Mr. Speaker, today I rise to address this chamber on the provisions of Bill C-86 that amend the Canada Business Corporation Act, the CBCA, and to state my support for Bill C-86.
Corporations are a pillar of the economy. Despite drastic changes to the marketplace, they remain engines of economic growth, innovation and jobs. In almost all cases, corporations serve the legitimate commercial purpose of their owners, the vast majority of whom are hard-working Canadians. In particular, corporations are a conduit through which individuals can make strategic investments and take calculated risks without jeopardizing their personal financial security and that of their families. In return, this helps to ensure the free flow of commerce, innovation, employment and prosperity.
Even though the word “corporation” tends to make us think of multinational companies headquartered in giant office towers, the reality is that most corporations are small businesses with relatively simple ownership and governance structures. I owned one of those prior to becoming a member of Parliament in Richmond Hill, and 85% of the small businesses in my riding could fit into that model very well.
Unfortunately, as with many things, it is also possible for a few ill-intentioned individuals to use corporations for improper or illegal ends. For example, an individual could attempt to hide illicit activities, such as money laundering, tax evasion or even terrorist financing by concealing these activities within the operation of a legally separate and distinct corporate entity with a byzantine ownership structure. Needless to say, any abuse of this sort in Canada harms Canada's reputation as a safe, fair and competitive place for doing business and casts the exceedingly far greater number of legitimate Canadian businesses in an unjust light.
I am sure that members are all aware of the recent reports about snow washing, the practice of using Canada as a base for corporate criminal activities, hiding behind our country's solid international standing. Our government is committed to curbing and deterring this type of abuse.
Canada is a member of the Financial Action Task Force, the FATF, an intergovernmental body that has set standards on transparency for corporate control and beneficial owners, that is, those who truly and ultimately own or control businesses, no matter what intermediaries they may have in place. The FATF standards require that appropriate authorities have timely access to accurate and current information about who ultimately owns and controls corporations in order to combat those criminal activities that can be perpetrated through the misuse of corporations and their ownership structures.
While we have made important efforts to curb these bad practices through our financial and taxation regimes, neither our federal corporate statute, the CBCA, nor its provincial and territorial counterparts require corporations to assemble information about their beneficial ownership. It is important that we reinforce our efforts in other areas with these changes to corporate statutes.
I mentioned the provincial and territorial laws just now. Incorporation is an area of responsibility divided between the two levels of government and it so happens that the vast majority of Canadian corporations, some 90% approximately, are incorporated at the provincial and territorial levels, leaving only some 10% of businesses incorporated federally under the CBCA. The provincial and territorial corporate laws under which the 90% of corporations fall are very similar in substance to the CBCA, but Parliament cannot alter them.
This means that any effort to correct a gap in corporate law has to be a team effort. The government must collaborate with the 13 provincial and territorial jurisdictions to make similar improvements in each respective statute; otherwise, we run the risk of asymmetrical regulation that can be exploited by wrongdoers.
Our 2017 budget recognized this, calling for collaboration between the levels of government to devise a strategy to shore up and strengthen our corporate landscape, and collaborate they did. A working group representing all 14 Canadian jurisdictions gave us an exemplary model of intergovernmental co-operation over many months, overcoming the idiosyncrasies of different legislation and operations to put together a viable plan to take an important first step in bringing more transparency to Canadian corporate structures.
Following on from the recommendations of the working group, in December 2017, all of the Canadian finance ministers agreed in principle to pursue legislative amendments to their corporate laws, with a view to putting them in place by the summer of 2019. These changes will require corporations to hold accurate, up-to-date information on their beneficial owners. Our 2018 budget formalized this commitment at the federal level.
That brings us to the proposed amendments before us today. These would only affect the CBCA, of course, but given the finance ministers' agreement, we expect the provinces and territories to follow suit in amending their constituent corporate statutes.
What the bill proposes is for privately held corporations to compile a list of those individuals who exercise significant control over them, whether through direct ownership, beneficial ownership, or other means. The law will set out criteria for who falls into this class of significant control, principally by way of thresholds as to how many and what kind of shares an individual controls.
Corporations will need to find some basic information about those individuals, some demographic data, and the how and when with respect to their exercise of control. They will take this information and put it in a register that they store in their corporate books, similar to what they do for their other shareholder information.
I would like to emphasize again that these new measures would only apply to privately held corporations. Publicly traded corporations already make numerous filings that promote transparency under provincial securities rules or stock exchange listing requirements, including about beneficial owners. These safeguards, combined with the difficulty in controlling a company with a diffuse ownership structure, mean they are not the main area of concern here.
Once this information is on hand, corporations will be required to update it at least once a year. This means doing their due diligence, taking reasonable steps to make sure the information is still accurate. As I mentioned, most Canadian corporations are small businesses with a simple ownership structure, and this should not be too difficult a task for them to handle.
We must take it one step at a time, however, and weigh our options at each stage to be sure that what we do makes the most sense for Canada and its provinces and territories. To that end, the important changes proposed by these amendments, and eventually those at the provincial and territorial level as well, set us on our path to making our marketplace safer and more transparent in corporate governance and toward maintaining our international commitments. These changes will help to enhance Canada's reputation as a place to do business and thereby further support the overwhelming majority of hard-working Canadians who own and control corporations for legitimate purposes.