Madam Speaker, I am pleased to speak to the important issue raised in Bill C-501 put forward by my colleague, the hon. member for Thunder Bay—Rainy River, dealing with unfunded pension liabilities.
The bill is a sign of his and his party's concern about pensions and the income security of Canadians in or approaching retirement. This is a concern shared by the government as evidenced by the number of initiatives that we have undertaken in response to the concerns of many Canadians across the country.
We appear to be coming out of the recent economic downturn experienced by countries all around the world. In that regard, I am pleased to point to the April 7 OECD interim economic assessment report that noted that the Canadian economy grew 6.2% in the first quarter of this year compared to 1.9% overall growth estimated for the other G7 countries. Our economy will continue to expand in the second quarter at 4.5%, twice the G7 average.
I mention this because a healthy economy can only be good for the stability of companies, the pension funds they support and the employees who will benefit from them. However, I do not suggest that this is not a reason for concern for individuals and for their companies that have not weathered the economic storm well.
During the downturn, which has led to a number of employers filing under insolvency legislation, many people, especially senior citizens, were understandably concerned that their pensions would be affected. While Canada is showing signs of emerging from this downturn, the financial well-being of these older Canadians must not be taken for granted.
Although the government has undertaken a number of specific initiatives to deal with those heartfelt concerns, debate on this bill allows us an opportunity to stand back and see where we are when it comes to our pension and bankruptcy legislation. The best place to start is in understanding exactly what the current legislation covers.
Canada's insolvency regime relies mainly on two statutes: the Bankruptcy and Insolvency Act, often called the BIA, and the Companies Creditors Arrangement Act, or the CCAA. These two statutes set the rules for the process of bankruptcy or, in the alternative, companies restructuring. Both are important pieces of marketplace framework legislation. They influence Canada's economic health, so much so that we must take great care not to tinker with their provisions on a piecemeal basis.
In broad strokes, the following is how the legislation works.
In bankruptcy, a trustee in bankruptcy seizes the non-exempt assets of the bankrupt company and sells, liquidates and distributes the proceeds of the sale among the creditors according to the distribution scheme set out in the BIA.
In the alternative, a company may choose to restructure. In restructuring, the company becomes a debtor rather than bankrupt. Rather, it works with an insolvency professional to try to find a repayment scheme for its debts that will satisfy the debtor's creditors and allow the firm to continue perhaps in a different and restructured form.
Historically, creditors receive better recovery under restructuring than they would if the debtor simply became bankrupt. Furthermore, it is better for jobs, growth and opportunity as it allows for the quick redeployment of assets from insolvent businesses to new and profitable ventures in a controlled and orderly manner, which is essential in today's economy.
That brings me to today's debate. One of the objectives of the insolvency legislation is to balance the competing interests of creditors, including employees and pensioners, for the scarce resources available in insolvency files as there is not usually enough money to satisfy the full claims of all creditors.
Great care must be taken when amending insolvency legislation because if the proper balance is not achieved, it is possible that the cost and availability of credit for companies with defined benefit pension plans could be negatively affected. This could, in turn, reduce the ability of companies to create or continue to fund benefit pension plans for their employees.
We also should be mindful that while exploring the various ways to help pensioners of insolvent companies, we do not impose additional constraints on reorganizing firms that could interfere in the reorganization process and eventually push still viable businesses into bankruptcy. Evidence has shown that restructuring and reorganization, as opposed to bankruptcy, provide better recovery for creditors and help to save jobs, which ultimately protects employees' wages and pensions.
I leave it to my colleagues to go over in greater detail the factors of which we must be mindful in considering the implications of pension protection in insolvency for the interests of stakeholders and the economy as a whole.
In the Speech from the Throne, the government committed to explore ways to better protect workers when their employers go bankrupt, and it certainly understands the value of secure and sustainable pension plans.
In order to promote more secure private sector pensions in the federal sphere, in October 2009, the government announced a comprehensive reform plan for the federal private pension plan legislation and regulatory framework. Many of these significant pension reforms announced by the finance minister are to be implemented through Bill C-9, the jobs and economic growth bill.
The Minister of Finance has also announced consultations with Canadians to obtain their input on this important matter, as well as consultations with his provincial and territorial counterparts that are currently ongoing concerning retirement security. A review of policy options is scheduled for the finance ministers' meeting to be held in May 2010.
In considering this bill, we must be mindful of the larger issue of pension and retirement income security. We must consider as well the interaction of this bill with the initiatives that are currently ongoing to promote the security of pensions as an important component of the retirement income security system. The government is considering all of these factors in fulfilling its commitment to explore ways to better protect workers whose employers go bankrupt.
I have a final note on this issue. Based on our experience at committee, I want to be clear on the present structure of the BIA. In fact, there is a super-priority group of current employees of a company that is looking at bankruptcy. That money that is available goes to those wages that are earned but not paid and they are a super-priority.
The next level is the secure level of debtor, which, to be frank, is the banks, those that have security against the bankrupt company in terms of hard assets and so on. It is really the banking level that most people consider.
The third level at present is everybody else, which includes the pensioners but also includes the suppliers, bondholders and a number of other debt instruments that companies use to operate.
This bill, from my understanding, and I will need some clarification as we debate this bill further, would move the pensioners above the secure level into the super-priority area. That was what was indicated in the speech by the mover of the motion. I will check into that further. However, what the Nortel employees who came to see us at the finance committee said is that they do not want to be a super-priority. They do not believe they could qualify for the secure level but they would be interested in a preferred position, ahead of suppliers and ahead of bondholders.
Through the debate over the next number of weeks on this and if it makes it through to committee, those are the questions that, as a member of the finance committee, I will be asking the mover to ensure we have clarification on what this bill would do. We need to be very careful when making these changes to the Bankruptcy and Insolvency Act to ensure everyone is treated fairly through this process.