House of Commons Hansard #132 of the 38th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was bankruptcy.


Wage Earner Protection Program ActGovernment Orders

4:20 p.m.


Yves Lessard Bloc Chambly—Borduas, QC

Madam Speaker, I thank my colleague from Saint-Bruno—Saint-Hubert for this opportunity to make some clarifications. This is a matter of concern to her because employment is her speciality. Every time she has a chance to support measures relating to human resources and skills development, she does so with alacrity and pertinence, not to mention great vigour. I thank her for this.

As to whether it would be appropriate to raise this issue here, I think we would need to see whether it is allowed by the Standing Orders. If it is, I think we should, because time is moving on. Today we are trying to remedy the shortcoming relating to wage protection when there is a bankruptcy. Two years have been wasted. In the meantime, how many companies have closed on account of bankruptcy and so on? People have lost all that was owing to them in the way of earnings and separation allowances, and often pension funds as well. This is a critical situation and one that needs to be laid at the feet of the Liberals because it was their responsibility to do something. They could not say they were unaware. There was an NDP motion on this, and much discussion. There was even a vote on the matter because of that NDP motion. The Liberals voted against that motion. This is a critical situation. The same thing goes for POWA.

I appreciate my colleague's question, because if this is not done in connection with this bill, the government will have to explain why it does not take the initiative, when it is well aware of the consequences on workers and their families. When we talk of poor families in bad housing, having trouble to feed themselves, measures like these are to blame.

Wage Earner Protection Program ActGovernment Orders

4:20 p.m.

Chatham-Kent—Essex Ontario


Jerry Pickard LiberalParliamentary Secretary to the Minister of Industry

Madam Speaker, I thank my colleague across the way for his presentation. When we talk about pension funds and covering them in the manner that he has suggested, it raises a question in my mind and in the minds of many people. In trying to do something that is very helpful for workers, it could be very negative to workers. Financial institutions must lend money to businesses to keep businesses running. They must allow businesses to loan and borrow money to start new ventures and move forward.

If we stop and think about the methods of pension plans, if there is a shortfall in investment, for instance the stock market goes down and the pension funds were invested in the stock market, or the interest rates are not as high as required to pay the pensions, then people who lend money to small businesses might stop and think about whether they should continue to lend it or whether they should lend it at a much higher rate, which would curtail business dramatically in our country.

The Liberal government has looked at that pension plan and has said that it will ensure that any dollars collected by the employer, any inputs the employers have made, have to be paid before the settlement of bankruptcy, and they would receive a priority in that case. All funds that went to the pension plan must be brought up to date before that final settlement is made. That protects the workers in the most sincere way possible while not preventing loans to businesses and others.

We all have to be afraid. If small business does not have the money in investments, it will be unable to proceed. Everyone knows the biggest problem for small business is dollar flow or cash available for ventures moving forward.

Maybe in trying to help one way, we may hurt another way unintentionally. I would just leave that with the member to think about.

Wage Earner Protection Program ActGovernment Orders

4:25 p.m.


Yves Lessard Bloc Chambly—Borduas, QC

Madam Speaker, I would point out to my distinguished colleague that the answer lies within his question. I believe the hon. member has all the information.

When there is a bankruptcy and one of the creditors cannot be repaid by a credit union or a bank, some funds are secured. So, for them, it does exist. As a former administrator of financial institutions, I know that mechanism is there. So, they cannot lose. Will that add to their burden? No, since the government will take the initiative to make the payment in respect of wages and to recover it itself.

The other aspect of his question underscores the following: is there a problem, for instance, with hesitating or arranging to avoid supporting benefits from the employment insurance fund ? Are we talking strictly about premiums to be paid to pension funds in this case? If we were to reason as the member suggests, we would be agreeing that employers would use assets in the pension fund to ensure the survival of their business. Well, I would surmise that such was not the intent of the House. Moreover, that is not how I understand the bill, unless my interpretation is wrong.

Thus, regarding the two scenarios, I think the answer lies within the question. The danger that is feared in this regard does not exist because of the two reasons I have mentioned. The first is that the bank has a security in case of bankruptcy or bad debt. As to the Government of Canada, it is able to place itself among the high-ranked creditors in relation to wages.

Wage Earner Protection Program ActGovernment Orders

4:25 p.m.

The Acting Speaker (Hon. Jean Augustine)

Before resuming debate, I would like to inform members that we are now into 10 minutes for debate and five minutes for questions and answers. The time for 20 minutes has passed.

Wage Earner Protection Program ActGovernment Orders

4:25 p.m.


Yvon Godin NDP Acadie—Bathurst, NB

Madam Speaker, it is my pleasure to rise to speak to Bill C-55. I particularly want to thank the hon. member for Winnipeg Centre for the battle he has been fighting for workers for many years.

That has been recognized in this House. Earlier, I heard the Conservative member for Kootenay—Columbia allude to the job done by the member for Winnipeg Centre, and the Bloc Québécois member for Chambly—Borduas acknowledged it as well. This goes to show that discussions have been ongoing in the House of Commons for a number of years. Unfortunately, the then majority government consistently denied workers the opportunity to benefit from wage protection and pension protection in the event of a bankruptcy.

We will recall how shameful and outrageous it was in New Brunswick, when Nakawick went bankrupt, to see employees who had worked for the company for 30 years, who were 53 years old and had not reached retirement age, lose their pension fund.

We have to remember that, when a collective agreement is negotiated, that is part of the so-called package. When you negotiate a collective agreement and the employer agrees to a 12% increase over three years, the pension plan is part of that 12% that the employees have obtained.

What message is this sending? I am not talking about now, because I am in favour of Bill C-55. It is a step in the right direction, but I do not think that it goes far enough. Are we sending unions and employees a message, saying, “Do not negotiate private pension funds. Ask for the maximum amount of money instead. You will be much safer if you handle your money yourself”?

The fact is that an agreement has been signed at the negotiating table, providing that the workers would have a pension fund and that the company would be responsible for setting money aside for these workers.

I am suggesting that this may not be the appropriate legislation. Indeed, when we look at pension funds, instead of having a bill, we should say that a company is responsible for setting aside a fund that neither the company nor any creditor that might come back to collect money following a bankruptcy can touch. That money would be set aside and guaranteed to be there. It would be put in a fund for workers.

As I already mentioned, I find it absolutely appalling when we look at the wage issue. It does not make sense that a man and a woman who get up every morning and go to work for a company, who help it make money over a period of 30 or 40 years, would suddenly find themselves in trouble because the company has filed for bankruptcy after spending too much and not closely monitoring its finances. All of a sudden, at the end of a week, it decides to go bankrupt. As for the workers, it is too bad, but they are not getting anything. It is the banks that will get money before anyone else does.

As regards students, for example, the government is telling them, “You will have 10 years to go bankrupt”, as if students were second-class citizens. By contrast, large corporations would be first-class citizens and would be protected. The Liberal government, and also the Conservative government when it was in office, have always protected big companies.

As we can see in the last budget, the government wanted to grant a $4.6 billion tax cut to large corporations. The Conservatives were not happy when the NDP said no to this minority government. Instead of giving this $4.6 billion to large corporations, we want it to go to ordinary Canadians. We want affordable housing and we want money to be set aside for that purpose, to the tune of $1.5 billion. We want this $1.5 billion to be used to reduce the debt of students, children and Canadians.

Nevertheless, the Conservatives complain daily in the House about how the Liberal government has bowed to the demands of the NDP by giving something to ordinary, everyday people. As if it were disgraceful to give students money. As if it were disgraceful to demand affordable housing so that the homeless can find suitable accommodation. That is how the Liberals saw it. Since they are a minority government, they had to give in. Otherwise, they would have had to put up their little election signs.

The Conservatives cannot believe that the money has not gone to big business. They are upset about it. Once again, they are defending the big banks. I am convinced that if any legislation in Canada were to put the workers first, the workers would be protected.

It is the public who votes in an election, not corporations or the great friends of the government. In fact, a company president gets only one vote. Consider Inco in Sudbury. If it has 8,000 employees, then that many people get to vote for politicians. Inco, however, has only one president.

How can this government show such little respect for the workers and try to make us believe all kinds of things? It is incredible. I was listening earlier to one of my Liberal colleagues say that by not paying them, they are protecting them. He said that they should be happy, since they being protected. He is trying to make them believe that if the money were not given to the bank than they might not have had a job. This is what they want people to believe. Furthermore, this government is trying not only to make us believe but also swallow the fact that workers who leave their employment are not entitled to EI. And if they make a mistake in their EI application, they might end up owing the government $10,000.

However, Mr. Dingwall can resign his position and get a $500,000 severance package. The government feels responsible for a former Liberal minister who has resigned his position. So, it gives him a half a million dollars. But when lowly workers leave their job, they are not entitled to EI. This is completely unfair.

I believe it is time we had a bill, one to which amendments could be made, particularly concerning students, so that they can be treated just like any other Canadian. I hope Canadians are aware of how they are treated. Workers are not entitled to their pension money if there is a bankruptcy, but the banks can get their money. A former minister who is working for the government leaves his job for no valid reason—he should perhaps have been sacked—and is entitled to half a million dollars.

An ordinary worker let go for misconduct is not eligible for EI, but Mr. Dingwall, with his $750,000 in expenses and his $274,000 salary, a man who even claimed the cost of a little pack of chewing gum, is entitled to a half million. Unbelievable.

In another case, a person who has stolen $1.5 million from the Government of Canada writes a $1 million cheque to pay it back and avoids going to jail. What is more, that person acquires the job of going around to our universities telling our students how not to get caught. Unbelievable. What kind of world are we living in?

Personally, I hope Canadians are going to wake up and clearly tell the government, or any political party, that they will no longer put up with this. They want protection. Someone who goes to work wants to get the wages he is entitled to according to the number of hours worked. If the company has been able to enjoy all these profits over the years, the worker at the very least deserves his pay at the end. He also deserves payments from the pension fund that was negotiated for him.

He also deserves a respectable life and a respectable retirement.

This is why we support Bill C-55. It does not go far enough, in my opinion. We should work on it and broaden its scope. All colleagues in the House should sincerely support it. It is not enough to express one's support for workers, while the major corporations and the banks are the ones really getting the support.

Wage Earner Protection Program ActGovernment Orders

4:35 p.m.


Marc Lemay Bloc Abitibi—Témiscamingue, QC

Madam Speaker, I listened intently to my learned colleague. I have a question for my colleague from Chambly—Borduas, who made a very good speech. I want to pay tribute to him. I saw him work on several files, among others, the Program for Older Worker Adjustment, which we want to re-establish. The Bloc will put enormous pressure on the House to have it restored, because it is necessary.

I have a question to ask my colleague concerning the bill before us. I would like him to tell us about student bankruptcy. After receiving loans and grants or following other arrangements with the federal government, they quite often cannot pay the government back. I would like my colleague to tell the House about this. I would like to know what his position is about this to see whether it goes as far as that of the Bloc Québécois.

Wage Earner Protection Program ActGovernment Orders

4:40 p.m.


Yvon Godin NDP Acadie—Bathurst, NB

Madam Speaker, I appreciate my colleague's question.

We favour having the law apply to everybody. In the past, if a student, two years after finishing their studies, could not pay back their debt, that student had a right, just like anybody else, to file for bankruptcy.

One feels sorry for the student, in a way. Let us take a frequent occurrence in rural areas. People pursue their studies in a university out of their region, they come back home, but they do not find work. They already have to start paying back their debt, even though they do not have a job.

From the start, the student in debt is treated in the same manner as a person who has filed for bankruptcy. The student has no right to file for bankruptcy, but the debt is recorded with collection agencies. They get their first job. They want to buy a car, but have no right to do so, because collection agencies have a file on them. They want to buy a house to get a start in life, but cannot do so because their debt is recorded with collection agencies, and all that even though they have not filed for bankruptcy. In fact, the mistreatment they suffer is twofold. It is discrimination. It is not fair that they be considered second-class citizens.

The government has introduced this measure because too many students were going bankrupt. If this is the case, perhaps we should analyze the cost for the student. What did the government do? It balanced its budget and had a zero deficit, saying that it did not want to transfer the debt to the future generation, but wanted to pay it before the arrival of the future generation. What it did was transfer the debt to the future generation directly through universities. After university, it is now the student who is in debt, not the country. The debt has been transferred to these young students. Who are these students? They are our children. This is what the government has done. It has put our children in dire straits. This is what this Parliament has done. It is not right.

Perhaps several members here already belong to big corporations, represent these and do not have any problem paying for their children. However, there are parents in Canada who cannot pay for their children and these latter are forced to go into debt.

It is quite sad. The government has put into debt many young students in Canada who cannot go back.

Nowadays, a young university student graduates with $40,000 in debt. If they have met someone who has studied at the university level and they decide to live together, that translates into a $80,000 debt. Suppose they do not work at the same place and both buy a small car costing $10,000, the debt soars to $100,000. If they want to buy a $80,000 house—and that is not expensive—the debt reaches $180,000 and they have not had babies yet. That is what the government has done to our children.

Bill C-55 provides an opportunity to adjust the situation so as to help our students. We should grant them the same rights in the area of bankruptcy and help them pay their student debts, not bury them in debt as is the case today.

Wage Earner Protection Program ActGovernment Orders

4:40 p.m.

Yukon Yukon


Larry Bagnell LiberalParliamentary Secretary to the Minister of Natural Resources

Madam Speaker, I am pleased to speak in support of Bill C-55, an act to establish the wage earner protection program act, to amend the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act and to make consequential amendments to other acts. Many members have already expressed support for the principles of this bill. In my view this clearly demonstrates the need for this piece of legislation.

Bill C-55 will help thousands of Canadians who must rely on a fair and effective insolvency system to deal with the situation of financial distress.

Stakeholders from a broad spectrum of interests, insolvency professionals in the legal and accounting communities, labour groups, associations of creditors, the business and financial community and consumer groups have been demanding improvements in our insolvency system. Bill C-55 will do just that. It will make our system fairer and more attuned to today's marketplace environment as well as help Canadians to overcome problems associated with bankruptcy. The bill will bring about many important changes.

First, the bill significantly enhances the protection of workers when their employer goes bankrupt or undergoes a restructuring process. The creation of the wage earner protection program act is a major breakthrough. Numerous previous attempts to deal with this issue have been made over the past 25 years and they have all failed.

I firmly believe that the solution proposed in Bill C-55 not only greatly expands the protection to workers, but does so in a balanced and reasonable way that mitigates the adverse impact on credit.

Let us not forget that bankruptcy is always about sharing the burden, because by definition bankruptcy means that there are insufficient assets to pay all the creditors. Bill C-55 ensures that the burden is shared in a fair and equitable manner by taxpayers, lenders and other creditors.

Second, the bill further encourages restructuring as an alternative to bankruptcy. The Companies' Creditors Arrangement Act, which governs all major corporate restructuring, has not been substantially modified since it was first enacted in the 1930s. It needs to be modernized to improve the predictability and consistency of the restructuring process.

Many new provisions are proposed in Bill C-55, including the treatment of contract, the provision of interim financing, governance arrangements and transparency and notification procedures. It also introduces clear rules to govern the treatment of collective agreements during a restructuring process, which fully respects labour law principles while recognizing labour costs may need to be dealt with to ensure a successful restructuring.

Third, the bill makes the bankruptcy system fairer while reducing the potential scope for abuse. Many changes proposed in Bill C-55 are directed at redressing inequities. In this regard I want to emphasize the proposal to exempt all RRSPs from seizure in bankruptcy.

Under the current rules, only registered pension plans with employers and some RRSPs held with a life insurance plan are protected. There is no reason for treating retirement savings differently. Bill C-55 will ensure that all Canadians have the same exemption for their retirement savings.

Fourth, the bill contains a number of technical amendments to clarify the law and improve the administration of the insolvency system. Several amendments pertain to clarifying the role and conduct of trustees, receivers, and monitor as well the supervisory functions of the Office of the Superintendent of Bankruptcy. While perhaps very technical, these amendments are clearly needed if we want our system to operate efficiently and with fairness.

Bill C-55 is the result of an extensive consultation process. The Senate committee conducted public hearings in 2003 and received more than 40 submissions. Its report contained detailed recommendations for changes to Canada's insolvency laws. In fact, the committee submitted more than 50 specific recommendations and a vast majority have been translated into the provisions of Bill C-55.

It is quite clear that this legislation is of interest to a very large number of Canadians. I am convinced that Bill C-55 deserves the full support of the House. I urge that the bill proceed expeditiously to the committee review stage.

Wage Earner Protection Program ActGovernment Orders

4:50 p.m.

The Acting Speaker (Hon. Jean Augustine)

Is the House ready for the question?

Wage Earner Protection Program ActGovernment Orders

4:50 p.m.

Some hon. members


Wage Earner Protection Program ActGovernment Orders

4:50 p.m.

The Acting Speaker (Hon. Jean Augustine)

The question is on the motion. Is it the pleasure of the House to adopt the motion?

Wage Earner Protection Program ActGovernment Orders

4:50 p.m.

Some hon. members


Wage Earner Protection Program ActGovernment Orders

4:50 p.m.

The Acting Speaker (Hon. Jean Augustine)

I declare the motion carried. Accordingly the bill stands referred to the Standing Committee on Industry, Natural Resources, Science and Technology.

(Motion agreed to, bill read the second time and referred to a committee)

Bank ActGovernment Orders

4:50 p.m.

Wascana Saskatchewan


Ralph Goodale LiberalMinister of Finance

moved that Bill C-57, an act to amend certain Acts in relation to financial institutions, be read the second time and referred to a committee.

Bank ActGovernment Orders

4:50 p.m.

Scarborough—Guildwood Ontario


John McKay LiberalParliamentary Secretary to the Minister of Finance

Madam Speaker, I am thankful for the opportunity to speak to this bill and for the resounding thunderous applause and enthusiasm with which this bill has been greeted.

This is a bill of great significance to our economy because the financial services in this country are extremely important to the functioning of our entire economy. For instance, in my area, which is the greater Toronto area, it is estimated that financial services account for something in the order of 21% or 22% of the GDP. That is a pretty significant industry when one thinks of all of the people in the GTA.

The proposed legislation fulfills a commitment made in budget 2005 to bring governance standards for financial institutions up to the levels adopted in 2001 for other federally regulated corporations. As well, this bill proposes to update certain provisions and governance standards that are unique to financial institutions. In 2001 we brought up the corporate standards. This bill in some measure follows on that initiative in 2001 and makes certain changes that are unique to financial institutions.

The financial services sector is one of the key foundations of a modern industrial economy. It is an important part of Canada's economic infrastructure and plays an essential role in ensuring stability, safeguarding wealth and fuelling growth and productivity. In this regard, the Government of Canada can ensure a modern and efficient regulatory framework needed to support a successful financial services sector. That is what Bill C-57 is all about, providing an updated and modernized governance framework that will help Canada's financial sector succeed and better serve Canadians.

A well functioning and innovative financial services sector is essential for the Canadian economy to achieve its full potential. Healthy financial markets represent a critical element of a positive and competitive business environment and are fundamental to achieving key economic policy objectives. A successful financial services sector is also critical to the interest of all Canadians.

As I said earlier, Canada's federally regulated financial institutions play a pivotal role in the national economy. Not only that, but they play a significant role in the lives of Canadians. That is why, notwithstanding the fact that some of this bill is quite technical in nature, all Canadians should in fact be interested in the progress of this bill through the House.

Indeed, financial institutions employ about 600,000 Canadians and account for something in the order of about 6% of Canada's GDP. Of course, they are also leaders in the use of information technology.

Because of the sector's importance, the policy framework must ensure that financial institutions have the tools they need to adapt to a changing marketplace. One of the tools that is essential to the effectiveness, safety and soundness of the financial system is good corporate governance practices.

Governance rules underpin the effective functioning of these institutions by setting up rules relating to the rights of shareholders, policy holders and members, the role of directors, auditors and other advisers, and rules relating to the preparation, review and disclosure of information. In this bill all of those elements are touched on in one way or another. Some changes are made. Some changes are parallel to what happens in other corporations that are federally regulated.

Effective governance benefits all stakeholders, including the financial institutions themselves and their shareholders. The regulator, in turn, relies on sound practices as part of its regulation and supervision of the financial system. For these reasons, the governance rules of financial institutions need to be updated on a regular basis. This is where Bill C-57 comes in.

To set the stage for changes proposed in this bill, as hon. members may know, federal financial statutes such as the Bank Act, the Insurance Companies Act, the Trust and Loan Companies Act, the Cooperative Credit Associations Act and related legislation set out the governance rules for federally incorporated financial institutions.

The governance framework set out in the financial institutions statutes uses the Canada Business Corporations Act, otherwise known as CBCA, as a reference point. As I said earlier, take the CBCA and therein is our basic governing structure for all federally regulated corporations. Then from there go to financial institutions and we will see some changes which are unique to financial institutions. There, in and of itself, is a key to reading the bill.

Changes made to this act are normally implemented in the statutes as appropriate for financial institutions. Members may recall that in 2001 the government undertook a comprehensive reform and modernization of the CBCA, as well as the Canada Cooperatives Act in Bill S-11, which received royal assent in June 2001.

Bill C-57 would provide financial institutions with the same modern governance tools by updating their governance framework generally along the lines of the changes made in the CBCA in 2001 and would update certain governance standards that would be unique to financial institutions.

The measures in the proposed new legislation fall into five broad categories that I mentioned earlier, adapted to each particular type of financial institution. These categories are: clarifying the roles of directors; enhancing the rights of shareholders; modernizing governance practices; strengthening the governance elements of the regulatory framework; and increasing disclosure in respect of participating and adjustable life insurance policies, otherwise known as par policies.

Let me take a moment to explain how the proposals in this bill will affect each of these categories.

First is with respect to clarifying the role of directors. An effective board of directors is key and critical to protecting the best interests of a financial institution. The financial institutions statutes recognize the importance of the board by setting out the standards, qualifications and duties expected of directors of those institutions, and it is quite extensive.

The new legislation contained in Bill C-57 also would clarify the role of directors in carrying out these important functions, for example, by explicitly allowing a due diligence defence. A due diligence defence in simple parlance is a director saying, “ I did everything possible within the bounds of reasonableness to understand what was happening in that institution. Therefore, when things went bad on this institution, I was still fulfilling my role as director and, therefore, should not be liable”. In simple terms that is a due diligence defence.

The way things stand currently, directors are liable in court if they do not fulfill their duties as prescribed in the financial institutions legislation. Imposing liability is a fair way of helping assure that directors comply with their responsibilities. It also is, and this is the point, fair to give directors an opportunity to demonstrate that they have exercised good judgment in fulfilling their responsibilities by doing such things as setting up appropriate policies and procedures.

Under the proposals contained in this bill, directors of financial institutions would have the same rights as directors of other corporations, namely, they can rely on what is known as a due diligence defence if, and this is a big if, they can demonstrate that they have fulfilled their responsibilities by exercising “care, due diligence and skill that a reasonably prudent person would have exercised in comparable circumstances”. That quote is from the CBCA legislation. This due diligence defence has now been incorporated into financial institutions legislation. This legislative standard would allow directors of financial services providers to show the proactive steps that they have taken in the exercise of their duties

The next point to be emphasized is the enhancement of the rights of shareholders.

The ability of shareholders to discuss and monitor corporate performance is an important element of good governance. The financial institutions statutes set out the rights of shareholders to participate in major decisions of a financial institution in which they have an interest. For shareholders to exercise these rights, they must have access to corporate information because, as they say, information is power and if one does not have the information, it is very difficult to exercise the power that would normally accrue to oneself as a part owner of the corporation.

Bill C-57 would enhance the ability of shareholders to exercise their rights by, for example, allowing shareholders greater freedom to communicate without triggering the proxy rules. Normally shareholders who wish to communicate about issues to be considered at the annual general meeting must circulate a formal document to every shareholder of the bank. This is intended to ensure that all shareholders receive timely and accurate information, but it is also an impediment to information communications among shareholders. Imagine if a person was a shareholder in bank X and was concerned about whatever was happening in bank X, that person would be loath to trigger a proxy fight by virtue of simply communicating his or her concern to other shareholders.

Bill C-57 would create greater freedom for shareholders to communicate without triggering a requirement to send out information to all the shareholders. As we know, in Canada, bank stocks are widely held. To communicate to all shareholders would indeed be a very expensive proposition even for a shareholder who was wealthy. For example, they would be able to make public announcements and issue press releases and would be able to communicate with small groups of shareholders without, as I say, triggering the proxy rules.

The third element of the bill concerns the modernizing governance practices. Given the importance of good governance to the well-being of a financial institution, the governance framework needs to be kept up to date with the best practices in this area. The new legislation in the bill would create a new going private transaction regime and would enable insider reporting, proxy and prospectus rules to be harmonized with the rules applied by provincial regulatory authorities.

Bill C-57 also would facilitate electronic communication and the voluntary use of electronic documents. Facilitating a more efficient flow of information would reduce compliance costs for the institutions and promote more effective governance practices. The bill would make it possible for financial institutions that get written consent to communicate with their shareholders electronically. As we can imagine, with a lot of the banks and other financial institutions, there are literally thousands of shareholders. Anything which would allow a more efficient form of communication as opposed to sending everything in the mail would be good for not only the shareholders but for the institution itself and all the stakeholders in the institution as well.

The fourth element of the bill concerns the governance elements of the regulatory framework. Unlike ordinary business corporations, federal financial institutions are regulated by the Office of the Superintendent of Financial Institutions which oversees the safety and soundness of federally regulated financial institutions. Bill C-57 proposes to strength a number of governance elements of the regulatory framework, including improving the flow of the information to the regulator.

The bill also would harmonize various governance standards within and across financial institutions and statutes. For example, the legislation would harmonize the authority of the minister to exempt and ensure a trust and loan company from its 35% public vote requirement with the same exception authority that applies to banks.

To clarify what that means, when an institution such as a co-op reaches a standard of $1 billion in equity, the normal requirement would be that the institution make 35% of that billion dollars in equity available to the public for purchase on an institution such as the Toronto Stock Exchange.

If we think about it, a co-op is owned by its members and it is uniquely inappropriate for the requirement of a co-op to float stock on an institution such as the Toronto Stock Exchange. The change proposed by the bill will allow a broader range of companies to apply to the minister for an exemption from the public float requirement. Currently they cannot even apply for the exemption.

A number of co-ops have come to me to express their support for the legislation. It was not contemplated when these institutions and this legislation was created, literally decades ago, that these kinds of institutions would achieve a $1 billion equity requirement. This catches up to the reality of the marketplace in the year 2005.

Finally, the policy governance framework in the Insurance Companies Act reflects the unique interests of the role of policyholders in corporate governance of insurance companies. The new legislation in Bill C-57 contains a limited number of proposed changes to the framework. These would work to increase disclosure in respect to participating and adjustable policies, otherwise known as par policies.

For example, the new legislation would require directors to establish corporate policies on participating accounts and changes to adjustable insurance policies. It would require actuaries to prepare fairness reports for the board's consideration. It also sets out requirements for communicating and making information available to policyholders, shareholders and the public. The details would be set out in the regulations which would be developed in consultation with the stakeholders.

A par policy at its simplest is a right on the part of the owner of the policy to participate in the governance of the institution. There were some difficulties with respect to some par policyholders getting sufficient and adequate information in order to make informed decisions with respect to their policies and with respect to their participation, such as it was, in the individual insurance company.

As well as committing to updating the financial institutions governance regime, budget 2005 also announced a review of the legislation concerning financial institutions. The Government of Canada's commitment to conducting regular reviews of the federal financial services regulatory framework has been key to promoting efficiency and competitiveness in the sector.

The sunset clauses in the Bank Act, the Insurance Companies Act, the Trust and Loan Companies Act and the Cooperative Credit Associations Act provide for an automatic five year review of the legislation. Therefore, legislation amending the financial institutions ought to be brought into force by October 2006. I hope it does not take all this period of time, but we have basically a year to get royal assent on this bill. I hope members opposite will be cooperative and recognize that this important to our sector.

This is a practice that sets Canada apart from virtually every country in the world, providing an important advantage to Canadian financial institutions relative to their foreign competitors. We are constantly refreshing the legislation that governs these banks.

During the upcoming months work will progress on the review of the federal financial services regulatory framework so that draft legislation will be ready to present to the House in early 2006 with a view to having it come into force by the deadline of October 2006.

The bottom line is that the intent of the bill is to provide Canada's financial institutions with the modern government tools they need. The initiatives proposed in Bill C-57 would provide them with the tools to do exactly that. I therefore urge all hon. members to give the bill their full support.

Bank ActGovernment Orders

5:10 p.m.


Guy Côté Bloc Portneuf, QC

Madam Speaker, I have already, in this House, told my colleague from Scarborough—Guildwood how much I like having an opportunity to debate various issues with him and to show him that, too often, he contradicts himself. However, I must admit today that following this most interesting speech on Bill C-57, it would seem that, this time, for once, the government is on the right track, which I must say does not happen often enough.

Indeed, there seem to be a number of very interesting measures in Bill C-57. It should be understood, however, that I am still not convinced that this bill cannot be improved. But the government is certainly on the right track. That being said, the member mentioned earlier a number of provisions dealing with institutions that have between $1 billion and $5 billion in equity. He was talking more specifically about cooperatives. He mentioned in his speech that other types of institutions could also be exempted from these obligations.

Could the member elaborate on those other types of institutions that could be exempted from the obligations set out in this bill?

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5:15 p.m.


John McKay Liberal Scarborough—Guildwood, ON

Madam Speaker, I never thought I would actually miss the hon. member on the finance committee. I have never quite been able to resolve his ultimate contradiction of being a separatist in a federal Parliament, but that is another issue altogether. His contributions to the finance committee were quite reasonable within the caveat just stated.

The equity float is $1 billion and it only applies to financial institutions that are federally regulated, so there are no other businesses outside the purview of a financial institution for which this float would be required.

I hope that gives the hon. member a straightforward answer to a specific question.

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5:15 p.m.

West Nova Nova Scotia


Robert Thibault LiberalParliamentary Secretary to the Minister of Health

Madam Speaker, the Parliamentary Secretary to the Minister of Finance mentioned one key element that is important to all Canadians and that is that these stocks are widely held. A lot of people may not recognize what it means to them but if they are participating in pension plans, if they have insurance or if they are buying insurance from a company, it is important for that company to be stable.

We learned not too long ago what happens when the investments of these insurance companies go sour. We had our insurance rates greatly increased because the funds backing up our insurance were reduced when the market went sour. Investments were probably too high in the technology sector and we had to pay much higher premiums to rebuild the financial capacity of those institutions.

I come back to the question of our pension plans. As Canadians we participate in RRSPs, in defined contribution pension plans or invest not necessarily in the company for which we work but invest in the market through one of the larger insurance companies, trust companies or the banks and we have an interest in where these funds are invested and that they are properly governed. As individuals, we might be a little dissociated from that because we do not directly hold the shares. They are held in trust for us.

Could the parliamentary secretary tell us how this improves our confidence as indirect participants in these financial institutions that the moneys held in trust for us on our behalf are properly managed through proper governance procedures?

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5:15 p.m.


John McKay Liberal Scarborough—Guildwood, ON

Mr. Speaker, the hon. member is absolutely right and it is one of the things I probably should have pointed out in my speech. The shares are in fact widely held and constitute a significant portion of Canada's wealth both in pensions, in RRSPs and directly held by individual Canadians. Yes, this is an extremely important area for our financial stability.

The member is also right to point out that a year or two ago insurance companies, particularly in the property and casualty sections, were experiencing some extreme difficulties. I think their normal return on equity is somewhere in the order of about 8% to 12% and they were experiencing negative returns on equity in the order of 1% or 2%. That is not sustainable in a market where, if the stock market flattens out or goes down and claims go up, in very short order they would have some difficulties with the sustainability and viability of their insurance companies.

These are challenges that the government faces. I would like to think that the Government of Canada over the last number of years has faced that regulatory challenge quite well. Therefore what we see is improved wealth creation in the hands of pension funds and in the hands of individual Canadians through the increased viability of our financial institutions.

We see institutions like Scotiabank that has made significant inroads internationally and now generates something in the order of 40% of its gross revenues offshore. This is a significant accomplishment on the part of that particular bank.

Sun Life and Manulife are Canadian success stories and have achieved a level of success around the world which I think augers well for Canadian pension plans, Canadian RRSPs and Canadian individuals. All of their share values have increased quite dramatically.

I think the Royal Bank is either number one or number two and Manulife is either number one or number two depending on the day on the Toronto Stock Exchange. My recollection is that about $50 billion is the share value of the Royal Bank.

Those are rather important and critical investments for Canadian pensions and Canadian wealth creation.

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5:20 p.m.


Dick Harris Conservative Cariboo—Prince George, BC

Madam Speaker, it is my pleasure to speak today to Bill C-57. The Parliamentary Secretary to the Minister of Finance has given a pretty good explanation of what the bill is all about.

It is very important to mention the participation of the corporations, such as banks, bank holding companies, the insurance companies and all the corporations for which the bill would set, modernize and update governance rules.

The parliamentary secretary did not mention this but it is also important to thank the members of the official opposition finance team for the input they gave to the government. I know the government, on many occasions, sought the advice of our finance critic, the member for Medicine Hat; the member for Edmonton—Spruce Grove; the member for Peace River; and the member for Portage—Lisgar, who all played a part in the formation of this bill. They have given input to the government over the years at committee and in the House. I know the government appreciated the fact that the members of the official opposition's finance group were able to participate and help the government out when it was seeking advice on some very complex issues of this bill.

The bill would make changes to the corporate governance framework of banks, bank holding companies, insurance companies, insurance holding companies, trust and loan companies and cooperative credit associations to bring them in line with the Senate Bill S-11, which was updated in 2001 for business corporations under the Canada Business Corporations Act. That is a mouthful to the average person out there watching this debate but what it means is to modernize the governance framework that the banks and financial institutions operate under so that what they do becomes more open and more transparent to shareholders and the general public at large that may do business or invest in these corporations or be part of credit unions and cooperatives. They would now be able to sleep a little better at night knowing that these governance regulations on how these corporations operate would be open and transparent. It would give them an extra measure of comfort when they are placing their money in the trust of these people.

The bill also enhances the ability of shareholders to exercise their rights by allowing for the electronic participation at meetings, which is important because many times shareholders may be living in Vancouver or Toronto and they just cannot afford to jump on a plane, fly across the country and be part of a shareholders meeting, even though they may have something important to say or to cast their votes. This would let them cast those votes electronically, something we have talked about in the House here. I am sure the day will come when members of Parliament may be able to cast their votes electronically from the other side of the country if they cannot make it to the House of Commons, which certainly would be a savings to the taxpayer given the cost of air travel these days.

The bill seeks to improve the flow of information from financial institutions to the Office of the Superintendent of Financial Institutions. The important part of the bill is that it would allow medium sized insurers and trust companies to apply for an exemption to the public holder requirement which requires institutions with equity holdings between $1 billion and $5 billion to make at least 35% of their voting shares available for trading on the public stock exchange. That is going to be a huge benefit to credit unions and co-ops that have been seeking this modernization of the rules.

The bill proposes changes to the policyholder governance framework and the Insurance Companies Act, which would be intended to increase disclosure in regard to participating in adjustable policies.

Millions of Canadians have insurance policies and millions of Canadians invest in insurance companies. These companies are reputable and have demonstrated that they are trustworthy, and although Canadians may feel comfortable investing in them, I would hazard a guess that many shareholders and policyholders really do not understand the fine print in their policies. This legislation would give that more disclosure.

It is important to point out that after the next election a Conservative government, this Conservative Party, will protect the best interests of consumers by fostering competition and ensuring that the financial services sector is appropriately regulated for the protection of shareholders and balanced with stability and the opportunity for success and growth. This is a written policy of our party, which we intend to follow through on when we become the next government in this House.

Cooperative organizations and banks have all expressed a level of comfort with Bill C-57. I think it is important to keep a line of communication open to the very companies that Bill C-57 would apply to, particularly banks and other financial institutions in our country.

In many cases, the government has failed to do this. Many times, banks have been left hanging by the indecision of the Minister of Finance on some very key issues such as bank mergers and cross-pillar merging. Credit unions have been seeking some administrative changes.

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5:25 p.m.

The Acting Speaker (Hon. Jean Augustine)

I am sorry to interrupt the hon. member.

The House resumed from October 4 consideration of the motion that Bill C-25, An Act governing the operation of remote sensing space systems, be read the third time and passed.

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October 5th, 2005 / 5:25 p.m.

The Acting Speaker (Hon. Jean Augustine)

It being 5:29 p.m., the House will now proceed to the taking of the deferred recorded division on the motion at third reading stage of Bill C-25.

Call in the members.

(The House divided on the motion, which was agreed to on the following division:)

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6 p.m.

The Acting Speaker (Mr. Marcel Proulx)

I declare the motion carried.

(Bill read the third time and passed)

The House resumed from September 28 consideration of the motion.