BANC - Standing Committee

Banking, Commerce and the Economy

Past Session: Past Session:
40-2 40th Parliament, 2nd Session (January 26, 2009 - December 30, 2009)
Select a different session
 

Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce

Issue 8 - Third Report of the Committee

Monday, June 22, 2009

The Standing Senate Committee on Banking, Trade and Commerce has the honour to present its

THIRD REPORT

Your committee, to which was referred Bill C-4, An Act respecting not-for-profit corporations and certain other corporations, has, in obedience to its order of reference of June 10, 2009, examined the said bill and now reports the same without amendment. Your Committee appends to this report certain observations relating to the Bill.

Respectfully submitted,

MICHAEL A. MEIGHEN

Chair

OBSERVATIONS TO THE THIRD REPORT OF THE STANDING SENATE COMMITTEE ON BANKING, TRADE AND COMMERCE (BILL C-4)

The Standing Senate Committee on Banking, Trade and Commerce has the honour to report Bill C-4, Canada Not- For-Profit Corporations Act, without amendment, but with the following two observations.

First, the Committee is mindful of the effect that proposed subsection 180(1)(b) of Bill C-4 could have on the ability of members of the accounting profession, including members of the Certified General Accountants Association (CGA), to perform the financial reviews and audits set out in proposed sections 188 to 191 of the bill. Proposed subsection 180(1)(a) states that, in order to be a public accountant of a corporation, a person must be a member in good standing of an institute or association of accountants incorporated by or under an Act of the legislature of a province. Proposed subsection 180(1)(b) would add that he or she must also meet any qualifications stipulated by provincial law with respect to the performing of any duty required by proposed sections 188 to 191. The Committee notes the concerns expressed by the CGA that these additional qualifications would impose, in its view, unnecessary restrictions on the abilities of its members to perform financial reviews of not-for-profit corporations both within and across certain provinces. The Committee also acknowledges the arguments put forward by representatives from Industry Canada, who stated that proposed subsection 180(1)(b) is necessary in order to respect provincial jurisdiction over the regulation of the accounting profession, in particular where there may be a number of different laws in force respecting the rights and duties governing the accounting profession in that province.

The Committee believes that competition in the Canadian marketplace is crucial, including competition among individual accountants who offer services to not-for-profit corporations. We are concerned that if the legislatures and accounting institutes and associations of the provinces do not give timely and due consideration to the implications of proposed subsection 180(1)(b), then the interprovincial mobility of accountants and the competitiveness of the services they provide may be affected. The Committee therefore urges consultation forthwith on this issue amongst relevant stakeholders to ensure consistency of rules and practices across Canada and the best possible outcome for affected parties.

Second, the Committee wishes to express its concern about proposed Part 9 of Bill C-4, which includes objective standards of diligence for directors with regard to the corporate governance of not-for-profit corporations. The bill sets out that directors would have an explicit duty to act honestly and in good faith in the performance of their duties. It would also provide directors with a due diligence defence where they have exercised the care, diligence and skill that a reasonably prudent person would have exercised in similar circumstances.

Given the lack of a clear standard of diligence in the current Canada Corporations Act for directors and officers of not-for-profit corporations, the Committee sees Bill C-4 as a general improvement with regard to the issue of the liability of directors and officers. The Committee is concerned, however, by the fact that the proposed standards of diligence to which directors and officers would be held by Bill C-4 could in fact be set so high as to discourage some volunteers from offering their services to not-for-profit organizations. The Government of Canada may need to provide further guidance on this issue to ensure that the standards of diligence demanded of directors and officers of not-for-profit corporations are commensurate with their roles as volunteers.

The Committee feels strongly that the significant contribution made by not-for-profit corporations to Canadian society must be recognized and promoted. The Government of Canada should ensure that any barriers or disincentives affecting the participation of volunteer directors and officers of not-for-profit corporations are minimized.