Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue 8 - Evidence, June 18, 2009
OTTAWA, Thursday, June 18, 2009
The Standing Senate Committee on Banking, Trade and Commerce, to which was referred Bill C-4, An Act respecting not-for-profit corporations and certain other corporations, met this day at 9 a.m. to give clause-by-clause consideration to the bill.
Senator Michael A. Meighen (Chair) in the chair.
[English]
The Chair: Honourable senators, this morning, our first task is clause-by-clause consideration of Bill C-4, but at the request of a number of colleagues on the committee, one or two questions, after reflection last night, still require clarification from representatives of the Department of Finance, and perhaps from the Certified General Accountants' Association of Canada, who testified yesterday.
Senator Massicotte you led this request, so I will ask you to begin.
Senator Massicotte: We are having this debate as to the relevance of paragraph 180(1)(b) versus having only paragraph (a) by itself. Paragraph (a) says in English — in French it seems to be different, which is another issue — that if they are ``a member in good standing'' of a provincially organized accounting profession, they are qualified under that paragraph. Paragraph (b) goes on to talk about meeting qualifications as defined under the provincial legislature.
We are asking ourselves if paragraph (a) is adequate? If they are already registered under provincial statutes to be, for instance, a certified management accountant, CMA, a certified general accountant, CGA, or a chartered accountant, CA, why do we need paragraph (b)? Paragraph (a) presumably already defines their qualifications and abilities, and we have at least one previous member of a provincial legislature who says that in her province the enabling legislation already defines who is qualified to perform whatever in a profession; therefore paragraph (b) becomes irrelevant.
Is that the case in all provinces? Why is there a need for paragraph (b) if we have already defined who is qualified under paragraph (a)?
Coleen Kirby, Manager, Corporation Canada, Policy Section, Industry Canada: Each province structures how it will legislate accounting differently. Some provinces have a single statute that creates the three provincial accounting bodies.
Senator Massicotte: Can you give examples?
Ms. Kirby: P.E.I. has recently changed their statute; Alberta has recently changed their statute.
Senator Moore: How have they changed it?
Ms. Kirby: They have one statute. Part 1 creates the chartered accountants of Alberta; Part 2 creates the certified general accountants of Alberta. Further on, another part lays out the qualifications to perform public accounting or audits. The act is in separate parts.
Other provinces, however, have four statutes. They have a statute that creates the provincial general accountants; they have provincial management accountants; they have a statute that creates the provincial chartered accountants; and, there is a wholly independent statute that then determines who is allowed to do what with respect to financial reviews. It may or may not create an independent body, which then essentially certifies or licences particular individuals or firms perform the actual review. In Ontario, the legislation is set up that way.
We have both situations, where everything is in one statute or everything is in totally separate statutes. If they are in a province that does it separately, they may be part of the certified general accountants, but the law does not touch who is licensed or authorized by the province to perform any kind of a financial review.
[Translation]
Senator Massicotte: Do you agree with that, Ms. Presseault?
Carole Presseault, Vice-President, Certified General Accountants' Association of Canada (CGA-Canada): No, that is not quite the situation. I was not able to prepare this in advance, but I will explain it. First, yes, the three orders of accountants are established by provincial legislation. So, for example, the Certified General Accountants Association of Prince Edward Island or the Certified Management Accountants of Newfoundland and Labrador are recognized as professional orders. Their mandate is essentially to protect the public. They fulfill that mandate by establishing eligibility criteria for the profession and for those who govern the profession.
[English]
Beyond that, I have not counted them recently, but there are hundreds of statutes that establish who may sign — I am simplifying things here — an auditor's report.
In British Columbia, for example, the Business Corporations Act, the Financial Institutions Act, the International Financial Business Act, the Legal Profession Act, the Real Estate Act, the School Act and the Society Act establish that any member of CGA-BC or the Institute of Chartered Accountants of British Columbia who has been granted an accounting licence may perform audits of public companies under those legislations.
I can provide you with this overview of the regimes in place in Canada. The area is complex, but in that same respect, for example, the Government of Canada has a number of statutes that establish who may provide an opinion on financial statements, according to those statutes.
Senator Massicotte: Let us say, we accept that the province is in a better position than the federal government to define who is qualified. In other words, we accept there is a public good to a government defining who is qualified to perform what in any profession. For example, they are a certified management accountant qualified under paragraph (a) in Ontario, which means they are now a member in good standing of an organization called Certified Management Accountants. However, if we also see a need for the province to define who is qualified to perform public audits, let us say, do we also need paragraph (b)? Without paragraph (b) or without other legislation, is there not a risk that certified management accountants can be employed to perform public audits?
Ms. Presseault: The key word here is ``what.'' The responsibility of the province is to oversee the professions, and they do that. They discharge that role by establishing the self-regulatory bodies.
However, in terms of doing ``what,'' my point earlier was that there are hundreds of statutes that establish who can do what, including a number of federal statutes. It is absolutely a provincial responsibility, and that is well reflected in paragraph (a). That responsibility is established in this legislation, as it should be, because it is up to the provinces. You would not want the federal government to recognize a self-regulatory organization or create one. However, you have the authority, through many other pieces of legislation, which have never been challenged, to establish who can do what under this legislation.
Senator Massicotte: I understand that, but is it accurate that under paragraph (a), they could be a member in good standing of the Ontario CMAs, for example, and satisfy paragraph (a), ``a member in good standing of an institute or association of accountants''? Yet paragraph (a) under Ontario apparently does not define in any legislation what they are qualified to do. It is in a separate act. Is that the case in Ontario?
Ms. Presseault: No, because there are a number of rules that all accountants must adhere to within the rules that govern the professional bodies.
In terms of public accounting, there is a separate rule in the self-regulatory framework. I cannot speak for other organizations, but in ours, the rules to be a public accountant are different. Not every professional accountant is a public accountant. To be a public accountant, they must meet additional requirements; what the minister referred to yesterday as courses and exams. The additional requirements are experience requirements, examination requirements and ethical requirements, such as the independence standard. I emphasize that to be a member in good standing of their professional body, to be a public accountant, they have to respect those rules. They must have liability insurance to protect their clients.
Senator Massicotte: Those rules are set by the self-governing association, not by the provincial legislature.
Ms. Presseault: Yes, they are set by the self-governing organization, exactly.
Senator Ringuette: I have a brief three-page document that describes the jurisdiction situation in the different provinces and territories in Canada. I am reminded of the minister in that we have a responsibility not to tread on provincial jurisdiction, and paragraph (b) treads on provincial jurisdiction.
Senator Greene: It is the opposite.
Senator Ringuette: The provinces have the legal responsibility to recognize skills, whether they are trade or professional skills. That is a given. We recognize in paragraph 180(1)(a) that the legislatures of the provinces have that authority, period.
I am somewhat dismayed that this bill has been in the works for such a long time and that we are finding issues like this one. With regard to the issue of Ontario, it is up to Ontario, not the federal government, to decide who can do what in regard to recognizing provincial trade and professional skills.
Mr. Chair, if you agree, I want to table, for every member of this committee, this three-page synopsis of provincial legislature enactment of responsibilities in regard to CGA associations in the different provinces. I think that synopsis will clarify the issue for all members.
The Chair: Can we know the source?
Senator Ringuette: Yes; it is from the Certified General Accountants' Association. It can be verified by our researchers.
Senator Moore: Is that the brief that Ms. Presseault mentioned that she could provide?
Senator Ringuette: Yes.
The Chair: Is it agreeable that the document should be filed?
Senator Ringuette: I think every member should have a copy to look into this issue.
The Chair: Before I turn to Senator Oliver, do the officials wish to make any comment on what we have heard?
Roger Charland, Executive Director, Corporate and Insolvency Law Policy and Internal Trade, Industry Canada: To perhaps clarify some misunderstanding, the text in paragraphs 180(1)(a) and 180(1)(b) aims at protecting and ensuring that provincial jurisdiction in the matter is respected and that this legislation does not override that jurisdiction.
This legislation will apply throughout Canada, so when we drafted the legislation, we had to be mindful of the various ways provinces and territories deal with this matter. In some cases, it may well be that paragraph (a) is sufficient, because the jurisdiction involved has decided to adopt a legislation that is all-encompassing, that does everything at the same time. However, other jurisdictions, such as Ontario, with the Public Accountant Act, have decided to split or separate the two areas.
Therefore, removing paragraph (b) and keeping only paragraph (a) sets the requirement of being a member in good standing of an institute or association of accountants, which, for example, means a member in good standing of the CMA.
Paragraph (b) is there to ensure that if the province has decided that additional requirements are needed to ensure this person has the qualifications to carry out the activities that public accountants under this act would carry out, then we want to ensure that they meet those provincial requirements. The policy intent behind paragraph (b) was to achieve the goal that Senator Ringuette mentioned.
The French text is drafted differently in terms of drafting protocols and conventions, and that is why we have a paragraph separated in the English version with (a) and (b), and we have a complete text in the French version. We have had linguists look at the text, and they are comfortable in telling us that both versions say the same thing. It is a matter of ensuring that however the provinces choose to regulate this issue, this legislation respects provincial regulation and does not override it.
The Chair: Without wishing to comment on the merits of what you say, I would love to hear evidence from the linguists who feel comfortable setting up subclause 180(2) exactly the same way in French and English, but for some unknown reason, they feel it necessary to treat subclause 180(1) in two different fashions. Sometimes common sense and professional qualifications do not match.
Mr. Charland: I am not a Justice drafter or a master of the protocols, but we have these same kinds of debates when we are in the drafting room.
The Chair: Maybe this committee would like to inquire into that question one day.
[Translation]
Senator Hervieux-Payette: The witness told us that there are a number of acts that deal with organizations, members of an institute in good standing, accountants' associations constituted as legal entities under a provincial statute. Once you are a member of an order that is mandated to carry out such and such a task, there can be one act, ten or fifty acts, the legislation is still provincial. So the argument is, why deal with qualifications because it is not up to us to decide them anyway; qualifications are established by provincial legislation. It is as if you said: you know, there are a lot of provincial statutes that cover all that; let us take a look at them. We understand that there is some redundancy. You give us explanation after explanation, but the explanations just end up confusing everyone. That is what I understand.
What if we did not have this reference to acts of provincial legislatures twice? What if we said it once at the start? Why say it twice? Any given mandate is going to be covered by one or two provincial acts; in Quebec, the mandate is covered in two cases, for CGAs and for CAs, and not for CMAs. They do not have the right to do that task, because of their own statute.
When you give the certification afterwards, I have a harder time understanding; it is all in the same paragraph. I can understand my colleagues thinking that we are saying the same thing twice. In a desire to respect the provinces, you are, for all intents and purposes, saying the same thing twice and confusing the committee. That is how I interpret it.
Mr. Charland: So do I.
Senator Hervieux-Payette: Basically, all provincial acts are included in the first part, subparagraph (a).
Mr. Charland: I would emphasize that (a) — in the English version, of course, the French version is drafted differently — just refers to being a member in good standing of an institute or association that is incorporated under a provincial act. So the reference to provincial legislation in (a) applies to the association of which you have to be a member in good standing, meaning that it has to be incorporated. Subparagraph (b) requires the individual performing the duty to meet the qualifications required under the act. So, the difference is between (a) and (b) in the English version — it is all one in the French version. . .The English version tries to do it too; it is the same thing.
[English]
Senator Oliver: I want to go back to the fundamental question asked by Senator Massicotte about subclause 180(1)(a) and subclause 180(1)(b). I think most people agree with subclause 180(1)(a). The issue is whether subclause 180(1)(b) meets qualifications with provincial legislation.
My question is for Ms. Kirby. Yesterday, Ms. Presseault told our committee that in Ontario there is a body called the Public Accountants Council, PAC; and this council, under the document circulated by Senator Ringuette, is the provincial body that provides the regulation. Ms. Presseault said yesterday that her group does not meet the qualifications. Is this not discrimination?
Ms. Kirby: The way Ontario has chosen to deal with financial reviews is that the province creates each of the provincial organizations. They then have a separate statute, the Public Accounting Act, which creates the PAC, whose job is to determine who may do the job of public accounting, that is, audits.
They have looked at the CGA requirements and have not yet approved them for providing audits in Ontario. They have also looked at the CA material and it has been approved. It is left to an independent provincial government body to determine who can and cannot perform audits.
Our concern, and the reason we put in paragraph (b), is that paragraph (a) refers only to provincial legislation creating the accounting organizations in each province. If there is a totally separate piece of legislation that has any bearing on who can or cannot conduct financial reviews, we want to respect provincial legislation and say that separate legislation that is not part of paragraph (a) applies.
Senator Oliver: This is the council in the case of Ontario.
Ms. Kirby: In this case, it is the council. We are not saying CGAs are not qualified to conduct reviews; we are saying the provincial government has the authority under the Constitution to determine matters concerning professionals.
It is up to provincial governments to determine these matters, and we will respect whatever the provincial government, or a body created by a provincial government, determines. Without paragraph (b), we do not have that; because paragraph (a), by itself, applies only to the legislation that creates the three provincial bodies, whether it is one act or three acts.
It is that separate legislation that is not part of the phrase ``incorporated by or under an Act of the legislature of a province.'' If the act does not create one of the provincial bodies, it is not covered by paragraph (a). To have any other piece of legislation passed by a provincial government, we must have paragraph (b). That is where the philosophy came from to include paragraph (b).
Senator Oliver: This paragraph 180(1)(b) is not new to Bill C-4. In previous iterations of this legislation in 2003, 2004, et cetera, paragraph 180(1)(b) was there. Indeed, in Bill C-21 that was brought in under the Martin government, I think paragraph 180(1)(b) was there as well.
Ms. Kirby: This section has not changed from Bill C-21. It was in Bill C-21 and it has been in every iteration of the bill since. It has had no wording changes since then.
The Chair: Before I give the floor to Ms. Presseault, speaking for myself only, I follow your argument, Ms. Kirby; and I think if there is separate legislation, paragraph (b) is necessary to catch it. However, we cannot seem to agree even as to whether there is at least one province — which, in my mind, is all it takes to require paragraph (b) — where there is separate legislation. I think you said Ontario.
Ms. Kirby: The Ontario Public Accounting Act.
The Chair: I heard Senator Ringuette say no, and I think I heard Ms. Presseault say no. I know which way I will go if you can convince me that there is separate legislation in at least one province, because then paragraph (b) will apply. Can you comment on that point?
Ms. Presseault: First, the Public Accountants Council for the Province of Ontario does not determine who should be licensed. The council does not issue licences. The mandate the council has in the Public Accounting Act 2004 is to set the standards for public accounting in Ontario.
A separate body sets those standards. In Alberta, it is set through legislation called Regulated Accounting Profession Act, RAPA. In Newfoundland, it is set through an organization called the Public Accounting Board. In Ontario, the Public Accountants Council, PAC, determines the standard. What I said yesterday is the Certified General Accountants in Ontario do not meet that standard.
Senator Oliver: That is what you said.
Ms. Presseault: However, I did not say they were not qualified. I said they did not meet that standard. It does not mean that they are not qualified. They do not meet that standard because that standard is not the CGA standard.
I remind honourable senators of the obligations of the Government of Canada under the Agreement on Internal Trade, AIT. In this discussion, we have not talked about the effect of the agreement; what it means to the not-for-profit sector or to competition in the marketplace. Yes, CGAs in Ontario, according to the statutes in place, cannot practice public accounting as defined by the Public Accountants Council of Ontario. However, our members — if they are recognized and they are members in good standing; they meet the requirements of the professional association — can provide statutory audits under a number of other pieces of federal legislation. I will name them again: the Bank Act, the Elections Act, the Canada Mortgage and Housing Corporation Act and so on and so forth.
It appears to me this whole discussion is about two things. First, it is about competition in the marketplace — that is clear and that has come out through the 10 or 12 years of the iteration of this bill. Second, it is about what we want to provide to the not-for-profit organizations here.
What I do not understand — and I have not had the opportunity to have those discussions for about six years with officials — is why these provisions are not contained in other Industry Canada modern legislation like the Canada Business Corporations Act, CBCA. I do not understand that.
I understand you are in a difficult situation. We are asking you to be the arbiter of what is essentially a competition issue in the marketplace.
The Chair: We do not shrink from our responsibility, but you will admit this difference of opinion has existed for a long time, as far as I am concerned. I am not sure we are Solomon, but we do our best.
Ms. Kirby: The only thing I will say is with respect to the Bank Act. Section 315, which sets out the qualification of auditors for the Bank Act, has four requirements. First, auditors must be Canadian, and we have not picked that up. Two of the others are the same as ours, in that they have to be a member in good standing of a provincially incorporated accounting association and they must be independent.
The Bank Act definition of ``independent'' is almost identical to the one in this bill. The difference is the Bank Act has chosen to put in a requirement that ``each have at least five years experience at a senior level in performing audits of a financial institution.''
This has been the way the Bank Act deals with whether or not they have the necessary experience to perform audits of financial institutions. I suggest that this standard is fairly high.
We have chosen instead to say that whatever the provincial requirements are for who can conduct public auditing, we will respect them. If a provincial government has a particular body that says they do not believe that a particular auditing group meets the standards of that province, we will not override that decision.
This decision is a provincial one. What we have chosen to do in paragraph (b) is to say that whatever the provincial government sets as the standards or the criteria, we will respect it.
Senator Moore: We were discussing the Ontario situation and the Public Accounting Act. In the sheets that were passed out from Ms. Presseault, it says regarding standards set by the Public Accountants Council, the Certified General Accountants of Ontario is in the midst of the ``sufficiency testing process.'' I take it, that process has been set out by the Public Accountants Council, under the Public Accounting Act. It goes on to say, ``We will be able to start issuing licences once it becomes an 'authorized' body under that act.''
I see the act was proclaimed in 2005. How long has the sufficiency testing process been going on in Ontario, and when will it end? Once it has ended, will the CGAs be promptly issued licences? Does that situation satisfy the interests and concerns of the CGA Ontario body?
Ms. Presseault: Senator, when you ask when it will end, you sound like one our members. Sufficiency testing is a long, arduous process and one that our affiliate in Ontario, along with CGA Canada, is involved in on a daily and weekly basis. This matter is serious and it involves something that CGAs wish to acquire, namely, the right to issue licences for their members. The issue is important, but I submit that it is a separate issue from this one.
Senator Moore: How long has it been going on?
Ms. Presseault: Since 2005; I also remind honourable senators that the reason the Public Accounting Act came to be was as a result of a trade challenge brought against the Province of Ontario under the agreement on internal trade in which the Province of Ontario was found to be out of line with their commitments to the Agreement on Internal Trade. That process is ongoing; we cannot put a timeline on it.
Despite that process, there is still an issue regarding the mobility of Certified General Accountants coming in from out of province. When we talk about the mobility in our world, we are not talking about a Certified General Accountant wishing to set up a shingle in Mississauga, but, rather, about a Certified General Accountant that wishes to follow a client across Canada as the client conducts business for whatever regulatory licensing requirements the client may need to follow for financial statements.
Senator Moore: What do the officials say about that situation?
Ms. Kirby: We have no involvement with what the Public Accountants Council of Ontario has done; reviewing standards, nothing.
Senator Moore: I thought you would say that.
Ms. Kirby: We tried to write a piece of legislation that said: If, at the end of that process, the CGAs are authorized to have met the standards and can issue the licences, they are authorized under this act to go ahead and perform financial reviews. If they do not receive that qualification for the provinces, then this act says they cannot go ahead and perform reviews. We are trying to respect the existence of that process and leave it to the provinces to resolve the issue.
Senator Moore: I know. I heard you and I heard you before. It looks to me like the CGA Ontario body, not to use strong words on this issue, is held hostage by the Public Accountants Council. I do not know who makes up that council or what the influences are within that group, but it seems to be extraordinary that, since November 2005 until mid 2009, this issue has not been resolved.
Is this of case of people ragging the puck here for subjective reasons? I do not understand this situation. They are professionals. I am concerned about this issue.
The Chair: Do you want to know who is on the council?
Senator Moore: That would be interesting to know.
The Chair: Do you want me to tell you? Our researcher has passed that information to me which states that:
(a) Councillors are to be composed of nine members who are independent of a designated body and who are appointed by the Lieutenant Governor in Council;
(b) four members who are appointed by the Institute of Chartered Accountants of Ontario;
(c) Two members who are appointed by the Certified General Accountants of Ontario;
(d) Two members who are appointed by the Society of Management Accountants of Ontario;
Senator Moore: I go back to the main point here. I think it ends up at the point Senator Fox raised yesterday about competition. I do not know why the CGA Ontario body has not been licensed. I expect that once they decide that a body will be licensed, then the criterion about what the body can and cannot do is set out. After three and a half years, why has this not been done? Can this kind of process, called the sufficiency testing process, happen in other provinces where CGAs, CMAs and others are frustrated in trying to acquire proper certification to perform their work and earn a living?
Mr. Charland: I am not sure what goes on behind the doors with the provincial regulators; I will not speculate on that matter. However, there is a forum where labour mobility is discussed. It is discussed under the Agreement on Internal Trade, where ministers are working out recent amendments to the agreement and trying to foster greater labour mobility. I think that issue is one of the issues being discussed in the process.
I am sure Ms. Presseault will agree with me on this: I do not want to lead the committee to think that this issue has been fully resolved. I do not think it has been resolved, but discussion has been occurring in that forum.
There are also the ministers of labour mobility — all the ministers, whether federal or provincial — who are dealing with professional accreditation. They have their own forum where those issues are discussed. It is not as if that issue is not being addressed. It is being addressed in this particular bill, but we wanted to ensure that whoever performs audits and financial reviews of not-for-profit corporations, for the benefit of and the protection of the public and our members, is qualified to perform them provincially.
There has been a lot of talk about the CGA, but there is also the CMA and other accounting firms. The legislation must deal with those groups as well. It must also deal with looking ahead to the future. This is today, but it is also setting a principle such that, whatever happens from now on, the framework should be that individuals that are able to carry out those audits and reviews under this act are qualified and meet the requirements set out by the provinces. We are going with that principle here.
The issue of labour mobility and competition is being discussed in other forums. The resolution, as I said, is like anything else. There is a balancing of interest. Some may be happier than others in terms of how these issues are being discussed, but the issues are being discussed.
The Chair: We will have to cut off this discussion, but Senator Ringuette wishes to have one last intervention.
Senator Ringuette: One of the issues that definitely must be highlighted here — and, my colleague Senator Moore touched on this — is that in Ontario there was a court decision that claimed discrimination. As a federal parliamentarian, I cannot endorse a piece of legislation that adds to some form of discrimination and has been disallowed by a court in Ontario.
The Chair: Is that a question or an opinion?
Senator Ringuette: I want an answer or rebuttal from the CGA on this point. From my perspective, if a court in Ontario has determined that the Ontario position with regard to legislation and recognizing qualifications has been deemed to be acting in a discriminatory fashion, then why should we, in a federal piece of legislation, endorse Ontario's discriminating practices?
The Chair: Do you wish to reply, officials? No? I gather not.
Senator Day: Four lights are on for the microphones.
The Chair: But no one is speaking.
Ms. Presseault: What I heard about the principle going forward is worrisome. I think we need to make a distinction about what is happening provincially and what the responsibility or the jurisdiction is federally. There are jurisdictions and precedents. Federal legislatures are able to set auditing requirements.
The Chair: Senator Massicotte, you indicated a small supplementary question and that is it.
Senator Massicotte: Our chair basically summed up the relevant question for me. I want to make this clear, Ms. Presseault: In Ontario, does the incorporation of the Association of CMAs make it less personal if the provinces define what they do? In other words, does the incorporation of that association tell us, and protect the public with regard to CMAs, who can or cannot do public audits? Is that in that piece of legislation?
Ms. Presseault: I do not know what is in the CMA legislation in Ontario. The Ontario legislation was changed a few weeks ago and I have not seen the final bill, so I do not want to comment specific to Ontario.
Provincial legislation is like any professional self-regulatory legislation; it sets out the responsibilities and roles of the regulatory body. That is what it does. It does not set the responsibilities of members.
The Chair: I think we better draw this discussion to a close and move on to clause-by-clause consideration.
Thank you very much, witnesses. We appreciate we put you in a difficult position without giving you warning. However, your input has been valuable to us.
I will start again; we started briefly last night but Senator Fox rightly pointed out that the clock was ticking and he had other responsibilities.
Is it agreed that the committee proceed to clause-by-clause consideration of Bill C-4?
Hon. Senators: Agreed.
The Chair: With leave of the committee, I will group the clauses of the bill.
Is that agreed?
Hon. Senators: Agreed.
The Chair: Shall the title stand postponed?
Hon. Senators: Agreed.
The Chair: Shall the short title in clause 1 stand postponed?
Hon. Senators: Agreed.
The Chair: Part 1, Interpretation and Application: Shall clauses 2 to 5 carry?
Hon. Senators: Agreed.
The Chair: Part 2, Incorporation: Shall clauses 6 to 15 carry?
Hon. Senators: Agreed.
The Chair: Part 3, Capacity and Powers: Shall clauses 16 to 19 carry?
Hon. Senators: Agreed.
The Chair: Part 4, Registered Office and Records: Shall clauses 20 to 27 carry?
Hon. Senators: Agreed.
The Chair: Part 5, Corporate Finance: Shall clauses 28 to 36 carry?
Hon. Senators: Agreed.
The Chair: Part 6, Debt Obligations, Certificates, Registers and Transfers: Shall clauses 37 to 103 carry?
Hon. Senators: Agreed.
The Chair: Part 7, Trust Indentures: Shall clauses 104 to 115 carry?
Hon. Senators: Agreed.
The Chair: Part 8, Receivers, Receiver Managers and Sequestrators: Shall clauses 116 to 123 carry?
Hon. Senators: Agreed.
The Chair: Part 9, Directors and Officers: Shall clauses 124 to 151 carry?
Hon. Senators: Agreed.
Senator Moore: On that section, I suggest an observation at the end with regard to that issue.
The Chair: Shall we discuss observations at the end?
Senator Moore: Yes, thank you.
The Chair: Part 10, By-laws and Members: Shall clauses 152 to 171 carry?
Hon. Senators: Agreed.
The Chair: Part 11, Financial Disclosure: Shall clauses 172 to 178 carry?
Hon. Senators: Agreed.
The Chair: Part 12, Public Accountant: Shall clause 179 carry?
Hon. Senators: Agreed.
The Chair: I am creeping up on it. Shall will consider the rest of the clauses, then come back to clause 180? Is that agreeable?
Hon. Senators: Agreed.
The Chair: Part 12, Public Accountant: Shall clauses 181 to 196 carry?
Hon. Senators: Agreed.
The Chair: Part 13, Fundamental Changes: Shall clauses 197 to 216 carry?
Hon. Senators: Agreed.
The Chair: Part 14, Liquidation and Dissolution: Shall clauses 217 to 241 carry?
Hon. Senators: Agreed.
The Chair: Part 15, Investigation: Shall clauses 242 to 249 carry?
Hon. Senators: Agreed.
The Chair: Part 16, Remedies, Offences and Punishment: Shall clauses 250 to 263 carry?
Hon. Senators: Agreed.
The Chair: Part 17, Documents in Electronic or Other Form: Shall clauses 264 to 271 carry?
Hon. Senators: Agreed.
The Chair: Part 18, General: Shall clauses 272 to 293 carry?
Hon. Senators: Agreed.
The Chair: Part 19, Special Act Bodies Corporate Without Share Capital: Shall clauses 294 to 296 carry?
Hon. Senators: Agreed.
The Chair: Part 20, Transitional Provisions, Consquential Amendments, Coordinating Amendments, Repeals and Coming into Force: Shall clauses 297 to 372 carry?
Hon. Senators: Agreed.
The Chair: Shall the title carry?
Hon. Senators: Agreed.
The Chair: Shall the short title in clause 1 carry?
Hon. Senators: Agreed.
The Chair: I will leave ``shall the bill carry?'' Let us go back. We have passed clause 179. Therefore, we are on clause 180.
Senator Ringuette: Mr. Chair, I have the following amendments to propose. I move:
That Bill C-4 be amended in clause 180 on page 83,
(a) by replacing lines 18 to 22 with the following
``of a province and''; and
(b) by relettering paragraph 180(1)(c) as paragraph 180(1)(b) or any cross-references thereto accordingly.
I have these amendments in both official languages.
The Chair: That, in non-legalese, is removing 180(1)(b), is it?
Senator Ringuette: Usually, it is done automatically but the Clerk of the Senate said ``for greater certainty.''
The Chair: Does anyone wish to speak to this amendment?
Senator Oliver: I am disappointed that there is an amendment. In the Senate, I am the sponsor of this bill. This bill has been around for a long time and an amendment means that, if passed in the Senate, it must go back to the House of Commons. The House of Commons likely will rise tomorrow and come back in September. There is talk in the air about an election in September.
If there is an election, this bill will once again die on the Order Paper. If that happens, it means all the people who wanted the not-for-profit passed so it could bring some certainty and accountability to what they are doing will lose once again. These people have been trying since 2003, 2004, 2005, 2006 and 2007 to have this particular bill passed. Thousands of not-for-profit organizations can benefit from this bill, and this amendment will have the possible net effect of meaning that, once again, it cannot be done.
A former chair of this particular committee, Senator Michael Kirby, sent an email that I circulated to everyone. If you read it, you will know that he has found that normal business practices cannot be used because of the current not- for-profit business law that was written in 1917. That is the situation we are faced with today. This amendment can easily have the effect that we will still be run by 1917 laws for not-for-profits, which do so much for our country.
I do not know why this item cannot be addressed with an observation, and left to the parties to negotiate further. I hope that honourable senators will think about the consequences of the amendment and what will happen: This amendment will have to go back to the other place.
Senator Ringuette: I find it striking that Senator Oliver would invoke that this bill is suddenly an urgent issue and that we may have an election call in the fall, which is speculation, while this bill has been delayed by three useless election calls. It has also been delayed by useless Parliament prorogation.
I also want to indicate that one of our witnesses in front of us with regards to Senator Kirby's letter is the daughter of Senator Kirby.
The Chair: That is hardly relevant to Senator Oliver's observations. Can we consider Senator Oliver's suggestion of observations and his remarks vis-à-vis the consequences?
Senator Ringuette: Yes.
The Chair: Thank you.
Senator Ringuette: In regards to the issue of discrimination and interprovincial mobility, we have identified an issue that directly affects both. We know what our position in this committee has been with regard to those issues.
I do not agree with the issues that have been brought forth by Senator Oliver. I will put on the record that I am not a member of any non-profit organization that this bill will apply to. I am also not a member of any accounting firm that this bill will affect.
Senator Moore: Senator Ringuette, I understand your intense work and feeling for what you are advocating, and I will support you as the critic of this bill. I have some reservation in doing so. At the same time, I will be most happy if you withdraw from the record your comment about Ms. Kirby, who I thought has been a forthright witness.
Senator Ringuette: I withdraw, Mr. Chair.
Senator Massicotte: Someone has suggested that I am in conflict. I will describe my conflict. I do not think I am, but I want to be transparent. I am a chartered accountant, CA, and a fellow chartered accountant, FCA. I do not think it is a conflict because it does not affect my livelihood and it does not affect CAs, but there has been some suggestion that I am in conflict so I thought I should declare that information.
Let me talk to the essence of this proposal. My understanding from the witnesses — and if I can have a copy of the act it would be better — is that the incorporation of accounts in Ontario under paragraph (a) does not go on to define who is qualified to do what in Ontario. In other words, they can be incorporated as a CA, CGA or CMA under paragraph (a), but in Ontario, that legislation does not go on to define who is qualified to perform public audits. If that is the case, which I understand it to be and we have witnesses on record saying that, I see it to be necessary to maintain paragraph (b) because paragraph (b) then goes on to allow the provinces to define who is allowed to do what. There is a public good for some government to define who is qualified to do what, and I think it is under provincial jurisdiction to do so. We should not immerse ourselves in their affairs. While they may be tardy, incompetent or whatever, we do not know and I express no opinion on that matter. I suggest we do not become involved in the matter, or enter into provincial territory as to who is qualified to do what and so on. I support the bill in its current form.
Senator Eyton: Senator Oliver and Senator Massicotte spoke eloquently about where I am coming from. I see, in simple terms, an effort that has been going on for a long time now that should be dealt with, and I think there is some vital need. I will speak about that in a minute.
I see it as a criteria or standard, saying that they have to be a member of a national organization, and then with the paragraph (b) part, meeting local requirements or meeting local standards. That paragraph cannot be all that bad. It seems to me, in federal legislation, we say only that we recognize that they have that authority under the Constitution and in practice. We do not want to intrude on that authority.
I have concerns from the testimony of the witnesses, but the dispute has been a long-standing one. The question occurs to me, why has it been so difficult? For example, with Ontario, why has it been so hard for Ontario to extend their standard to apply to CGAs? It probably has something to do with competition, but I am not sure. The makeup of the body referred to was balanced, and I gather it has been in operation for a few years.
The real difficulty is that the provinces have varying and different standards. Why is there no universal standard? I do not know why the accounting professions, whatever qualifications they require, cannot come together. It seems to me not such a difficult thing to say, with respect to certain practices, that these standards will apply. It cannot be that complicated.
I have concerns about competition. I have concerns that the provinces have not come together. However, notwithstanding those concerns, I support the bill, with strong observations asking the provinces to be consistent; at least to the degree that (b) is not necessary. The problem is the inconsistency that requires the inclusion of (b).
On a personal note, I have been involved in many not-for-profit corporations. Some were not planned that way. However, I have never encountered this issue as a problem. My personal survey would cover 25 or 30 purely intentional not-for-profit corporations. It looks like a big issue, but in practice, I do not think the problem is widespread. It would be hard to come up with an example where it became a problem.
Senator Fox: I thank the witnesses that came before us. They brought forth compelling arguments on both sides of the issue. I congratulate them on their professionalism. I thought the Industry Canada officials were well prepared. They have been through this issue a number of times, and their arguments were also compelling. That does not mean I always agreed with what they said. I thank them for their professionalism and the way they put forward their arguments.
I strongly support the bill. I serve on a number of boards of not-for-profit organizations, and I think it is important that the bill pass. I am not convinced by that argument that it must be passed today. I want it to pass, and I hope it can pass today. If we amend the bill, it goes back to the House of Commons and comes back in whatever way the House wishes to dispose of it, if not tomorrow, perhaps on September 14 or 15 when we come back. The House of Commons is in a position to either agree or disagree with us. If they disagree with us, we will let it pass. At a minimum, we will dispose of the amendment. Either it passes or it does not pass. A large consensus is that if the amendment does not pass, there should be, at the minimum, observations attached to the bill in that regard.
The basic plus side of the amendment is that it sends a signal that we are not happy with the situation as it is now. There may be provinces that have not defined the rights, obligations and duties, and somehow we will legislate — I hate the word ``discrimination'' — discrimination against one body and in favour of another. Even if the House of Commons sends the bill back to us, we will have sent an important signal to the provinces, particularly the provinces in default, that they should take their responsibilities seriously. For those reasons, I will vote for the amendment.
Senator Day: It is important for us to declare any potential conflicts of interests, so I declare that I am not a member of the chartered accountants or certified general accountants, but I am a member of several self-regulating bodies. I am also a member of a number of boards for not-for-profit organizations.
From that point of view and with that declaration, I will support this amendment. I heard the CGA say — and I think Senator Massicotte missed the second part — that when they are incorporated provincially, they are incorporated to license their members according to the rules they set out. The associations have a number of different rules for different activities, including public accounting. The provincial body will not tell the member that they can do something that is contrary to any provincial law. The associations obviously will not do that or they will lose their incorporation rights and the right to self-regulate. To be a member in good standing, a member must follow the licensing rules of that self-regulating body. All that provision means is that whatever laws apply provincially will be administered by virtue of the incorporation, and therefore, we do not need (b). That position supports the position of our deputy chair earlier that paragraph (b) is redundant and therefore can create confusion and unintended consequences by virtue of its inclusion.
Senator Hervieux-Payette: I want to be on the record. We know that Ontario is the heart of the financial sector, so I agree that CGAs should have the right to conduct their activities in that province like anyone else in this country. I come from Quebec. CGAs have permission to do all the activities, including auditing.
Referring to non-profit corporations, because I have served a zillion years with a non-profit corporation, there are people on both sides who are more or less volunteers, even though they charge a small fee. It was usually my role to negotiate with them to perform an audit for us for peanuts, because they were not paid the usual fee their firm charged. We are depriving our non-profit corporations of a large number of people. For that reason, I support the amendment. If we can wait for a certain number of years, we can wait for a few months more to have all those who want to serve the non-profit corporations join the clubs of hundreds and thousands of these organizations.
[Translation]
The Chair: Moved by Senator Ringuette that Bill C-4 be amended in clause 181, page 83, by substituting the following for lines 17 to 20. . .
Senator Hervieux-Payette: It is line 17 in French, but line 18 in English.
[English]
(b) by re-lettering paragraph 180(1)(c) as paragraph 180(1)(b) and any cross-references thereto accordingly.
All in favour of the amendment please signify.
Line Gravel, Clerk of the Committee: Six.
The Chair: All those opposed please signify.
Ms. Gravel: Six.
The Chair: The amendment fails then.
I am informed that the Library of Parliament — Julian Walker, who is here to assist us — normally prepares observations if we wish to have observations. Mr. Walker, do you wish some guidance?
I should finish, I am sorry. Shall clause 180 carry?
Some Hon. Senators: Agreed.
Some Hon. Senators: On division.
The Chair: The clause carries on division. If we wish to have observations, the Library of Parliament will prepare something.
Senator Oliver: Senator Moore indicated during clause-by-clause consideration that he wanted to come back to a section for observations.
The Chair: That is one observation, and you indicated that perhaps it would be appropriate to have observations with respect to clause 180.
Senator Oliver: Yes.
Senator Harb: It should be as part of the observation, stated in the strongest possible terms, that we want to ensure consistency in the application of the law. What came out loud and clear is that we are setting a precedent here. The CGA Association mentioned that there are a number of federal laws already on the books, such as the Bank Act, the Central Mortgage and Housing Corporation Act and others that do not make those references. Their fear is that for us to make them in this legislation, we create a precedent that could discriminate against 70,000 professionals who practice their profession across the land.
The second point is as important. The association clearly stated to us yesterday that under the present rules, although they are not allowed to practice in Ontario, they can work and practice when it comes to issues dealing with the Canada Elections Act, because the act is a federal statute and does not exclude them, as this bill does in paragraph 180(1)(b). If possible, we should put in strong terms that we want the government to sit down with CGAs as soon as possible, because otherwise this committee and maybe other bodies of the Senate will need to revisit the situation because this situation goes against everything that we stand for as a committee.
We are the committee that has been studying interprovincial trade. We had an extensive number of hearings across the land. We wanted to have uniformity in the law, in particular when it comes to labour mobility. This issue goes right to the heart of labour mobility.
While this debate was useful and it was conducted in a fair manner, we do not want to delay the legislation, especially in light of the fact that it was supported by all the political parties. Yet, we want to ensure that the government knows that more work needs to be done.
The Chair: When you say sit down with the CGAs, do you mean all accounting professional bodies or only the CGAs?
Senator Harb: I mean whatever it takes; perhaps all the other bodies, perhaps CGAs. Since CGAs are the ones that have the beef with the issue, we could start with them and, if necessary, bring others to the table. That point is important.
Senator Massicotte: I would word it more generically. Many independents are doing a good job. The wording should say that obviously we are in favour of interprovincial trade; we are in favour of competition; and we have concerns as to openness and whether people are protecting their territory.
I would make it more generic and say we encourage these associations to be open to competition, or something of that nature. That is where we are coming from. We cannot express an opinion as to whether it is appropriate, but we should encourage competition.
Senator Hervieux-Payette: Senator Eyton, you made some observations. Why do you not give us your side?
Senator Eyton: I am developing a nasty habit. I tend to support Senator Massicotte in whatever he says and does.
I believe there should be observations. I think they should reflect the tenor that Senator Massicotte referred to. We have heard things that are concerning, and they should be reflected in observations that do not try to decide anything or pick winners and losers, but rather the observations should talk in general terms about the issue we see and the need for consistency and even-handedness in establishing qualifications.
The Chair: We could include something referring to our hard work as compared to perhaps not as much hard work elsewhere, but we will leave that.
Senator Moore: Does the researcher have enough with regard to the concerns I expressed yesterday?
The Chair: Do you want to elaborate on that concern now?
Senator Moore: Yesterday I listened to the minister's comments, but I have a concern with regard to the due diligence defence as opposed to the traditional idea of volunteers working for the community cause and for the common good, acting in good faith and acting in the law. This test will be a strenuous one for these people to meet. It will inhibit, rather than attract and lead to the retention of, qualified directors and officers in our community not-for- profit organizations. I want to register that concern.
I heard the officials say they thought that the insurance premiums will go down. That effect remains to be seen, because I see this test as becoming more onerous, and insurance companies are looking for more and more things, and charging more for those newly defined qualifications and duties.
The Chair: Senator Moore, you have been closer to the practice of law than I have. Is a good faith defence easier to meet than a due diligence defence?
Senator Moore: Yes.
The Chair: If you do not have anything in the common law, a defence would be good faith.
Senator Moore: Yes.
The Chair: The officials took the view, rightly or wrongly, that in the absence of any specified standard of care, the situation was vague and led to uncertainty and to the insurance companies maybe not knowing what to do. This test gave them some certainty.
Senator Moore: That is what they said. They said acting in good faith is a lesser test than acting reasonably. I do not subscribe to that view.
People do not become involved in volunteer organizations for self-interest or for monetary gain or to conduct matters in an improper or unlawful manner. To me, the issue goes right to the heart of what not-for-profits are and what they have been traditionally in our country.
Senator Massicotte: The Canadian Bar Association raised this issue in front of the House of Commons committee, and I also agree that we should comment on it. The legislation is an improvement on the status quo, which is a void. The insurance companies and many others are wondering about the responsibility.
I share Senator Moore's comment that there is an increasing responsibility for prudent directorship; and the defence, if you wish, is the due diligence defence that we see as dominant in the corporate world as well as being defined by the courts.
My concern is probably similar to Senator Moore's. I sit on boards for not-for-profit organizations. I tell the boards I am not available for much of the time and they say, do not worry, just sit on the board and it is okay.
My worry is that if the test is the same in not-for-profits as it is in the corporate world, some of us will be discouraged from sitting on boards because often, we are not present at meetings. As you know, in law, even if you are not present, you support the decision. We should express a concern because that situation may discourage intelligent, willing people from sitting on those boards.
The legislation says due diligence such as a ``prudent'' administrator would apply in a comparable circumstance. The argument the qualified department officials make, I presume, is that, related to comparable circumstance, the court will consider the fact that the organization is not-for-profit, and therefore, supposedly the due diligence test will be softer than in the corporate world. That may be the case. The courts will need to determine what comparable circumstances are in a not-for-profit organization. Is a not-for-profit organization any different from a corporation? I think our guidelines will comment of that nature and alert the department that they may need to provide clarity and lessen the responsibility of a board member for a not-for-profit organization compared to the corporate world, if the courts go off in the wrong direction on this issue.
If courts apply the same rule as in the corporate rule, it is not in the interests of our society. We do not know if the courts will but I would alert the department regarding that matter, in the comments.
Senator Hervieux-Payette: Many more women are sitting on these boards than men, and that is probably the only field where women are succeeding at becoming chairpersons. That is only a little caveat. However, we sit on many non- profit corporations and in my case, one of them is Les Grands Ballets Canadiens. Their meeting is on Wednesday and we sit on Wednesday, so I cannot attend. The organization insists that I remain on the board because they want to have the endorsement of well-known people, and it is on the letterhead of the organization.
I am sure other people have similar examples of many other organizations. There is a long list of people who sit on the board, and obviously I cannot attend the meetings. Will we exclude everyone who brings something to the organization? Sometimes it means only that the person writes a cheque for $100,000 at the end of the year.
I subscribe to the argument to clarify that issue, because if we exclude people who bring a lot to the non-profit corporations — if they do not attend meetings they are likely to pay a big price if there is a problem — it will not take long before anyone with any kind of a high professional occupation will not be able to sit on these boards. We will not benefit from their financial support, and sometimes their direct involvement in projects in a particular time frame. However, attending meetings is the big requirement of what they are supposed to do. In a corporation, it is necessary, and who has attended and who has not is published at the end of the year. We have that requirement in the Senate as well.
The Chair: You are caught both ways.
Senator Hervieux-Payette: We are absent either from the Senate or from the board. I want this observation to be specific; that we want at least some indication that we will not lose many generous people sitting on these boards.
Senator Massicotte: Should the record also reflect that we have female chairs and co-chairs?
Senator Eyton: For now.
The Chair: Mr. Walker, do you have enough information? We all speak with extraordinary clarity, so I cannot imagine you have any problem at all.
Senator Harb: Should we mandate Mr. Walker to include everything in the report that reflects the general discussion.
Senator Massicotte: I want a copy to be circulated with a requirement to respond within 24 or 48 hours, and that the steering committee consider those comments in formulating the report. We should circulate a draft of the report, as opposed to simply delegating responsibility completely to the chair.
The Chair: You said report; do you mean a draft of the observations?
Senator Massicotte: Yes.
The Chair: Fine; is it acceptable to send the observations in one language only, as a broullion?
[Translation]
Senator Day: In which language?
Senator Hervieux-Payette: Just in French!
[English]
Senator Fox: Can we have the observations today?
The Chair: Is that acceptable?
Senator Fox: I know Senator Oliver is concerned about passing the bill.
Senator Day: There is no amendment.
Senator Fox: I know there is no amendment, but do we have to agree to the observations?
The Chair: No; they are provided as an attachment. I will report the bill but with observations, if that is agreeable to everyone.
Ms. Gravel tells me that I did not ask, ``Shall the bill carry?'' Is it agreed that I report Bill C-4 to the Senate without amendment but with observations?
Hon. Senators: Agreed.
The Chair: Do we attach the observations when I report it?
Ms. Gravel: Yes.
The Chair: My report is next week.
Senator Hervieux-Payette: On Monday.
The Chair: Can we have these observations completed by tomorrow?
Senator Fox: We will be able to see and vet the observations and submit our comments to whomever?
The Chair: I guess comments are submitted to Ms. Gravel.
Line Gravel, Clerk of the Committee: Maybe we will have them by the end of the day today if we are lucky.
[Translation]
The Chair: The problem is that the translators are overloaded.
Senator Massicotte: Can we have the English today and the French tomorrow?
Senator Fox: The French today and the English tomorrow.
[English]
Julian Walker, Analyst, Library of Parliament: Is first thing in the morning acceptable?
The Chair: Will you have it in both languages first thing in the morning?
It will be ready tomorrow. Senators, you will have it by email. Thank you all very much.
Senator Moore: We will report the bill on Monday?
The Chair: Yes; is that okay?
Senator Moore: Yes, that is fine.
(The committee continued in camera.)