Proceedings of the Standing Senate Committee on
Legal and Constitutional Affairs
Issue 17 - Evidence for April 26, 2012
OTTAWA, Thursday, April 26, 2012
The Standing Senate Committee on Legal and Constitutional Affairs, to which was referred Bill S-1003, An Act to authorize Industrial Alliance Pacific Insurance and Financial Services Inc. to apply to be continued as a body corporate under the laws of Quebec, met this day at 10:30 a.m. to give consideration to the bill; and, in camera, for the consideration of a draft report on the provisions and operation of the Act to amend the Criminal Code (production of records in sexual offence proceedings), S.C. 1997, c. 30.
Senator Bob Runciman (Chair) in the chair.
[English]
The Chair: Good morning, honourable senators. We are meeting today to review Bill S-1003, An Act to authorize Industrial Alliance Pacific Insurance and Financial Services Inc. to apply to be continued as a body corporate under the laws of Quebec.
Bill S-1003 is a private bill that was introduced in the Senate on April 2, 2012, and was referred to this committee for study on April 24, 2012. Committee members may recall that in December the committee dealt with a similar bill.
Unlike public bills, private bills that confer specific powers or rights on particular persons or groups of persons, most incorporations or changes in existing acts of incorporation can be accomplished through administrative action — for example, letters patents or supplementary letters patent — and do not require parliamentary intervention. However, there are certain matters relating to companies and certain amendments to original acts of incorporation that can only be accomplished through parliamentary action.
Under the rules of both houses, every application to Parliament for a private bill must comply with certain conditions. Under the Rules of the Senate, the Director of Committees is the Examiner of Petitions for Private Bills, and a private bill cannot be introduced in the Senate until it has been favourably reported on by the examiner. Last week, the report from the Examiner of Petitions for Private Bills was presented in the Senate, indicating compliance with all of the requirements of our rules.
The petitioner for this particular private bill is Industrial Alliance Pacific Insurance and Financial Services Inc., which is currently incorporated under the federal Insurance Companies Act. With the enactment of Bill S-1003, Industrial Alliance is seeking to apply to be continued as a body corporate under the laws of the Province of Quebec.
In order to explain the reasons for this application in greater detail, I am pleased to welcome Azmina Karim-Bondy, Chief Legal Counsel, representing the company.
Ms. Karim-Bondy, welcome. We will begin with your opening statements.
First, we have a point of order from Senator Joyal.
Senator Joyal: Thank you, Mr. Chair, and I apologize to the Senate. Pursuant to the Conflict of Interest Code for Senators, I would prefer to withdraw from the meeting on this particular bill because I might find myself in a conflict of interest. I would like the clerk of the committee to take note of that declaration. I will refrain from the debate and the study on this part of the committee meeting, but I will return to continue our discussion on the subject we raised last night.
[Translation]
Senator Rivard: I think that what Senator Joyal just did has woken me up. Just like everyone else just about, we have a share portfolio. And I think that in a minority share portfolio, I have shares from the Industrial Alliance Pacific company. I wonder if I should withdraw. I do not have time either to consult the Ethics Commissioner.
Senator Dawson: I think that to the extent you feel in any way. . . I live in Quebec, I know people from Industrial Alliance Pacific and I have acquaintances, but I do not feel I am in a conflict of interest. But if you have the least doubt, I should always withdraw. Because I do not think this will affect result of the vote on the adoption of the bill.
Senator Rivard: I did declare that I own a number of shares of Industrial Alliance Pacific, a very small number. I am going to continue. I just wanted to point that out.
[English]
The Chair: Once again, over to you, Ms. Karim-Bondy.
Azmina Karim-Bondy, Chief Legal Counsel, Industrial Alliance Pacific Insurance and Financial Services Inc.: As the chair stated, I am Chief Legal Counsel for Industrial Alliance Pacific Insurance and Financial Services Inc., the petitioner in this matter. The petitioner is requesting that the members of this committee consider adoption of Bill S- 1003, An Act to authorize Industrial Alliance Pacific Insurance and Financial Services Inc. to apply to be continued as a body corporate under the laws of the Province of Quebec.
You may recall that I was here before you about four months ago requesting adoption of Bill S-1002 on behalf of Industrial Alliance Pacific General Insurance Corporation, which I will refer to as IAPG. Although I am pleased to have the opportunity to come before you again, you may be wondering why I am here once again and why this particular bill was not initiated at the same time as Bill S-1002.
The difference between the two is, as you may recall, that IAPG was a wholly-owned subsidiary of Industrial Alliance Pacific, which I will refer to as IAP. IAP was the parent company, and IAPG was the subsidiary. The wholly- owned subsidiary had no employees at all, and all of the work of that company is undertaken by IAP.
IAP, the company before you today, on the other hand, has approximately 450 employees and approximately $3 billion in assets under management. It is 99.9 per cent owned by Industrial Alliance Insurance and Financial Services Inc., which I will refer to as IA.
However, there are approximately 405 shares out of over 1 million shares that are issued and outstanding that are held by minority shareholders. IAP also has approximately 11,000 participating policyholders who have a right to vote on matters relating to the restructuring of this company.
Consequently, an annual general and special meeting of the company had to take place in order to seek approval of the continuation process by all the shareholders and the participating policyholders. You will note from the petition that a vote took place. It was held separately for the participating policyholders and the shareholders, and a majority of the votes that were cast were in favour of this process. Indeed, I believe the participating policyholders voted 93 per cent in favour to have this process take place.
The earliest time that we were able to have the annual general and special meeting was subsequent to the filing of the year-end financial statements of the company, which had to be approved by the board. The board meetings were in February. We then had to have a sufficient notice period to send out all the circulars and information to the policyholders. Given that we had to send that material out and have a meeting, March 26 was the earliest time that we could have the annual and special general meeting for the policyholders and shareholders.
Once they approved the continuation process, we then moved swiftly to have this private bill introduced. It was introduced on April 2, as the chair mentioned. First reading took place then, and second reading began on April 4 and was completed on April 24.
I now turn to the reasons why this private bill, Bill S-1003 is required.
As you may have heard during Honourable Senator Comeau's speech during second reading debate, IAP is amalgamating with its parent company, IA, for economic, regulatory and efficiency purposes. As in the case of the bill that was before you four months ago, IAPG, the move to amalgamate is an administrative measure that will allow the two corporations to streamline processes by easing red tape and administrative and legal duplication, while allowing for greater internal capitalization flows. Specifically, the amalgamation will reduce unit costs; provide flexibility for investment; mitigate the effects of the long-term interest rates; reduce regulatory and filing requirements by consolidating with a single regulator; and, finally, bring economies of scale for the two companies.
When this amalgamation was first announced, it was anticipated that about 12 positions at the Vancouver office of IAP would be redundant as a result of corporate service areas such as human resources, accounting and actuarial. I am pleased, however, to advise that as of today's date, eight of those positions have been reabsorbed into the company in other areas. That has been a minimal potential job loss. There are potentially four more positions, but there is time to reabsorb them as well.
In addition, the impact on other stakeholders of the company, such as the participating policyholders or policyholders in general or the minority shareholders, was also evaluated by a special committee of the board. This special committee was struck to evaluate the impact on these other stakeholders and, particularly, on the participating policyholders and the minority shareholders. They retained an independent expert firm to consider the issue and review the evaluation.
The conclusion was that there was no negative impact. Indeed, there is a positive impact for the policyholders of this company as this regulatory reorganization will allow the Industrial Alliance Group of companies to face today's economic situation in a financially stronger organizational structure, which will create jobs for Canadians and prosperity for the Canadian economy.
I should note that IA, for those of you who are not maybe from Quebec City, has over 4,100 employees across the country and 2,500 alone in Quebec City. It is the largest non-government employer in Quebec City.
In order to amalgamate the two companies, they must be under the same regulator. IA is regulated by the Autorité des marchés financiers in Quebec City, and IAP is regulated by the Office of the Superintendent of Financial Institutions, the federal regulator. In order for the merger to take place, IAP must become a provincial charter and be incorporated under the laws of Quebec.
As was the case with the previous bill, Bill S-1002, as there is currently no provision existing within the Insurance Companies Act of Canada to move from federal charter to provincial charter, we are, once again, humbly in your hands regarding this private bill today.
With the very capable and appreciated assistance of the office of the parliamentary counsel, whose valuable advice and guidance brought us to this process today, I am happy to report — and as the chair reported — that we have undergone all the required prerequisites for the introduction of the bill, including publication of a notice in the Canada Gazette and certification of the petition by the Senate's Examiner of Petitions.
It is also important to note that both the Office of the Superintendent of Financial Institutions, our current regulator, and the Autorité des marchés financiers, the Quebec regulator, have provided letters of confirmation that they have no objection to this process.
I do have copies of those letters available. Should you require those for the record, Mr. Chair, I have those available here.
In order to complete the process, the AMF, after this bill has passed through both the Senate and the House of Commons and received Royal Assent, should you wish to adopt it, in order to complete this process, the AMF must then approve the transaction to grant a Quebec charter. This approval will be granted by the Quebec Minister of Finance, who will not formally consider the issue until this private bill has passed through the federal Parliament.
Therefore, honourable senators, I respectfully submit that Bill S-1003 be adopted by this committee, and I will be pleased to answer any questions that you may have.
The Chair: Thank you. That was a thorough presentation, and it has encouraged a number of questions. We will begin with Senator Dawson.
Senator Dawson: This is more a statement than a question. I will phrase it as a question.
The reality is that I have been involved in four of these bills over the last 10 years. I have asked the Library of Parliament to look at possible amendments to the Insurance Act so that we do not have to use the precious time of the Legal Committee and the Senate to rubber stamp bills. It always embarrasses me when the Senate is used for rubber stamping. The reality is that with respect to the very legitimate request from Industrial Alliance, I certainly recommend — and I made this speech in the Senate — that it be adopted.
I think it is not necessarily the Legal Committee but rather the Banking Committee that should study the possibility of amending the Insurance Act so that we are not put in a situation where we have to have this type of procedure.
Do you think this power could be given to the Department of Finance, either to OSFI or to the Minister of Finance? That is, in cases that are non-controversial, when there has been approval by the board and by the shareholders, there should be a process adopted at Finance, in the Insurance Act, so that we do not have to submit you or any other insurance companies to the task of having to go through this process. I think it is quite legitimate as it is written now, but there is a possibility of streamlining the Insurance Act so that you are not put in this situation.
Ms. Karim-Bondy: Yes, Senator Dawson, that is correct. It would have to be an amendment to the Insurance Companies Act of Canada, which is the statute under which we are regulated. That statute would require amendment. That, of course, is left in the hands of Parliament to amend a statute of that significance, which, I assume, would originate through the Minister of Finance's office.
Senator Dawson: I will be bringing a proposal back to the Senate regarding that. The request that I made came out just after this bill was tabled, so I have not had time to act on it. However, I commit to raising it in the Senate as soon as possible so that we do not have to go through this rubber stamping process in the future.
[Translation]
Senator Dagenais: I understand what Senator Dawson means. I can tell you that in another lifetime, as a supervisor in an insurance company, I had to go before the Government of Quebec which was at that time suggesting a private bill.
You referred to an annual general meeting during which a vote was taken, a vote of 33 per cent. I imagine that they had a quorum. Where do you feel the quorum lies: 50 or 75 per cent?
Ms. Karim Bondy: Yes. According to the constitution, we only need 1 per cent overall.
[English]
Ms. Karim-Bondy: As we had 11,000 participating policyholders, we only needed 1 per cent of quorum. In fact, about 567 participating policyholders returned their proxies to us, which is about normal.
[Translation]
Senator Dagenais: And so they had a quorum?
Ms. Karim Bondy: Yes, because we only needed 110 people.
[English]
Senator Angus: Thank you for coming before us. This is a subject that I am familiar with. I was, unfortunately, absent due to illness during the speech of Senator Comeau in the Senate, and I was not here when you presented on the other bill, so I want to make sure I fully understand.
This is a process, which corporate lawyers are familiar with, of continuation from one jurisdiction to the other. In this case it is the Industrial Alliance Pacific, which is a federally incorporated body.
Ms. Karim-Bondy: Yes.
Senator Angus: You want it continued under the Quebec law and then do the amalgamation, which is the administrative cause or reason behind your bill.
Ms. Karim-Bondy: That is correct.
Senator Angus: On the Toronto Stock Exchange there is a listing under ``Industrial Alliance'' — I think the symbol is IAG.
Ms. Karim-Bondy: Yes.
Senator Angus: Which of these entities is that, or is there yet another one?
Ms. Karim-Bondy: I will explain.
IAG is the ticker symbol used for the public company which is the parent company of IAP. To take the chain, Industrial Alliance itself, the public company, is the entity that is the fourth-largest insurance company in Canada; that is, the one with the 4,100 employees across the country. It owns this company 99.99 per cent. IAP is a Western-based subsidiary and it is a federal charter. We are amalgamating IAP, the Western subsidiary, which is a federal charter, with IA, the public company.
Senator Angus: So the public company has a Quebec charter as we speak?
Ms. Karim-Bondy: Correct, yes.
Senator Angus: It is public; it has all these shareholders that you mentioned. The Western subsidiary, for whatever reason, was incorporated under the Canada Corporations Act. That is where the action is being carried on now.
Ms. Karim-Bondy: Yes.
Senator Angus: Why is that?
Ms. Karim-Bondy: The company that we are talking about today, IAP, was formerly called Seaboard Life Insurance Company and was purchased by Industrial Alliance in 1999. It acquired the federal charter. It acquired a company which had a federal charter and it kept it as its subsidiary.
At the time in 1999, Industrial Alliance, the public company, also owned another company based out of Vancouver called Northwest Life Assurance Company. Northwest Life was also a federal charter. The two joined together to become Industrial Alliance Pacific as it is known today.
Senator Angus: They were not listed companies?
Ms. Karim-Bondy: No, they were not listed companies.
Senator Angus: Seaboard was not either?
Ms. Karim-Bondy: No. It was a privately held company.
Senator Angus: We are talking here about a legal technicality.
Ms. Karim-Bondy: That is correct.
Senator Angus: There is no political intrigue or jurisdictional battle as between the feds and the Province of Quebec?
Ms. Karim-Bondy: No.
Senator Angus: The parent company, for all intents and purposes, has always been a Quebec company. It is listed and has many thousands of public shareholders.
Ms. Karim-Bondy: That is right. This is completely administrative.
As I indicated, both the federal regulator and the Quebec regulator have confirmed that they have no objection to this process. They have talked and we have letters of confirmation.
Senator Angus: That is the key part. It is not just a life company, I understand; it is also P&C and undertakes other activities in Quebec other than life insurance?
Ms. Karim-Bondy: Industrial Alliance or Industrial Alliance Pacific?
Senator Angus: The new entity that will be amalgamated.
Ms. Karim-Bondy: It is basically a life company, but it has subsidiaries that are P&C and other entities. For example, one of the subsidiaries of Industrial Alliance is IA Clarington, a mutual fund company. It also has another subsidiary called Industrial Alliance Auto — it is French, so it is Industrielle Alliance Assurance Auto et Habitation Inc. It is basically a P&C company that does car and home insurance. The company that I brought before you in December was also a general insurance company owned by Industrial Alliance Pacific, the Western subsidiary.
Yes, it has a number of subsidiaries that do different things, but principally IA, the mother company, is a life insurance company.
Senator Angus: Colleagues may be interested to know — and I only found this out because I am reaching retirement age — that in the Senate, all of us senators have certain basic life insurance coverage.
Ms. Karim-Bondy: Yes.
Senator Angus: It is with IA. They are offering ongoing things to retiring senators. I hope your clients will be very kind to the most recent upcoming retiree.
Ms. Karim-Bondy: Of course.
The Chair: That could be misinterpreted.
[Translation]
Senator Chaput: In your presentation, you say that in the beginning, you had expected in this merger to lose approximately 12 positions, but it seems now that the majority of these positions were reassigned elsewhere and that only 4 positions will be lost. Is that correct?
Ms. Karim Bondy: Yes. In fact, for those who were already company employees, this was in Vancouver, but for other positions in the company.
There are four remaining ones, but we are trying to find them positions within the company also.
Senator Chaput: So there were not many negative repercussions?
Ms. Karim Bondy: No, that is right.
[English]
The Chair: Are there any additional questions from members?
I am seeing a consensus to move ahead with this legislation and move into the formal script.
Is it agreed that the committee proceed to clause-by-clause consideration of Bill S-1003, An Act to authorize Industrial Alliance Pacific Insurance and Financial Services Inc. to apply to be continued as a body corporate under the laws of Quebec?
Hon. Senators: Agreed.
Senator Angus: I wonder, chair, will we dismiss the witness before we move to clause-by-clause consideration of the bill?
The Chair: This will only take a minute; I was going to wait until we were finished.
Senator Angus: Fine, then.
The Chair: Shall the title stand postponed?
Hon. Senators: Agreed.
The Chair: Carried.
Shall the preamble stand postponed?
Hon. Senators: Agreed.
The Chair: Carried.
Shall clause 1 carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall clause 2 carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall the preamble carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall the title carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall the bill carry?
Hon. Senators: Agreed.
The Chair: Carried.
Is it agreed that I report this bill to the Senate?
Hon. Senators: Agreed.
The Chair: Carried. That concludes that.
Ms. Karim-Bondy, we thank you very much. Again, your appearance before us has been most impressive.
Ms. Karim-Bondy: Thank you, honourable senators. It was my privilege to be here before you. It has been a real honour to have had a moment to sit in these esteemed chambers twice, and hopefully we will not be here again.
Senator Angus: We have to congratulate the chairman on having expedited passage of his first bill as chairman in record time.
Senator Dawson: I wanted to congratulate him on his election as chair.
Senator Angus: I am sure he will give you the floor to do that.
The Chair: No, that is adequate.
I will try to condense this into one motion — we did it in three yesterday — that we move in camera in order to consider the draft report; that senators' staff be permitted to remain in the room for the in camera portion; and that a transcript be kept of the in camera portion of today's meeting and a copy be kept for consultation, as required by the committee clerk, and that it be destroyed at the end of the current parliamentary session.
Would someone move that? Moved by Senator Joyal.
Do we have agreement?
Hon. Senators: Agreed.
(The committee continued in camera).