Madam Speaker, I am pleased to begin second reading of Bill C-5.
This legislation is a key part of the framework laws that provide the foundation for our economy. Marketplace framework laws provide the cornerstone of good government. They help government play a less intrusive role in the economy by establishing the rules that level the playing field for all concerned.
Modern, up to date framework laws protect consumers, small businesses and others against the abuses of economic power. They provide rights and impose obligations on marketplace participants, thereby providing certainty and reducing transaction costs. Framework laws are therefore essential for creating a climate for business that fosters jobs, innovation and growth. They help create the proper economic environment in which firms and consumers make their decisions.
The particular framework laws in the legislation before us involve bankruptcy and insolvency, an issue that few Canadians want to contemplate. However, when Canadian businesses or consumers find that they have need of insolvency protection, they want to be assured that Canada's laws help them make the necessary decisions to get their lives or their businesses back on track again.
Canada needs bankruptcy laws that encourage rather than deter risk taking and entrepreneurship. This is achieved by enacting bankruptcy laws that provide certainty and fairness to both debtors and creditors. The health of the Canadian marketplace depends on this balance. Lenders and borrowers need the assurance that their transactions are backed by framework laws that will treat all parties fairly and that will allow innovative solutions.
At stake are jobs that rely on a company's ability to carry on paying its debts. Good bankruptcy laws give firms and individuals in financial trouble greater opportunity to get back on their feet by reorganizing their affairs and allowing them to capitalize on emerging opportunities. We must also be mindful of the health of businesses that rely on the ability of its customers to pay. At stake are the interest rates and conditions of borrowing at institutions. They must always consider the risk of not getting their loans repaid and set the price of their loans accordingly.
In sum, this proposed legislation is dealing with the whole moral and ethical climate of the marketplace. Canadians want to be assured that no one is slipping away from financial obligations by
using bankruptcy as an easy way out. Canadians want assurances that the piper will be paid.
Over the years bankruptcy laws have been very difficult to reform and modernize. It proved to be difficult because so many different and often diverging interests must be taken into account in bankruptcy legislation. Consider for a moment the different points of view.
Consumers abhor bankruptcy. They want bankruptcy laws that offer a real and honourable alternative to bankruptcy and asset liquidation. Canadian consumers want to be responsible and honour their financial obligations but when there is no viable alternative, consumers do not want to be harassed or stigmatized. They want to turn the page quickly and be given another chance to start afresh.
Then there is the business community. Business women and men need insolvency laws that encourage rather than discourage them to be bold, innovative and to take risks, knowing that there will be a fair process to negotiate with creditors and reorganize their finances if their financial situation deteriorates to a state of insolvency. Corporate directors need incentives, not disincentives, to make the bold decisions that will save a business in financial difficulty.
What about lenders? No business, and for that matter very few consumers, could go on and contribute to the health of the economy without financing being available, and on reasonable terms. Without bankruptcy laws that recognize the market realities of security lending that treat different classes of creditors fairly and equitably, Canadian businesses and consumers would be at a competitive disadvantage compared to competitors in other countries.
Then there are the insolvency practitioners such as trustees and receivers. They need adequate protection against personal liability for claims that would otherwise lie against the debtor or estate. Without adequate protection against personal liability, trustees and receivers would either not deal with sensitive estates or would systemically opt for liquidation when they would have opted for trying to salvage the business and preserve the jobs that depend on it.
Then there are federal and provincial treasuries that are legitimate creditors. Where should they rank among other creditors? What priority, if any, should the crown legislatively grant itself?
There are many different and divergent interests. In the event of an insolvency, when it comes time to divide the assets of a company, like dividing a pie, each of these interests wants a piece of that pie which unfortunately is not large enough to cover all liabilities.
Where is the balance? What is fair and equitable? Is what is fair for one class of creditor fair for another class of creditor, fair for the business debtor and its employees, suppliers and shareholders? These are the questions that insolvency laws grapple with.
At the same time, if the reorganization features of bankruptcy laws are effective, the insolvent company can be given breathing space to get its affairs back in order. It is as though the baker were to say to his creditors "back off for a bit, then you will all get your piece of the pie and there will be more pies to come in the future".
With so many conflicting interests is it any wonder that over the past decades bankruptcy and insolvency reform has been among the most difficult legislation to pass in the House?
The legislation includes more than 70 amendments which respond to the needs of the many and varied constituents it exists to serve, including the business community and consumer groups. The amendments cover a wide range of bankruptcy issues from consumer issues to commercial issues, to priorities and privileges and to amendments to the Companies' Creditors Arrangement Act.
I feel we are on solid ground with Bill C-5. I am confident the House will pass the legislation. I am confident for three reasons, first because of the wide range of input and advice that we have received from the whole spectrum of stakeholders.
In 1993, following passage of the Bankruptcy and Insolvency Act, Industry Canada set up the Bankruptcy and Insolvency Advisory Committee to review insolvency legislation, to identify priority issues and to formulate possible solutions to them. More than 100 private sector insolvency experts have participated in this process. They represented consumers, business, lenders, insolvency practitioners and governments. Their voluntary effort speaks well of the importance of the legislation as well as the desire of the private sector to participate in the process leading to legislative reform.
I was very impressed by the calibre of the advice the committee provided. The vast majority of the amendments before the House directly respond to the specific recommendations made by the committee.
I emphasize this legislation reflects the government's resolve to respond to the needs of our clients, those who need and use the legislation. Framework legislation must respond to the real needs of the marketplace by taking into consideration real situations.
By themselves governments do not have the expertise to anticipate the impact their regulations may have in the marketplace. However, by working as a facilitator to bring together the various interests and stakeholders, governments can play an effective role in helping to build modern, workable framework laws and policies. I am confident the House will recognize the quality of the advice
we have received and see it reflected in the wisdom of the amendments before us.
The second reason I am very confident in the legislation before us is the exceptional co-operation and support received from cabinet colleagues. The amendments before us touch on a variety of issues and interests. The ministers responsible for those interests have provided their support and encouragement for this legislation.
For example, the Minister of Human Resources Development not only supports but has also been instrumental in crafting the measures to make student loan debts non-dischargeable for a period of 24 months after termination of studies.
Students who have received financial assistance from taxpayers owe it to society and to future generations of students to reimburse the loans they have received.
At the same time, however, governments and bankruptcy laws have to recognize that some students may find themselves in a hardship situation. This is reflected in the legislation by limiting the period during which student loan debt would be non-dischargeable.
The Minister of Justice and the Secretary of State for the Status of Women are both quite enthusiastic about the measures to prevent those who have been fined for sexual and other physical assault from declaring bankruptcy as a means of avoiding their obligations.
Under this legislation judgments for wilful damages will not be released by a discharge. My colleagues have also supported the measures in this legislation that would see spousal and child support payments become provable priority claims.
The Minister of the Environment has offered me great advice and collaboration in coming to grips with the important issue of environmental liability for insolvency practitioners as well as the no less important issue of the priority for environmental clean-up claims.
I am proud to report the provisions proposed in this legislation will not only assist business reorganizations but will for the first time in Canadian history formally and legally recognize the priority of a clean environment.
The third reason I am confident the legislation before us will obtain the support of Parliament is that Bill C-5 is part of work in progress. It is neither the beginning of the process of reforming Canada's bankruptcy laws nor the end.
Some members will recall the spirit with which the changes to the BIA were greeted three years ago. It was regarded as a necessary first step in the reform of the framework laws. Some members wanted to go further but one of the compromises made back then was to commit the government to bringing bankruptcy law forward for a parliamentary review three years after royal assent.
The three-year review of the BIA was instrumental in obtaining stakeholder and parliamentary approval of the 1992 amendments. It provided some assurance to those whose concerns were not addressed in 1992 that their issues would be dealt with in phase two of the amendment process.
They were assured further modernization of the statute would be considered by Parliament. The time for that review has arrived. Members on both sides of the House will welcome the opportunity to address many of the issues that were left unresolved on the Bankruptcy and Insolvency Act was passed in 1992.
The legislation before us is very much intended to assist Parliament in a statutory three-year review. This legislation fine tunes and where warranted rectifies the reforms introduced in 1992.
It applies the spirit of the 1992 legislation and emphasizes giving time for reorganization of business and rehabilitation of consumers. From 1993 to 1995 over 48 per cent of the reorganizations started under the Bankruptcy and Insolvency Act are still alive. They are now under way with creditors and the court's approval.
The reorganization provisions have created a framework to facilitate discussion and negotiation between creditors and debtors. The clear benefit is that the framework has created an environment in which possibilities that would have been lost can be explored in a transparent manner.
In other respects this legislation adds new items to the bankruptcy reform agenda such as international insolvency and reform of the Company's Creditors Arrangement Act.
In 1992 the passage of bankruptcy reform legislation represented something of a breakthrough. Much had changed since the last reform legislation had been passed some 40 years before. The legislation before us represents very much a consolidation of some of the reforms passed three years ago.
The 1992 legislation addressed the heart of bankruptcy practices by reforming the rules surrounding reorganizations. The legislation before us takes these rules further by addressing many crucial issues that arise in bankruptcy, issues such as environmental liability and director liabilities, issues such as the treatment of off farm income and consumer rehabilitation.
Some of my colleagues will address these areas in more detail. In summary I emphasize the three strategic thrusts the legislation before us provides.
First, Canadian bankruptcy law will continue to provide a framework in which it is preferable for consumers or businesses to reorganize their affairs rather than declare bankruptcy.
Second, the legislation emphasizes the importance of measures to promote consumer rehabilitation. We want to create an environment in which consumers can act as responsible citizens.
Third, the legislation is aimed at promoting fairness to both creditors and debtors.
The legislation helps minimize the social and economic costs that result from insolvencies. It provides framework laws that will help business debtors who want to become competitive once more and consumers who want to act responsibly.
I hope all members will join me in voting in favour of the bill at second reading.