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THE STANDING SENATE COMMITTEE ON BANKING, TRADE AND COMMERCE

EVIDENCE


OTTAWA, Wednesday, May 15, 2019

The Standing Senate Committee on Banking, Trade and Commerce met this day at 4:15 p.m. to study the subject matter of those elements contained in Divisions 1, 5 and 26 of Part 4, and in Subdivision A of Division 2 of Part 4 of Bill C-97, An Act to implement certain provisions of the budget tabled in Parliament on March 19, 2019, and other measures.

Senator Douglas Black (Chair) in the chair.

[English]

The Chair: Colleagues, good afternoon and welcome. Welcome, members of the general public who are following today’s proceedings of the Standing Senate Committee on Banking, Trade and Commerce either here in the room or listening via the web. My name is Doug Black. I’m a senator from Alberta, and I chair this committee. I’m going to ask my colleagues around the table to please introduce themselves to the witnesses, and then I will welcome the witnesses.

Senator C. Deacon: Colin Deacon, Nova Scotia.

Senator Duncan: Pat Duncan, Yukon.

[Translation]

Senator Dagenais: Good afternoon. Jean-Guy Dagenais from Quebec.

[English]

Senator Stewart Olsen: Carolyn Stewart Olsen, New Brunswick.

Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador.

Senator Wallin: Pamela Wallin, Saskatchewan.

[Translation]

Senator Verner: Josée Verner from Quebec.

[English]

The Chair: Thanks very much, senators. Of course, we are assisted ably, as we are every week, by the clerk of our committee and by our — I was going to say counsel but I’m not going to say counsel. I’m going to say analysts.

Today we continue our subject matter examination of all or parts of four divisions of Part 4 of Bill C-97, the Budget Implementation Act, 2019, No. 1.

Honourable senators will know that our committee must report our findings to the Senate by no later than June 6, 2019.

We will begin with Division 5 of Part 4, which deals with the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act. We have panellists today representing the Canadian Association of Insolvency and Restructuring Professionals, represented by Jean-Daniel Breton, Corporate Practice Committee, by video conference. Welcome, sir.

From the Canadian Bond Investors’ Association, we have Joe Morin, Past Chair, by video conference; and we have Raj Sahni, Partner, Bennett Jones LLP, also by video conference. Welcome to you both as well.

From the Council of Canadians with Disabilities, we have here in the room today, Steven Estey, Government and Community Relations Officer. We are, of course, indebted to you all for being here today. We’re going to begin with opening remarks, and then we’re going to follow with questions from the senators. I understand that we will begin with you, Mr. Breton, followed by Mr. Morin and Mr. Sahni and then followed by Mr. Estey. If that’s acceptable, Mr. Breton, why don’t you take it away.

Jean-Daniel Breton, Corporate Practice Committee, Canadian Association of Insolvency and Restructuring Professionals: Thank you. Good afternoon, Mr. Chairman, distinguished members of the committee and guests. Thank you for inviting me to speak to you today. My name is Jean-Daniel Breton and I’m appearing on behalf of the Canadian Association of Insolvency and Restructuring Professionals, known by the acronym CAIRP in English and ACPIR in French.

CAIRP is the national not-for-profit organization that represents approximately 1,000 insolvency and restructuring professionals in Canada as well as over 500 articling, life and corporate associates. Almost 90 per cent of licensed insolvency trustees licensed under Canada’s Bankruptcy and Insolvency Act are members of CAIRP.

As trustees in bankruptcy, receivers, monitors and financial advisers, CAIRP members are and have been involved in every major insolvency and restructuring filing in Canada. Although your review encompasses a larger portion of Bill C-97, my comments today will focus on the changes proposed with respect to the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act and Part 4 of the bill. The changes affect both personal insolvencies and commercial restructurings.

Dealing first with personal insolvency issues, the bill proposes an additional category of exempt assets in section 67 of the BIA, the Registered Disability Savings Plan. The underlying purpose of RDSPs is to save for the long-term financial security of a person affected by a disability. Assisting a disadvantaged, vulnerable section of the population to plan for long-term security is a worthwhile goal and is consistent with the balancing of interests that are inherent in the objectives of the BIA. CAIRP supports that measure.

Allow me now to address the measures that are applicable primarily to commercial proceedings. In the bill, there are four of these and they consist of introducing an obligation to act in good faith on the part of all interested persons; an additional measure to review or attack certain payments made to management or directors prior to the inception of insolvency proceedings; a measure to compel creditors to disclose their economic interests; and a shortening of the period for which an initial order can be made under the CCAA, and a restriction on the relief that can be made available to the debtor company during that period.

With regard to all of these commercial provisions, CAIRP is expressing concerns that these might bring unintended consequences and should be subjected to a deeper review and commentary by stakeholders before being implemented. Some of these concerns are outlined in the document that I’ve provided to Ms. Gordon for distribution to committee members. We can discuss these during the question period, if you wish.

Thank you.

The Chair: Thank you very much, Mr. Breton. That was very interesting. We will get back to you on that. If we can move now to the panel representing the Canadian Bond Investors’ Association, please.

Joe Morin, Past Chair, Canadian Bond Investors Association: Thank you all for your time this afternoon. We appear before you on behalf of the Canadian Bond Investors’ Association, the CBIA, to make brief submissions with respect to certain of the amendments proposed to the BIA and the CCAA under Bill C-97.

The CBIA was established in 2011 and represents over 50 of the largest fixed-income institutional investor organizations in Canada, with over $1.2 trillion in fixed-income assets under management. Member organizations come from the insurance, asset manager — including bank-owned — pension and investment counsel sectors. As such, the CBIA is the voice of Canadian institutional bond investors, but we represent the millions of pensioners, policyholders and retail investors who depend on the CBIA members for sound management of these investments.

Any amendments to the insolvency legislation can have significant consequences to the CBIA’s members and their constituents. Accordingly, the CBIA has previously submitted a letter dated August 19, 2014, which we’ve shared with you, to Industry Canada with the CBIA’s feedback on the public consultation and review of the BIA and the CCAA, and we’re here today to make certain further submissions specifically on the proposed amendments under Bill C-97.

I am joined by Raj Sahni, an insolvency law partner with the law firm Bennett Jones LLP, which is assisting the CBIA in making its submissions.

Raj Sahni, Partner, Bennett Jones LLP, Canadian Bond Investors Association: Thank you, Mr. Morin and thank you to the Senate committee for allowing us to be part of today’s panel. In the interest of time, as Mr. Morin mentioned, we are focusing only on those issues with the proposed amendments to the BIA and the CCAA, which are of particular interest to the CBIA.

An insolvency proceeding, whether under the BIA or the CCAA, is often a frightening, uncertain and intimidating process for creditors, including bond holders, who will see their interest payments being suspended or stayed and may face the prospect of recovering only a fraction of their principal debt. Any changes to these insolvency institutes should be made only if necessary and helpful and should be avoided if they increase uncertainty or may result in inconsistent results as compared to existing, well-established rules, laws and legal principles.

The CBIA’s view is that some of these proposed amendments are unnecessary and will harm, rather than help, creditors and the insolvency process under both the BIA and the CCAA.

We note concerns with respect to two amendments in particular. The first is the addition of clause 11.9 to the CCAA with respect to the disclosure of financial information. The CBIA’s submissions with respect to this proposed amendment were set out in detail in the August 2014 letter referred to by Mr. Morin, which has been provided to the clerk for submission to this Senate committee.

In summary, the courts in Canadian insolvency proceedings have recognized that a creditor is entitled to assert the full face value of its claim, regardless of whether that creditor may have acquired the claim at a discount. The secondary market for bonds creates important liquidity for bond holders who wish to exit their investment.

As noted in the 2014 letter, requiring creditors to disclose the discounted value at which they might have purchased those bonds may significantly hamper the secondary markets and the liquidity they create, particularly if there’s any suggestion that the claim cannot be voted or receive distributions for full value in an insolvency proceeding. There would be no incentive for secondary market purchasers to take the risk of buying bonds if, in addition to the risks they’re already taking, the interest payments might be stayed in an insolvency proceeding and they might not receive the full value of recovery in an insolvency proceeding, their claims are also reduced, both for voting and distribution purposes.

The CBIA’s second concern with respect to the amendments proposed by Bill C-97 is the addition of an undefined duty of good faith through the proposed addition of CCAA clause 18.6 and BIA section 4.2. There’s already a requirement on the part of a debtor company to show it is acting in good faith in connection with obtaining and extending protection in a CCAA proceeding. Bankruptcy trustees, receivers and monitors are court officers that, similarly, already have a duty of good faith to act in the interests of the estate and creditors generally.

To impose an unclear and undefined good faith requirement on the part of creditors toward each other and toward the estate is unnecessary and will lead to uncertainty, increased disputes and potentially unpredictable and unfair results. Particularly, if a court is given the power to make any order it considers appropriate in the circumstances, as proposed by the current amendments.

It is unnecessary because the rights and claims of creditors are determined based on their legal positions and respective statutory priorities; for example, whether they are secured or unsecured by virtue of existing laws. There are safeguards already in place in insolvency statutes to address any improper payments that may have been received by a creditor as a preference or as a transfer at under value under BIA sections 95 and 96.

Creditors are stayed from enforcing their rights during the pendency of an insolvency proceeding unless the court orders otherwise, and in examining whether a stay should be lifted, a court will review whether a creditor is acting in good faith vis-à-vis its legal rights and priorities. Beyond that, there is no need to impose an overarching, undefined duty of good faith on creditors. Creditors are not a homogenous group. They must be allowed to advocate for the best possible results in line with their particular rights and legal priorities. Uncertainty, increased disputes and unpredictable results will result from an unclear concept of good faith and wide discretionary powers on the part of the courts.

Moreover, since bondholders are often pension funds, as Mr. Morin noted, the bondholders may already owe fiduciary and other duties to the pensioners and their constituents, who are in the funds’ beneficiaries. Those duties must be paramount. The statute should not be amended to create potentially conflicting duties and this issue must be much more thoroughly examined and considered before implementation.

Thank you for this opportunity to appear before the Standing Senate Committee on Banking, Trade and Commerce. If the CBIA has any further submissions, we would request an opportunity to make those in writing to the committee.

The Chair: Very well. Thank you very much, gentlemen. We will be back with some questions after we hear from the Council of Canadians with Disabilities through Steven Estey, Government and Community Relations Officer.

Steven Estey, Government and Community Relations Officer, Council of Canadians with Disabilities: Good afternoon. Thank you very much for the opportunity to address the committee. My name is Steven Estey and as you mentioned, I’m the government and community relations officer at the Council of Canadians with Disabilities.

Before I continue, I should let you know that I’m a completely deaf person and I’m communicating with you by this tablet here in front of me. The folks doing the Hansard in the back are typing a verbatim text and I’m reading it on the screen. There’s what little bit of a delay with that, so if you ask me a question and I delay in responding to you, it’s not because I’m not paying attention but rather technology needs to catch up to you. I find it helpful to explain that at the outset of these things.

The Chair: Thank you very much.

Mr. Estey: In any case, CCD is a nonpartisan, not-for-profit national human rights organization of people with disabilities working to ensure an inclusive and accessible Canada. Our mission is to give voice to Canadians with disabilities and to advocate for an inclusive and accessible Canada, where people with disabilities have the full realization of human rights and participate on an equal basis with others in all aspects of Canadian society.

Of particular note here today is the fact that CCD was instrumental in the creation of the RDSP, or Registered Disability Savings Plan, over 10 years ago. Our national coordinator at the time sat on a small advisory panel to Jim Flaherty, then the Minister of Finance, and was interested in finding ways that families could help ensure a better future for their kids with disabilities.

From those discussions, the RDSP was born. Since that time, CCD, my organization, has appeared many times before committees in Parliament and the Senate to consider ways of improving the plan and its impact for people with disabilities and their families.

This afternoon, as part of the work of the committee to study certain aspects of Bill C-97, I’ve been asked to address or to focus, rather, on Division 5 and Part 4 of the bill, which amends the Bankruptcy and Insolvency Act. Specifically, clause 134 of the bill adds the RDSP to a list of protected property in the case of a bankruptcy.

As you will all know, some of you much better than me, section 67 of the Bankruptcy and Insolvency Act protects certain types of property in the case of a bankruptcy, such as the Registered Retirement Savings Plan and Registered Retirement Income Fund. What this amendment does, as you know, is that protection to the RDSP.

The Council of Canadians with Disabilities applauds this change and we see it as entirely consistent with the larger message that we’ve been carrying here for many years of trying to ensure that as many people benefit from the RDSP as possible.

As I’ve noted, CCD has had the opportunity to meet with others over the past decade to discuss how to improve this already very helpful plan. Most recently, we had the opportunity to meet with your Senate colleagues at the Standing Committee on Social Affairs, Science and Technology who undertook a very comprehensive study of the RDSP program and released an excellent report at the end of last year. The report was titled Breaking Down Barriers: A critical analysis of the Disability Tax Credit and the Registered Disability Savings Plan. I don’t want to get into the details of that report here today, but I would like to say a couple of quick things.

First, the amendment that I’ve been talking about is most certainly a helpful step in responding to the challenges outlined in that report. Again, we really do applaud the initiative.

Second, I’d like to note that the Social Affairs Committee actually makes 16 very detailed recommendations around the RDSP. While this particular initiative is certainly a helpful step, there are many other initiatives that should be considered. I understand that beyond the purview of folks here today, I just wanted to make a little pitch in case you have the chance to talk to colleagues about it down the road.

For example, many people who benefit from RDSPs face significant challenges when their parents pass away in terms of getting other people to be able to access their bank accounts and access their plans and so on. This is part of the discussions had with the Social Affairs Committee, and I just wanted to flag it for you as well.

Equally concerning is the fact that some people with disabilities face real challenges, even in opening up an RDSP, because they are seen to lack the capacity to be a plan holder. Again, this is beyond the purview of your discussions. I just wanted to flag it.

In both cases, I think it’s very clear that these people are exactly the kinds of people that the RDSP was intended to support when it was created. It’s CCD’s hope that the amendment being discussed today is a step along the road to addressing these more fundamental concerns. Thank you very much for your attention. I look forward to our discussion.

The Chair: Mr. Estey, thank you very much for that presentation. I’m quite sure that I speak for all my colleagues here in saying we salute the work that you do and the work that your organization does.

Senator Stewart Olsen: My questions will be to our first presenters, Mr. Breton and the Canadian Bond Investors’ Association.

Both of you mentioned that you have some questions about the unintended consequences of certain parts of this Bankruptcy and Insolvency Act. I guess my question is, did you attend any consultations? From both of you, please. Were you consulted? If not, who was consulted? If you have any knowledge of that.

Mr. Breton: I know that some of these discussions have been held for some time in the insolvency community. It was the subject of certain round table discussions, some discussions also with the government in the context, for instance, of the retirement income security process that was undertaken last year. Some of these changes were formulated at that time, and we did comment on those changes at the time.

I don’t know of any wide canvassing process to seek the view of all of the stakeholders in the insolvency process with regards to these particular changes.

Mr. Sahni: From the CBIA’s perspective, there has been consultation among the CBIA membership as well as counsel and certain of its major constituents. The CBIA wrote a former letter to Industry Canada when Industry Canada was conducting a review of the BIA and the CCAA back in 2014. Many of these same issues were covered then. We provided a copy of that letter to the Senate committee. You’ll note the same concerns in there that we’ve summarized today are set out in more detail in that letter.

The Chair: Thanks very much. I’m sure we’ll get back to that a little later.

Senator C. Deacon: Thank you, witnesses. I’d like to start, if I could, with the Canadian Bond Investors’ Association.

The disclosure of financial information and the concern that creditors be entitled to the full face value of their claim. Just to go back a lot of years for me, a discount to the face value of a bond reflects internal risks in the organization, perceived internal risks to the organization, external environmental changes in terms of higher interest rates or lower interest rates. The changing market value is reflective of that.

What would be the reason for not recognizing the full face value? What reasons have been put forward? Are you aware of where this would not be recognized? That doesn’t make any sense to me. This is key to having a market.

Mr. Morin: Absolutely. Maybe I could ask Mr. Sahni to answer from a legal perspective. From a market perspective, as you point out, bond prices are subject to the current interest rate environment as well as the coupon that they carry. If you look at a bond that was issued 10 years ago with, say, a 7 or 8 per cent coupon, that bond could potentially be trading — we have some bonds in our portfolio today trading at 150 per cent of par. Other bonds are trading at 80 per cent of par. Others are trading at around par.

This is what is required to make an active secondary market in bonds. It is all premised on the fact that your claim is always 100 cents on the dollar.

Senator C. Deacon: Absolutely.

Mr. Morin: If you change that in a bankruptcy scenario, how do you divvy up the proceeds between someone who bought the bond at 150 cents on the dollar and one who bought it at 60 cents on the dollar?

Senator C. Deacon: That’s right. I think you just made a very good point. You are assuming the risk. When you purchase the bond at a premium, you are assuming the risk that if something happens to the company, you will only get 60 cents on the dollar. And vice versa, if you are buying at a discount you assume, okay, I will be able to collect my 100 cents on the dollar. That’s the market forces.

Mr. Morin: Absolutely.

Senator C. Deacon: What rationale has been given to have a different approach to this? What’s the thinking? Help me.

Mr. Sahni: It escapes us, senator. The case law is consistent with what Mr. Morin just described. This issue has been before the courts previously. Courts were asked to look at the question of whether bonds held by distressed investors ought to be given full value for voting purposes under the reorganization plan, under the CCAA. And the courts have held that they should be. There is no reason that those bondholders should have a discount applied to their voting rights.

To support the point, let’s say a distressed investor is buying a bond at $50, they are providing liquidity to the original bondholder who is able to then sell the bond, rather than hanging on and incurring further risk. The distressed bondholder is buying it knowing that in an insolvency proceeding, they can assert a claim for a $100 bond but they might receive somewhere between $50 and $100 in terms of their actual recovery. They may not get 100 cents on the dollar in an insolvency scenario.

If you now apply a further discount to that, let’s say that bondholder has to disclose that it paid $50 for that $100 bond and the courts can use that information or other parties in the proceeding are able to say that bondholder should then only get a $50 claim then, in fact, the bondholder’s risk is much greater because then the bondholder might only get a 50 to 70 per cent recovery —

Senator C. Deacon: That could be quite disruptive to the markets.

Mr. Sahni: Absolutely. That is a real worry. We have heard no good rationale on why it is included in the legislation.

Senator C. Deacon: What rationale were you given? I assume you heard no good rationale, but what rationale were you given?

Mr. Sahni: The basic rationale has been greater transparency of the process. That’s really the only rationale that has been given.

Senator C. Deacon: Thank you. In terms of duty of good faith, help me understand what rationale you were given in terms of what problem is being solved with that, purportedly? What’s the intention?

Mr. Morin: It seems to me, if this proposed change goes through, we as a creditor are asked to be nice to another creditor, and perhaps give them some of our value, if that’s deemed to be acting in good faith, rather than simply acting in the best interests of our — we represent pensioners. We represent the sorts of people that are represented by Mr. Estey’s organization.

Those are the sorts of people that we represent, and it is our fiduciary obligation to represent their best interests and the legal interests that are embodied in the contracts that we enter into.

Senator C. Deacon: Mr. Breton, just from your standpoint, as someone who is expert in running these really difficult proceedings, when you are in a situation of bankruptcy, I would assume that clear rules are quite essential. Any time you get into something where there are vague rights or competing rights, it makes things more challenging. So anything that strengthens clarity would be helpful to you, I would think, and anything that lessens clarity would be more challenging.

I don’t want to put words in your mouth but . . . .

Mr. Breton: You are absolutely right, clarity is a good thing. Yes.

The Chair: You put words in his mouth.

Senator C. Deacon: From your standpoint, do these two provisions we’ve just been speaking about provide greater clarity or lessen clarity? I will let you answer that without me.

Mr. Breton: I don’t believe they provide more clarity. As I’ve explained in the document that I’ve circulated, with regards to the issue of the good faith, it really seems to be very much a question of geography.

Senator C. Deacon: Yes.

Mr. Breton: The people in Quebec don’t seem to have as much difficulty with the concept of good faith as the people in the rest of Canada, and that’s probably a cultural thing because the concept of good faith is an integral part of the civil law. There is a specific provision right at the beginning of the Civil Code that imposes an obligation of good faith on all parties in their relationships with other parties. So it is not something that’s completely foreign to us. I am from Quebec, so it is not something that’s completely foreign to me.

But on the other hand, when I speak to people from the other provinces, I’ve heard expressed a very deep concern with regards to exactly the issue of clarity.

What exactly does it mean in the context of an insolvency proceeding to be acting in good faith? Does that mean that I now must basically open the kimono and show all of my cards, otherwise I may suffer consequences because I may be accused of not acting in good faith? Or is the fact that you are trying to obtain the best possible result for yourself, individually, and that you are trying to come up with a reorganization process that collectivizes all of these individual “wants.” Is that sufficient to achieve good faith? That lack of clarity is problematic with regards to that particular provision.

With regard to the disclosure of economic interests, you will notice that I do have a slightly different position from the one that was expressed by your other guests. What I said in the document I’ve circulated is that the provision seems to be very well-intentioned and maybe warranted in a lot of cases, but I do make a specific carve out with regard to the issue of the underlying value of the transaction, which is what Raj and Mr. Morin were discussing. Should you be taking into consideration the amount at which a bond was traded in order to calculate either the voting rights or the compromise that the creditor will receive?

We are saying that we believe that particular portion of the provision goes way too far. But the issue of disclosure of economic interests may be something that may need to be explored in a situation, for instance, where there is a misalignment between the legal interests of the creditor and the economic interests of the creditor.

That would happen, for instance, in a situation where a creditor has a credit default swap that causes him to have a much better outcome if the company fails than if the company succeeds. So in that particular case, his economic and legal interests may be completely misaligned. It is better for his legal interests, for his claim, that the company survives. But his economic interest lies elsewhere because of the credit default swap that will cause him to have full proceeds and make somebody else suffer the loss in that case. In that sense, that provision has some good aspects and other aspects that we find difficult to understand.

[Translation]

Senator Verner: My question is for Jean-Daniel Breton.

Mr. Breton, with respect to my colleague’s question about the obligation to act in good faith, I noted on page 2 of your presentation that, in Quebec, it seemed very well-received in general. Unfortunately, in terms of geography, legislation under common law is applied very differently compared to legislation under the Quebec Civil Code.

If clarifications were made to define the notion of “good faith,” still on a geographical basis, would this create difficulties in Quebec? Is there a way to accommodate everyone when we talk about acting in good faith?

Mr. Breton: That’s a very difficult question to answer. Given that, in our culture, we understand the obligation to act in good faith, I don’t think that specifying or defining it would cause issues in Quebec. At worst, it would limit an obligation that already exists. I don’t think that this would cause any issues. I think that it’s a little more difficult to define what the obligation means exactly for the common law provinces, because the concept is inherently vague.

Senator Verner: Do you have any suggestions?

Mr. Breton: No. At this time, I may not be the best person to answer that question. There should be a committee of people who practise in the common law provinces. They would be best suited to define and specify what they need to address the perceived issues with this provision.

Senator Verner: Thank you.

Senator Dagenais: My question is for Mr. Breton. Mr. Breton, you said that you come from Quebec. You know that there are many advertisements in Quebec... I don’t know whether it’s the same across the country, but many advertisements give the impression that the trustees race to target potential clients who are having financial issues. To what extent could the new measures in the budget encourage more people to consider bankruptcy instead of seeking ways to settle their debts?

Mr. Breton: I don’t believe that the provisions that I reviewed in Division 5 of Part 4 encourage bankruptcy instead of dealing with debts or making a proposal. I don’t think that any provision in the bill really changes the situation. I couldn’t say whether it will affect consumers. However, I don’t see why the bill would have that effect.

Senator Dagenais: Like me, you know that bankruptcies are costly for the government because they prevent the payment of taxes. Out of curiosity, do you have any data on this subject?

Mr. Breton: I don’t have any figures for the debts. I know that the losses for creditors are significant. Of course, this constitutes a substantial sum. As far as I can remember, bankruptcies in Canada amount to 130,000 bankruptcy or proposal files. This figure is slightly higher than last year, when there were about 125,000 files. The breakdown consists of about 57,000 bankruptcy files and 73,000 proposal files. Most of these files are consumer files.

Business bankruptcies amount to fewer than 3,000 bankruptcies and fewer than 1,000 proposals from companies. I don’t count the procedural files under the CCAA. There are some procedures, but much fewer, of course. The procedures are usually reserved for larger files.

We talk a lot about bankruptcy files. It’s a significant part of the economy. It imposes a very heavy debt burden. However, I don’t think that I agree with your initial statement that it’s costly for the government. I have the impression that many debts are borne by credit card companies. As a result, the financial system incurs these losses. There are government debts, of course, and there are also many student loan debts. I think that commercial lenders also lose a great deal of money in bankruptcy files. Obviously, given that credit card companies and financing companies are making profits, the government is indirectly losing profits as a result of the reduction in taxable income.

Senator Dagenais: Thank you, Mr. Breton.

[English]

Senator Wallin: I have two related questions to Mr. Estey. In a bankruptcy is your necessary assistance property always protected? The second part of that question is, in a bankruptcy situation, what is the impact on your ability, after the fact, to apply for newer technology or newer equipment?

Mr. Estey: I was thinking I was going to get out of here without anybody talking to me at all. I was actually hoping that would be the case, you know.

Senator Wallin: No way.

Mr. Estey: I had a bit of a technical problem at the beginning of your question, so could I ask you to restate, please? Thank you very much.

Senator Wallin: The first part of the question is, in a bankruptcy situation, is your assistance property, whatever that may be, always protected? Then the second part is, after a bankruptcy, does that impact your ability to purchase or apply for newer technologies?

Mr. Estey: That is an interesting question. In a bankruptcy situation, is your assistant — like your physical assistant, that type of thing? Those programs come from outside of an individual’s income, in most cases as I understand it, so I don’t think they would be impacted in a situation of bankruptcy. Similarly, technology, the things that people with disabilities use to comport themselves in their community, are often provided by government programs. I don’t think that bankruptcy would be an impact for many people. That said, there are certainly people with disabilities who do pay for their own accommodation and things like that. I’m sure that, in that set of circumstances, there would be an impact.

In terms of the RDSP and the extension of bankruptcy situation with the RDSP. We look at this extension as a very positive thing. If you are a person with a disability and you have an RDSP, and you face a situation of bankruptcy, that RDSP is something that’s been set aside over a long period of time, often by family members and things like that. I wouldn’t want to see it simply evaporate in that set of circumstances.

Senator Wallin: I have one small question for Mr. Sahni — others may want to comment — on the issue of bankruptcy and insolvency. One of the proposals from government in the legislation is to provide courts with further powers to address executive payments made before an insolvency and, where appropriate, to deter executives from taking actions contrary to the interests of employees and pensioners. Do you all agree with that? Mr. Sahni, why don’t you start?

Mr. Sahni: From the CBIA’s perspective, we have not had a chance to discuss that particular issue with the constituency so I can’t speak to it on their behalf.

Senator Wallin: Anyone else want to comment on that?

Mr. Breton: I did make some comments on the issue of executive payments in my document.

Senator Wallin: Sorry about that. I had to step out briefly so I miss it, but it is on the record. Thank you.

Senator Wetston: Thank you, Chair. Mr. Estey, I want to know about this RDSP a bit more. Can you give me an idea of the extent of its use, and any issues associated with the application of it from the point of view of those who have the benefit of having it? Also, whether or not the bill that I think you are supportive of with respect to those amendments in any way affect those matters.

Mr. Estey: The RDSP is a unique thing. As I understand it, not many countries in the world have it, and countries have been looking at Canada as a model.

Essentially it’s a mechanism whereby an individual with a disability is able to open up a savings account, or something like that, and put into it a certain amount of money per year and that money is matched by the government. There are a number of details around this that I don’t know off the top of my head.

If, for example, if you have a kid with a disability and you open up an RDSP account, you put $1,000 in, the government will match that with $1,000. Then there’s a bond associated with that for another $500, something like that, and that’s something that accrues year after year.

You can open an account if you have a child with a disability immediately after you have that child, and put money into it up until the individual with the disability is, I think, 49 years old.

There are thresholds that the government sets about contributing X amount of money per year to the RDSP and up to a certain amount over the totality of the contribution agreement.

What you have is a situation where if you’re a middle-class family and you’ve got a kid with a disability and you’re thinking about the future for that child after you’re gone, how are they going to support themselves, those kinds of things.Previously there was only what you could set aside as an individual, as a family, and what kinds of social assistance might be available, particularly relevant for kids who have significant disabilities.

So this program was started about 10 years ago, the RDSP program, as a way for families, middle-class families, lower-middle-class families, working-class families, to set aside money with government support to build a bit of a nest egg for their child after they’re gone.

In our community — people with disabilities and family members — the RDSP is perceived to be an extremely positive and helpful thing. We’re very happy with it.

Certainly, as I said, the Senate has looked at it and proposed a number of things that might strengthen and enhance it, and I’d encourage you to consider those further down the road.

This particular mechanism, the inclusion of the RDSP as a protected situation in bankruptcy, is certainly a positive thing.

Senator Wetston: Chair, maybe we should look at that, not in the context of a budget bill. You probably know what I’m getting at when I say that.

The Chair: Thank you, senator.

Senator Wetston: Just another quick question, if I may.

I was quite interested in your comment regarding the credit default swap arising in the circumstances of an example in the way you described it.

You know very well that there have been a lot of risks associated with these instruments in the past, and it was one of the tools giving rise to some of the issues in the financial crisis, as you very well know.

So the example of this in the context of these types of proceedings are of interest to me, and I guess the question I would ask you is what’s your sense of the extent and use of these kinds of instruments today, particularly in the context of the environment of changes and amendments to this kind of legislation, thinking more about it from a risk perspective.

Mr. Breton: I don’t have any data that would be helpful in determining to what extent they are being used. I know they were a big factor in the financial crisis of 2008. I don’t know to what extent they are being used now. The problem with them is that they’re pretty obscure instruments, so we don’t know about them all the time. In certain cases we can suspect that they exist, but we don’t always know.

Senator Wetston: Can I ask a quick follow-up or do you want to go to second round?

The Chair: If it’s quick, Senator Wetston.

Senator Wetston: For the last 10 years there have been a massive amount of fixed income investment and there’s been concern about the liquidity of these kinds of investments, mostly because of the low for a very long time.

What’s your experience with that, and are you seeing any of these kinds of proceedings that we’re talking about here? The mischief associated with these amendments is one thing, but giving rise to these amendments, are you seeing anything going on because of the massive amount of fixed income issues associated with liquidity for these kinds of bonds in the low for long environment?

Mr. Morin: I’ll take a crack at answering the question. Liquidity is something that comes and goes in the market, and you often see that when equity markets are selling off there’s a lot of turmoil in the fixed income markets as well. Then when there’s distress in the markets in general, there’s distress in the bond markets.

During those periods where there’s distress in the markets, liquidity is very, very tight. When there’s euphoria in the markets, then liquidity is robust and you can get out of positions and sell and buy positions.

It’s something that is not static. It’s an active market. I don’t think it necessarily relates specifically to what we’re talking about today with respect to the proposed changes in legislation. Have I answered the question?

Senator Wetston: That’s fine. Your answer is helpful in the sense you don’t see any connection whatsoever thinking about why they are legislating, because I think you both indicated you’re not sure why this is being proposed. Thank you.

The Chair: Senator Deacon before we go to second round, I have a couple questions. Not of you.

Gentlemen, thank you very much for the presentation. I want to understand from your point of view the magnitude of the consequences of the concerns that you have raised with us today. Is this important, as far as you’re concerned? Talk to us, please, about the magnitude.

Mr. Breton: The concerns that we’re expressing are important. We think that these can have unintended consequences that could be surprising and that could affect the practice.

The Chair: Thank you very much. And Mr. Morin and Mr. Sahni, what are your views?

Mr. Morin: My view, from a portfolio manager’s perspective, is that if the rules of the game aren’t well-defined, it makes my job extremely difficult to do. If I’m holding a bond that I think the company is going to go into bankruptcy, I have two key issues that we’ve highlighted today. I don’t know what the rules of the game are, and therefore it’s very difficult for me to make decisions, investment decisions.

The Chair: And you believe this muddies the rules of the game?

Mr. Morin: absolutely, yes.

The Chair: Mr. Sahni?

Mr. Sahni: I would add to that. I agree with both positions. I think the additional point here is that in every insolvency proceeding we’re dealing with limited judicial resources. It takes some time to get before the courts and have proceedings dealt with, and that time obviously has a money value to it.

The problem is that these proposed amendments will introduce additional delays and introduce additional uncertainty. There’s no good rationale for including them, and they could have potentially far-reaching consequences given the current wording of the proposed amendments.

For example, if you look at the amendment dealing with the duty of good faith, the issue of whether or not a duty of good faith ought to be included for all parties is one issue. As we’ve heard, the view in Quebec might be different from the view in the rest of the country. But an additional part of that amendment, which not many people are focusing on but which could have very far-reaching consequences, is that the amendment purports to give judges the power to make any order they see fit in the circumstances. This introduces complete uncertainty into what is otherwise now — thanks to a long history of law and statutory amendments — relative certainty on most points. We still have uncertainty on some points, but we’re now introducing a brand new concept which gives courts wide ambit to make any order.

The Chair: That’s very helpful. So what would you recommend we do?

Mr. Sahni: Well, I think on both of these amendments, they’re not in a place yet, where they should be tabled as legislation. I think they need much further consideration and consultation among all of the stakeholders that are involved in insolvency proceedings.

The Chair: Thank you very much. Anyone else have a comment on that? I’m thinking specifically of you, Mr. Breton.

Mr. Breton: I completely agree with Raj’s comments. Of course, I’m separating my comments into two parts, the part that deals with the commercial restructuring or the commercial proceedings and the part that deals with the personal insolvencies. As I said, the part that deals with the personal insolvencies, which is the RDSP issue, we strongly support.

The Chair: I understand that. Thanks very much, gentlemen.

Senator C. Deacon: Chair, I just wanted to finish on a positive note, thanking Mr. Estey and Mr. Breton. It looks like one element of this was done right and is a very positive change, as proposed. Thank you for your compelling statements.

The Chair: Thank you very much, Senator C. Deacon.

Gentlemen, thank you all very much for contributing to our deliberations. Very thoughtful. Very helpful to us. Thanks very much to you all.

We are going to now suspend, senators, as we have a vote in the chamber in 20 minutes, and then we’ll come back for our second panel.

(The committee suspended.)


(The committee resumed.)

The Chair: Welcome back to our meeting of the Standing Senate Committee on Banking, Trade and Commerce. We are continuing our subject matter study of Bill C-97, the Budget Implementation Act, 2019, No. 1.

This panel will concern Part 4 of Division 5, dealing with the Canada Business Corporations Act. For this subject, we welcome the commentary from Transparency International Canada, Denis Meunier, Director, who is with us in the meeting room today.

Also during this panel, we’re going to deal with the Pension Benefits Standards Act, 1985. For commentary on this, we welcome by video conference from Guelph, Ontario, representing the United Steelworkers, Alex D. McKinnon, Department Leader, Research, Public Policy and Bargaining Support, Canadian National Office.

We’re very appreciative that both of you found time to appear before us today. Mr. Meunier, I will ask for your opening remarks and then, Mr. McKinnon, we will hear from you. Then we will go to senators’ questions.

Denis Meunier, Director, Transparency International Canada: On behalf of Transparency International Canada, I thank you for the invitation to testify before this committee. TI Canada works to increase transparency and accountability in Canada and fight corruption through research, education and advocacy through opportunities like this testimony today.

Beneficial ownership transparency is TI Canada’s main area of work at present. We believe that Canada needs a pan-Canadian, publicly accessible registry of beneficial ownership for corporations to counter our national money laundering problem, known as snow-washing. The problem has gained prominence in the media in the past week and earlier, with many journalists, civil society, businesses and notably the Finance Minister and Attorney General of British Columbia agreeing with our recommended solution.

We understand that the federal government is working with the provinces and territories on a phased approach to increase beneficial ownership transparency, starting with requiring improvements to each jurisdiction’s corporate legislation before addressing the issue of a registry.

With that said, TI Canada believes that the proposed amendments in Bill C-97 under Subdivision A of Division 2 of Part 4, which apply to the Canada Business Corporations Act, are a tepid step allowing investigative bodies access to corporate beneficial ownership registries without a court order. While the amendment proposed will allow investigative bodies to request information of a corporation about individuals with significant control, the investigative body must serve notice either at the place of business or through registered mail. Investigative bodies may only do so when they have reasonable grounds to suspect that the information sought would be relevant to an investigation.

Investigative bodies will, de facto, be sending a signal to the target of the investigation that he or she is under investigation. This is akin to giving a head start to a potential criminal in a race to further disguise true beneficial ownership by creating other legal arrangements to hide their identity.

The CBCA may also not provide accurate information to the investigative body because there is no requirement upon registration of a corporation to verify the identity of individuals with government-approved documentation.

Even the U.S., the second most financially secretive jurisdiction in the world after Switzerland, has a bipartisan bill in Congress called the Corporate Transparency Act of 2019, requiring a unique identification number of beneficial owners from non-expired passports or driver’s licences upon corporate registration. The CBCA should require a unique identifier when registering the individual with significant control.

While the amendments proposed in Bill C-97 are a step forward for the timeline the federal government is working on, without a publicly accessible registry with verification of the identity of the true beneficial owners, the law will not be effective in preventing criminals from staying ahead of law enforcement in maintaining their anonymity.

I’ll be happy to take your questions. Thank you.

The Chair: Thank you very much. Mr. McKinnon, please.

Alex D. McKinnon, Department Leader, Research, Public Policy and Bargaining Support, Canadian National Office, United Steelworkers: Thank you for the opportunity to speak to you with respect to your deliberations on the budget bill, specifically to matters on retirement security. This is also the first time I have appeared in front of a committee like this.

By way of introduction, I am Alex McKinnon, the research instructor for the United Steelworkers, Canadian National Office. For most of my 32 years on staff, I have focused on pensions and benefits across the country. Before that, I spent 12 years as a millwright in Stelco, and I’ve retained the dialect of speaking like a millwright, so I apologize.

My comments are more focused on the impact bankruptcies, and insolvencies have on working people in this country. In these situations, the impact is felt most by those who can least afford it. As the government said, everyone deserves to have peace of mind when it comes to their retirement, especially people who have worked their lives to help a company try to stay afloat. On that part, we actually agree.

But the reality of what we’ve seen is a travesty when we look at Sears and Nortel. At a provincial level, we’ve seen the injustice at my former plant, Stelco, as thousands of retirees, including widows and myself, have lost their health care benefits and possible cuts to their pensions. None of those pensioners are rich, and for most, this represented their only source of retirement income.

Although I know the discussion today is focused on bankruptcies and insolvencies, I’m always suspicious of the government when they talk about enhancing retirement security, and I’d be remiss if I didn’t mention that the Steelworkers are actually working with a bunch of other unions to defend the thousands of employees who have been kicked out of the Public Service Pension Plan. Our attempts to find a resolution with a negotiated cost plan have fallen on deaf ears in dealing with the government. For the 4,000 employees at Chalk River and Sheridan Park, the government has quashed their dreams of retirement security.

Back to the budget bill, it’s my union’s view that Bill C-97 does little to enhance retirement security for Canadians or provide any greater peace of mind. Our union supported the two private members’ bills — you probably met some of our people lobbying last week — to actually move pensions and liabilities into a priority basis. Plain and simple, we think it’s a far better way to protect retirement security for pensions.

We know that, as we’ve worked through bankruptcies and insolvencies — and we’ve worked through a number of them — they’re no friend to labour, retirees or widows. What they are a friend to is legal billing. The proposed changes to the act only serve to enhance the legal billings and not retirement security.

I’ve negotiated enough contracts across this country over the last three decades to understand what I call weasel language. For me, I suspect that this is in the same category. Providing more transparency and apparently making people now act in good faith during the proceedings is always a good step, but let’s not confuse that with enhancing retirement security.

The budget bill doesn’t propose treating workers as secured creditors, it doesn’t provide pensions for protecting post-retirement health and welfare benefits during the bankruptcy, and it doesn’t have any effective provisions for preventing excessive bonuses paid during the proceedings.

Bankruptcy laws have to protect workers. Those are the people who are the middle class or want to get into the middle class. Executives can still continue to get bonuses. Many millions of dollars were paid out to Nortel, Sears and Stelco executives. Assets and product lines were shipped out of the country in advance of the bankruptcy and insolvency. Providing a simple test of a single-year look back is an easy thing, quite frankly, to manipulate. Meanwhile, workers and retirees had their benefits cut and lost vacation, severance and termination. We need better legislation and better protection for workers, retirees and their widows. We think this bill does little to advance their rights.

As the previous speaker, I would be happy to take your questions.

The Chair: Thank you, Mr. McKinnon. I would have thought you have done this many times before, having heard that presentation.

[Translation]

Senator Verner: My question is for Mr. McKinnon. Last week, as part of our study of the bill, we met with various officials, including Mark Schaan. I asked him about your union’s demands. In short, he told me that your proposal had been very seriously considered. However, he was ultimately concerned that it could compromise the corporate restructuring process when companies face difficulties, because the financial value of their current and future obligations would, in many cases, be greater than the value of the assets in place. He said that this could undermine restructuring efforts and compromise pension plans by alienating potential investors. Basically, I guess you were already aware of this type of response, but how do you address this type of argument?

[English]

Mr. McKinnon: Other companies will buy companies in bankruptcy if there’s value there. Falconbridge got bought out by a number of companies and Glenngarry and Glencore, a number of other places. Places get bought out. If there’s money to be made, they’re going to buy it.

Senator Wetston: Thank you. I have a general question, Mr. McKinnon. The economy affects workers obviously directly. I’m an Ontario senator from Toronto. The companies you have just mentioned is an indication of how the manufacturing sector is changing so much. Obviously if that’s changing, either by companies going into receivership or leaving the country or being bought out, what’s your view in the sense of how the government is dealing with the issue that you’re discussing today? Are they reflective of that in their policy discussions with unions and workers? Or are they missing that, carrying on a normal course, making some miscellaneous amendments and you obviously coming forward today and saying they just haven’t done enough?

Mr. McKinnon: I’m not sure I understand your question when talking about the manufacturing sector. If you’re asking if the government has done enough to protect the manufacturing sector, the answer is no. In Canada, specifically in Ontario, which had an economy strongly based on manufacturing, we’ve seen a lot of manufacturing disappear out of this province.

With respect to pensions, no, I haven’t seen a lot of government action to actually protect retirement security. The case of the members at Chalk River and Sheridan Park are a clear example.

Senator Wetston: You’re getting close to what I was trying to understand from you. There is a direct relationship here. If there’s a direct relationship to the way in which the manufacturing sector is changing, that’s going to impact your workers directly. It would affect it in part in the way you have just discussed with us today.

I’m wondering whether or not you see there’s a missing piece in this. There’s a recognition that things are changing. Are workers carrying the burden here because of the lack of that recognition or the ability to address that?

Mr. McKinnon: Workers are certainly carrying a lot of burden during periods when employers are having financial difficulty, whether it be insolvency, bankruptcy or just prior to that. There are often a lot of concessions made during that period of time that workers continue to try to support their employer to make things work. At the end of the day, it’s usually the workers who take the worst beating.

Senator Wetston: I have a question for Mr. Meunier. Welcome. I’m not passionate about a lot of things, but I am passionate about money laundering, crime and ensuring we have vehicles in place to be able to detect it.

We realize some progress is made on beneficial ownership. Obviously we have some distance to go. I did ask officials why the registry isn’t made public as opposed to align it with specific circumstances in which this information would be made available. Could you comment on that, please?

Mr. Meunier: Yes, the government has indicated in the last budget that it will be bringing further amendments to the Canada Business Corporations Act. This is what I read. I understand there will be consultations with respect to, not a public registry, but the idea of a registry. The government isn’t acknowledging necessarily that it will go that route. We’re hoping it will because that is the trend internationally and with our partners in the EU. There are more than 40 countries that are moving forward with a publicly accessible beneficial ownership registry, even in some cases in the European Union with access, under certain circumstances, to trusts.

This is where Canada needs to go. It currently is not even meeting the international standards set by the FATF, and those standards were set back in 2003, so we’re 15 years behind. We’re either non-compliant or partially compliant on some of the beneficial ownership standards. I hope that the international community will revise the last recommendations, which are dated 2012, perhaps in the next few years to require beneficial ownership registries to be accessible publicly. That’s the trend.

This is certainly something that we hope the government will move toward in its consultations because it is a major gap. Research has shown that the lack of transparency with respect to corporations and trusts — today we’re speaking of corporations — is a major means by which money launderers hide their proceeds. Basically, we’re not talking about public corporations here. The CBCA is addressing private corporations.

The thing that’s a bit of a contrast is the fact that publicly accessible information about insiders, public beneficial owners for publicly traded corporations in Canada — when you reach 10 per cent ownership or more — is already available. Yet we have no such access for private corporations where the risk for money laundering has been identified by the government as being much higher, of course, than public corporations. I hope I’ve answered your question.

Senator Wetston: I’ll go second round.

Senator C. Deacon: Thank you to our witnesses. Mr. Meunier, I really enjoyed the praise you reaped on the government for their tepid step forward.

Is there a question you wanted us to ask of department officials as to why we’re not moving more swiftly on this issue, because it puzzles me to no end? Senator Wetston has already forgotten more about this topic than I’ve yet to learn, but I really would love to get some insight from you. They’ll obviously read the transcripts so they’ll be prepared for the question, but I’d love to know what question you would like most asked by us because I’m puzzled by our lack of action.

Mr. Meunier: I’d like for you to ask why Canada, in the last 15 years, hasn’t moved forward on this issue and introduced changes to the CBCA that would bring Canada more in line with the more progressive countries in Europe and others, such as the U.K. I would like to ask them, for instance, why they wouldn’t require further identification when there’s a registration of a corporation. Police will go to a company and present the request under the current proposed amendments. If I were a crook, I would challenge the police in terms of that request. I would go to a federal court and ask them to tell me, what are the reasonable grounds to suspect? I’d cause delay.

The penalty is $5,000. That’s a cost of doing business. We’re not talking about low-level criminals here. We’re talking about organized crime. I would like to ask why they have not incorporated a requirement to verify, either through passport or a driver’s licence, like the U.S. They would have at least that much information so if the police finally do obtain the information, there is a real person at the other end. Let’s face it — criminals lie. They will do everything they can. They will have nominees identified, instead of themselves.

Senator C. Deacon: Thank you. Why are you saying we should just identify those with significant control?

Mr. Meunier: That’s the way the legislation has —

Senator C. Deacon: What is significant? Is that supermajority, like 65 per cent?

Mr. Meunier: The legislation does define who has significant control. There are three parts. You can be one of three different categories. One of the categories that gives me some difficulty says you can be an individual with significant control if you are the registered holder of the shares which, in many cases, could be a lawyer or a nominee. That doesn’t trace back to the actual —

Senator C. Deacon: I understand now. Thank you.

Mr. McKinnon, thank you very much for your testimony. I remember back when Conrad Black got in trouble for taking the pension funds of the Dominion store workers; that was a long time ago when I first got into the investment industry. The issue had been going on for a long time. I’m wondering specifically if you could be helping us with the budget amendments that have been put forward. Your comments of a general nature are very strong but I’m looking for specific recommendations or the specific actions that you are asking of us.

Mr. McKinnon: First I will say I do remember Conrad Black. He was successful in getting money out of the salary plan; he had to return it back to the unionized plan.

With respect to more advocacy around bankruptcies, with respect to pensions, you should be having a discussion about moving them into a higher category than where they are now. We are certainly talking about moving them into the secured creditor status. I think we should have that kind of discussion.

I think that’s why, on June 7, we’ve been asking for the block bill to go to second reading; we want to have that open discussion about finding solutions.

My more general worry is that bankruptcies wipe out a large degree of pensions for people who can least afford it. These people are at the bottom of the food chain. They don’t have any other savings. They don’t have money in a tax-free savings account. I quite frankly worry about that. I worry about the retirement crisis that we will have in this country in about another 10 or 15 years.

Do you want me to just give you a single answer about what we can do? We need more honest and open and transparent discussion about trying to find a solution, to be quite frank.

Senator C. Deacon: I really like your suggestion — it does not relate specifically; it could have but it is not in the legislation — to have the workers as secured creditors.

Senator Wallin: Thank you. I think we all enjoyed your use of the word “tepid” in describing this approach. That’s often the case. We pretty much share the view that more transparency in this area is crucial and necessary. I want to see how you weigh that off given the other circumstances in our economy right now.

We see more public companies who are reverting to private status or companies not going public at all and making the decision to stay private because they are so concerned about the rules and the layers of rules. We already have investment issues in this country in terms of uncertainty around the energy sector and tariffs, no free trade agreement — those kinds of things.

Then you have the straight-up privacy concerns about having people in private operations putting information on the public record. How do you strike that balance without making this a place where people don’t want to invest?

Mr. Meunier: The fact is that publicly traded corporations already have a registry. We are not giving people’s home addresses or something in public. All we’re asking is a number of basic criteria, the least possible, as long as we know. A small business, doing business with another supplier, needs to do its due diligence if it wants to get paid. It is very important not just for banks and casinos and the reporting entities covered under the proceeds-of-crime legislation, but for others as well, to know who they are doing business with. I believe it is good for both large corporations, private corporations, to know who they are doing business with.

Back to your privacy issue, we are asking for the least amount of information that is still sufficient to ensure that we know, on the record, that businesses know, that the public knows, who they are dealing with. We don’t want their social insurance numbers. Nobody wants that. We want the least amount of information. There may be more than one Joe Smith somewhere in Canada, so it would be nice to know that the person is associated with maybe one address, at least, and other identifying information so that we know. I don’t know if I answered your question.

Senator Wallin: Sometimes, to your earlier point, people do register their holdings through a lawyer. There are all sorts of reasons for that — maybe family reasons or competitive reasons with other companies in the same field. What you are asking for is pretty minimal, but there are huge question marks. There was an announcement today in British Columbia about an inquiry into money laundering. There are negative repercussions from that potentially, as well.

Mr. Meunier: If I may add, the United Kingdom has tested a beneficial ownership registry, publicly accessible. Some research has been done by other civil society organizations, looking into the public data. They found a number of individuals, maybe 100 directors, running 500,000 companies. They found people who had actually been banned from being a director of a corporation who, through the database, were identified. A number of criminals were identified as holding large, private corporations.

Exemptions should be provided so that minors who are involved in corporations, perhaps owning shares, would not be identified. If there are other reasons for their security to be at risk, there are provisions in the U.K. for that. In B.C., as well, they have an exemption regime in their land registry program.

Senator Wallin: Is the U.K. a better model than what the Americans are looking at, for example?

Mr. Meunier: Oh, my god, the Americans’ model is not the model to follow.

Senator Wallin: You sort of said that it was at least a start.

Mr. Meunier: The Americans are the second-most secretive jurisdiction based on the Tax Justice Network’s evaluations. In what they have in front of them, they have actually exempted any corporation with fewer than 20 employees.

Senator Wallin: You are not happy with this bipartisan proposal?

Mr. Meunier: I like the idea of the identification. I think that is smart, but their bill is not. The U.K. system is a better one. They are actually improving it because the beta system which they put out was not necessarily the best.

Senator Wallin: Great. Thank you.

Senator Duncan: Thank you very much for your presentation, Mr. Meunier. I am the rookie in the room. In trying to get up to speed, I took a page from my children’s book and googled you and there you were with the basic information.

You referred to countering a national money-laundering problem. I have heard this phrase used as a problem and, of course, I follow the British Columbia news. Do we have any sense of scale? In terms of monetary value, have we defined the problem? Do we know the extent?

Mr. Meunier: The last valuation done publicly was announced by, I believe, Maureen Maloney who was conducting a panel out in B.C. They’ve come up with a model that identified the problem, very conservatively, at $46 billion a year in Canada. There are other estimates. I wrote a paper at the C.D. Howe Institute in which I basically said $5 million to $100 million, but you may as well just guess.

The Chair: Did you say, per year?

Mr. Meunier: Yes, that is per year, $5 billion to $100 billion in Canada. That’s not based on a Canadian model. It is based on IMF models, as well as the RCMP’s estimate of $5 billion to $15 billion which was provided to a Senate committee several years ago.

Estimates vary quite widely but I would suggest that the estimate that came out in B.C. is probably not a bad way to start. Frankly, we as a government — sorry, I do not speak for the government but I used to. The government must take advantage of this opportunity, in my view, to come up with its own estimate.

The government for a long time did not come up with a tax-gap measure, but it does now. No matter how difficult it is, even if it is a “plus or minus” figure, it gives you something to shoot at. Then you can track over time to see if it is increasing or not, based on constant dollars, on the size of our economy, et cetera. I would say $50 billion is probably not exaggerated.

Senator Duncan: To follow up on that, you mentioned a paper you had written for the C.D. Howe Institute. Could that be forwarded to the clerk?

Mr. Meunier: I would be happy to.

The Chair: Thank you very much.

Senator Duncan: I am trying to follow all of this. Some years ago, people in the Yukon could very quickly register their companies and just maintain an office. The corporate tax rate was increased. There was a hue and cry by the legal and banking communities. I’m going back many, many years. They said that all the investment income, or income, would be lost by the legal community, the banks and so on.

Is there a link between the corporate tax rate charged in the provinces and territories and this sort of activity?

Mr. Meunier: I don’t know that criminals pay a lot of tax.

Senator Duncan: No, but the corporations they are hiding in, might.

Mr. Meunier: I don’t think I can answer your question. I can say that it is important for all the provinces to harmonize their corporate registration systems with the feds. Ninety-one per cent of all corporations are registered in the provinces. That’s really where the problem is, except B.C. is moving in that direction. It is very important. Obviously that is why this government is trying to work with the provinces, but there are things the federal government can do by itself. They can show a model for all the provinces to take action. I’m sorry I can’t answer your question directly.

Senator Duncan: I hear you say it needs to be bumped to the first ministers’ table and an agreement reached?

Mr. Meunier: It would be great if the provinces could see the light.

Senator Duncan: Good luck.

Senator Wetston: I think it is a good follow-up question. I had been advised that Finance has met with the provinces on at least two occasions, to try to develop this cooperative approach. Where it is at, I’m not absolutely sure.

Following up on your answer about the provinces, we know we are in a federation. You heard me say this many times: We have ten corporate statutes, three territorial, one federal. Private companies are registering under the CBCA. You introduce the public registry? They list in B.C. Then they list in Alberta. They delist and go to Saskatchewan. Then they delist and go to New Brunswick. The cost of this is minimal.

Unless you have a coordinated approach to this issue, they just delist and go somewhere else. Would you not agree with that?

Mr. Meunier: Yes, senator, I do agree that’s one of the issues we have. We live in a federation and that is it. This is where the provinces need to realize that, when Canada makes commitments internationally at the G20 that it will live up to the international standards set by itself as a member of the Financial Action Task Force that the provinces have a responsibility, vis-à-vis Canadians, of a public interest. We see figures of $50 billion a year? That pays for a lot of hospital care and a lot of education. Frankly, when you don’t address it, it incentivizes transnational organized crime and not just in Canada. Canada becomes a wonderful place to park money whether it is Russian money from organized crime or other transnational groups. We become a wonderful place to stash dirty money.

This is where the provinces are not experiencing victimless crimes. Millennials are trying to buy houses in Toronto, Vancouver, and it is moving to Montreal as well. What are we doing for our children, for your children, for your grandchildren, when they can’t afford to move into homes because there is a pressure? It is not all money laundering that is causing it, but it is bringing a certain amount of pressure.

Senator C. Deacon: I want to confirm that the example just given by Senator Wetston highlights why notice is problematic. That’s fair?

Mr. Meunier: Yes.

The Chair: Gentlemen, thank you very much for your contributions. Mr. McKinnon, we look forward to welcoming you back. Mr. Meunier, I believe you have been with us before?

Mr. Meunier: I have appeared in different capacities, including as Deputy Director of FINTRAC.

The Chair: Thank you very. That was helpful. We look forward to welcoming you both back. You have made a difference to our deliberations. Thanks very much.

(The committee adjourned.)