide extensive standards regarding the availability of financial statements to the membership and for soliciting corporations to other interested parties. These standards are in keeping with what are generally seen as best practices in modern corporate statutes. As well, the new act recognizes the distinction between corporations that exist only to meet the needs of their members and who are financed solely by those members and those whose activities are financed by the public or the government.

At each annual meeting the directors of all corporations must provide members with comparative financial statements for the year in question. The preceding year is reported to a public accountant if there is one and any relevant information as deemed appropriate. The corporation must also keep financial records at the corporate office where they are to be freely available to the members. Finally, all soliciting corporations will be required to file their financial statements with the director appointed under the act. This will ensure public access and scrutiny of this information.

Both non-soliciting and soliciting corporations will have graduated levels of financial review based on gross annual revenues. These annual revenue threshold levels, which at this time are only proposals, will be set by regulation once this bill is passed. There are two categories of non-soliciting corporations. The first category will be those with gross annual revenues of less than $1 million. These corporations must undertake a review engagement of their financial statements by a qualified person. However, if they wish, members could unanimously resolve not to undertake any form of outside review.

An example of this type of corporation would be a mutual benefit or a sporting club such as a curling club, for example, where no public interest is served by having the organization publicly disclose its financial information. In such cases, it should be up to the members themselves to determine the level of financial review that best serves their needs.

The second category is non-soliciting corporations with gross annual revenues of equal to or greater than $1 million. These large corporations must have their financial statements audited by a qualified person. Soliciting corporations would have three graduated levels of financial review based on gross annual revenues. The smallest soliciting corporations, those with gross annual revenues of less than $50,000 would be required to have a review engagement of their financial statements.

The members of these corporations could resolve, with the unanimous consent of all members, not to undertake any form of outside review. This is appropriate. Audits, even review engagements, are expensive undertakings.

There is little to be gained by requiring very small locally-based not for profit organizations to spend a considerable percentage of their revenues on a review of their books. This could severely diminish their capacity to fulfill their mission. To those who would suggest that there would therefore be no oversight at all of these corporations, the Canada Revenue Agency could always intervene should there be a suspicion of any financial wrongdoing. The second category of soliciting corporations would be those with gross annual revenues of more than $50,000 but less than $250,000. Such corporations would be required to have an audit of their financial statements. However, members of these corporations could resolve by a special resolution to undergo a review engagement instead.

Finally, soliciting corporations with gross annual revenues of more than $250,000 would be required to have an audit of their financial statements. These measures are responsible and fair. Corporations are given the flexibility they need and at the same time these measures ensure a degree of public transparency that does not exist at this time for not for profit corporations.

We all have an interest in ensuring that not for profit corporations and other corporations without share capital, who perform outstanding services in Canada and around the world, are not overburdened with regulations. We also have a responsibility to protect the public interest.

It is my contention that the bill meets both of these requirements. I urge all members to support the expeditious passage of Bill C-21. I think it is a good bill and deserves our support.

Canada Not-for-profit Corporations ActGovernment Orders

11:30 a.m.

Conservative

Michael Chong Conservative Wellington—Halton Hills, ON

Mr. Speaker, I rise today on Bill C-21, an act respecting not for profit corporations and other corporations without share capital.

The not for profit sector in this country is made up of approximately 18,000 not for profit organizations that collectively have over $100 billion in revenue, which is a significant part of the third pillar of our economy and something that this bill addresses but not without major flaws.

I want to speak to four aspects of this bill, some of which are good and some bad. Those four aspects concern the streamlined incorporation process, improved financial accountability, the rights and responsibilities of directors and officers, and the ability for members to appeal or seek redress for actions that a board has taken.

In terms of the streamlined incorporation process, the government has done a good job in replacing the letters patent system of incorporation by an incorporation as of right system. That will allow many not for profit corporations to more easily incorporate than in the previous process. It eliminates the current requirement for ministerial review of applications and replaces it with the standard filing specified forms and the payment of a fee. If this system were also implemented via an online form, it would also be advantageous.

However, the second element of this bill that I want to speak to is the improved financial accountability, which creates too many different classes of not for profit corporations to regulate themselves in terms of financial reporting requirements. There are five different classes: first, a low revenue soliciting corporation; second, a medium revenue soliciting corporation; third, a high revenue soliciting corporation; fourth, a low revenue non-soliciting corporation; and fifth, a high revenue non-soliciting corporation.

I think there are far too many levels of categories for these not for profit corporations to determine what their reporting requirements are and as one not for profit moves from year to year into one category and the next, it is going to create a lot of confusion as to what category they are in and what level of reporting they require.

For many larger soliciting corporations, the threshold for not reporting a review engagement, in other words, for them not to have to file with Industry Canada a review engagement, is the consent of all their members. In this particular situation, for these not for profit corporations, that have a significant number of members, this may be too onerous a threshold for them to forgo the review engagement that in some cases can cost upwards of $1,000, which may be a lot of money for a corporation that does not have a lot of revenue.

The third area which creates an onerous burden on not for profit corporations is the rights and responsibilities of directors and officers. The government has said that it wants to create a framework under this act to ensure that not for profit corporations can more easily go about their business, especially with regard to the standard of care that must be taken into consideration by the board of directors.

This is something that many not for profit corporations will find difficult to deal with because many of them do not pay their board of directors. Many not for profit corporations approach people of stature in the community to see if they are willing to lend their names, to sit on a board of directors, and to lend their expertise. Most community leaders are more than willing to lend their names and time to a not for profit corporation because they know that the standard of care is not the same that applies to corporations engaged in normal for profit business.

This bill creates a standard of care that is significantly higher than the existing standard of care that private enterprises are obligated to follow. This is going to do two things. It is going to make many people seriously reconsider whether or not they want to take on the liability of sitting on a board of directors for a not for profit. Also, it is going to lead to increased costs for the not for profits because many of the boards will now elect to take out directors liability insurance. That adds another burden on the not for profits, many of which are without a great deal of revenue.

The fourth area I want to speak to, and one which I think is onerous for the not for profits, is the provision in the bill that allows members to enforce their rights and to appeal to a court. The bill allows members to seek relief from a court if they believe their rights have been oppressed.

In this case the bill does allow religious organizations an exemption based on a tenet of faith. In other words, if the organization made a decision based on a tenet of faith, the members could not appeal to the courts to seek redress for whatever action the corporation had taken.

However, this tenet of faith is not clearly defined in the bill. My worry is that this will potentially infringe on religious freedom when appeals are made because the bill is not clear as to what exactly is a tenet of faith. For that reason also, I think this bill should be opposed.

Most important, this bill should be opposed simply because it is a travesty. It has been five years since the government engaged in the voluntary sector initiative, and this is all it has come up with. In 1999 the government announced the initiative as a result of its commitments in the Speech from the Throne.

This voluntary sector initiative at the time was announced as a five year action plan at a cost of $94.6 million. It was to examine the regulatory framework of the voluntary sector, to examine capacity building measures, relationship building measures, and to do this in strong and in-depth consultation with the voluntary sector.

One of the commitments made in this voluntary sector initiative was to clarify the guidelines on allowable expenses. It was to streamline the process and make the process more transparent for the regulation of charities under the Income Tax Act. It was to make more transparent the method by which charities receive their charitable status, and to possibly examine whether or not the rules that are currently in place and which have been in place for centuries dating back to Elizabethan law, should be broadened for charities. In other words, it was to see whether or not the rules for which charities should be recognized should be broadened to include not just those religious organizations and those organizations whose intent is to educate, but also to broaden it to advocacy work and other areas.

However, the bill is absolutely silent on that aspect. The government has fallen far short of what the voluntary sector was expecting. For that reason I oppose sending the bill to committee before second reading.

Canada Not-for-profit Corporations ActGovernment Orders

11:40 a.m.

Liberal

Alan Tonks Liberal York South—Weston, ON

Mr. Speaker, I am pleased to have the opportunity to speak to the not for profit corporations bill.

I have been listening intently to many of the issues, suggestions and observations that have been raised by members opposite and in particular, the last member's comments. I hope that what I am going to say will address some of those concerns.

We should reflect for a moment. When we think of not for profit corporations, we generally think of the good works they do, of the benefits all Canadians derive from the efforts of thousands of volunteers in the voluntary sector. All of us have had huge experience with members of these organizations. We realize that the quality of life in our communities depends on this voluntary capacity without which we could not do our jobs. We think of the social bonds that are formed among members of non-profit organizations. We also think of them when they join together and participate for the higher benefit of the public good.

In these cases it is important to recognize that not for profit corporations are only as effective as their members make them, and that membership brings with it responsibilities and equally important, it brings rights. In a very complex society we have to keep in mind the accountability that goes with responsibility. We also have to keep in mind the protection that members have when they become part of a voluntary, not for profit organization.

This legislation will go a long way toward protecting the rights of members. In doing so, it will ensure that corporations are more open, more transparent and accountable to the men and women who are the heart and soul of any non-profit organization that is working within our communities. I would suggest very humbly that the bill will accomplish this in several ways.

First, members will have access to corporate records to facilitate active monitoring of the board's performance. In a modern non-profit corporation, or any corporation for that matter, it is imperative that the members have the ability to keep themselves fully apprised of the ongoing dealings and workings of the organization and that they apprise themselves of its status and take action when they perceive that problems are starting to occur.

The bill provides that the non-profit corporation must maintain and make available to its members a lengthy list of important corporate records. These include the corporation's articles, bylaws, meetings of members or committee of members, and resolutions of the members or a committee of members. It is not an onerous undertaking by any stretch of the imagination, that the accountability of individuals and individuals together makes the corporation, in this case the voluntary corporation, responsible and accountable.

Second, the bill provides members with the right to access to a corporation's membership list. It is hard to believe in this day and age but this is an important facet of closing the accountability loop. This would give members the opportunity to act in concert on matters of concern to the corporation's members.

An individual may only retrieve the membership list once per year and must sign a statutory declaration affirming that the list would only be used for the purposes set out in the bill. The general public would not have a right of access to those membership lists. The confidentiality of members would be respected to that extent, but the members themselves would have access to the lists, as it should be.

Third, the bill enhances members' rights by permitting any member entitled to vote at a meeting of the membership to submit a proposal for consideration at that meeting and to speak on the matter addressed in the proposal, sort of the concept of natural law. If a matter is raised, all of the organization's members have a right to be informed of that before and after it is raised. If such a proposal is submitted in the required period, the corporation is required, subject to any restrictions in the bill, to include it with any material being distributed by the corporation in advance of the meeting.

The ready access to membership lists to which I have already spoken should promote better communication and contact among the membership.

The fourth way the bill enhances the rights of members is by protecting members who feel that their rights are being infringed or that actions are being taken that are not in the best interests of the corporation. Members will be able to utilize oppression remedies, something which another member talked about, to launch derivative actions or to seek injunctive relief. These remedies are standard provisions in modern corporate statutes.

The oppression remedy allows a member to apply to a court for an order in respect of conduct that the member feels is against his or her interests. The powers of the court are very broad. The court may order a restraining of the conduct in question and appoint a receiver or a receiver manager. It may amend the articles. It may review the bylaws. It may appoint or even replace directors if just cause is raised and if the nature of that which is raised by the member is in keeping with the degree of seriousness that we have observed from time to time in organizations.

In a derivative action, if the business of the corporation or part of it is being conducted in a manner that a member feels is not in the best interests of the corporation, he or she may apply in the name of the corporation to a court to remedy that situation. The applicant must first notify the directors of the corporation of the intent to make that application and must convince the court that he or she is acting in good faith and that the action would be in the best interests of the corporation. If a member finds that the corporation, its directors, officers and other parties do not comply with the act, they may seek from the court a restraining or compliance order to ensure that the act is obeyed.

There is one exception to this. The oppression remedy or derivative action and injunctive relief would not be available to a member if the action in question was, in the view of the court, based upon a tenet of faith held by the members of the corporation. This gets into the religious aspect. It does not mean that a member of a religious organization would face restrictions on his or her ability to use the courts in order to overturn an action taken by a corporation made on the basis of its religious doctrines or tenets of faith. However, this is only fair. The bill should not override the rights of religious organizations to decide for themselves how their doctrine should be applied. It is an appropriate limitation on members' rights.

Fifth, in order to ensure that as many members as possible are able to participate in the meetings of the members, the bill provides that, as long as it is permitted by the bylaws of the corporation, meetings may be held wholly or partially by electronic means. This includes any form of telephonic, electronic, or other means of communication, as long as it ensures that all members participating in the meeting can properly communicate with each other.

The bill also provides that, subject to the bylaws of the corporation, the votes may be held by electronic means. The criteria for such votes are the same as for electronic participation in meetings of the membership.

Finally, members are given the right to make, amend or repeal bylaws for the corporation by majority vote. The only restriction concerns bylaws that would result in what was deemed to be fundamental changes to the corporation, such as changing the name of the corporation, changing its mission or its sense of purpose, instituting a new class of membership, or changing criteria for membership. In these instances, the bylaw in question may be passed but it must be approved by two-thirds of the appropriate members as opposed to simple majority. This is in contrast with the current practice in which corporations must submit any new or amended bylaws for ministerial approval.

By enhancing the rights of members of not for profit corporations, I believe that this bill is good for the non-profit corporations themselves and for the voluntary sector as a whole. While there has been reasonable attention given to some of the shortcomings in the bill, the ongoing experience of the bill in fact will make it a very important instrument that will keep non-profit organizations viable and accountable, and that will keep the membership totally informed in terms of what their rights are as members of those groups. The non-profit corporate sector will continue to enhance the kind of quality of life that we want for all our communities.