Bill to Amend the Canada Business Corporations Act and to Make Consequential and Related Amendments to other Acts
Third Reading--Debate Adjourned
October 31, 2023
Moved third reading of Bill C-42, An Act to amend the Canada Business Corporations Act and to make consequential and related amendments to other Acts.
He said: Honourable senators, as sponsor of Bill C-42, I want to thank the Chair of the Standing Senate Committee on Banking, Commerce and the Economy — Senator Wallin — the deputy chair — Senator Loffreda — and members Senator Bellemare, Senator Colin Deacon, Senator Gignac, Senator Marshall, Senator Martin, Senator Massicotte, Senator Miville-Dechêne, Senator Petten, Senator Ringuette and Senator Yussuff for their study of Bill C-42. As always, they conducted a detailed review of the legislation before them.
Colleagues, this legislation will, if passed by the Senate, help fight overseas tax evasion, money laundering and fraud by imposing some of the strictest penalties in the world on those who fail to disclose the information required to identify who is actually benefiting from ownership of a given company or corporation.
Corporations could be fined up to $100,000, and directors and officers of those corporations could personally face fines up to $1 million as well as up to five years in prison.
Bill C-42 will establish a free, publicly accessible beneficial ownership registry of corporations governed under the Canada Business Corporations Act. Such a registry would enable all Canadians to overcome corporate secrecy and look past shell companies to see who truly owns a given company. Such transparency would not only allow Canadians to know more about the businesses they deal with but also support the Government of Canada’s efforts to combat money laundering and terrorist financing, deter tax evasion and tax avoidance and ensure that Canada is an attractive place to conduct business.
Honourable senators, as important as the passage of this bill is, only about 15% of Canadian corporations are covered by this legislation. The registry will only truly become effective if all the provinces and territories join it in order to provide 100% coverage. The good news is that Quebec and British Columbia are already on board. As witnesses have stated, it is a first step — a vital one, but a first step, nonetheless.
Canadians have been waiting for this important piece of legislation to fight money laundering and overseas tax evasion, and that is why I’m pleased to have had the opportunity to sponsor this bill. The Panama Papers, as well as other mass leaks, have shown that criminals look for places with a lack of beneficial ownership transparency. We should not underestimate the significant burden tax evasion and avoidance place on the Canadian economy.
In 2019, the United States Department of State designated Canada as a major money laundering country. A United States Department of State report from March 2022 estimated that every year in Canada, between C$50 billion and C$120 billion is laundered — which is roughly 5% of our GDP.
Moreover, a 2020 report by the Criminal Intelligence Service of Canada found that money laundering represents between 2% and 5% of GDP in Canada, which means between C$45 billion and C$113 billion is laundered in this country every year.
The lack of beneficial ownership transparency is impacting the trust of Canadians and foreign investors in our economy. With our stable government and banking system, we have become an international hot spot for criminals and foreign money that has been obtained by drug cartels, corrupt dictators and the Mafia. We must put an end to Canada’s reputation as a most attractive country in which to launder money. The registry proposed by this bill would be a significant step forward in this regard, and of great benefit to law enforcement and in building and reinforcing trust in the Canadian marketplace.
Colleagues, I seek the support of senators to pass this legislation. Thank you.
Honourable colleagues, I rise to express the importance of Bill C-42 as a powerful invitation to provinces and territories to follow suit and put in place similar transparency regimes with respect to beneficial ownership.
Many of you may not know, but in a previous life, I was a corporate law partner in a national law firm. This bill is, thus, of great interest to me and brings back many memories. Today, I would like to bring your attention to the Quebec legislation as a model that each province and territory should consider.
As was pointed out at second reading by both the sponsor and the critic of the bill, as well as today at third reading by the sponsor — I thank them for their excellent remarks — this bill will apply to about 500,000 corporations; that is, those that are incorporated under the Canada Business Corporations Act, or CBCA.
You may think that’s a lot, but it isn’t. In fact, it represents only 15% of Canadian corporations. The remaining 85% of corporations operating in Canada are legal entities incorporated under provincial or foreign legislation.
Moreover, many businesses in Canada operate through a trust, partnership, limited partnership, cooperative or joint venture, or are carried on by one or more individuals. All these businesses are regulated by provinces and territories. In fact, under our Constitution, most businesses, whether incorporated or not, are governed by provincial laws.
In order to stop money laundering and the recycling of proceeds of crime, provincial legislation providing for public access to information regarding ultimate or real beneficial ownership is urgently required across Canada.
Over the past 10 years, every province except Alberta has passed legislation to implement a registry of the real beneficial owners of business corporations incorporated under their respective corporations laws.
Most of these laws require business corporations to keep an internal beneficial ownership registry and to report to the relevant province’s director of corporations information about the individuals who effectively control each business corporation.
I will note that this information is not publicly available, except in British Columbia and Quebec. In British Columbia, the provincial corporations registry has been in place since October 1, 2020, for private corporations, whereas the register of individuals with significant control was implemented in mid-2019. The full registry for British Columbia will come into force in 2025.
In Quebec, a bill entitled An Act mainly to improve the transparency of enterprises was introduced on December 8, 2020. That bill was passed on June 8, 2021, and came into force seven months ago on March 31, 2023.
Paul Martel, a lawyer and leading authority on Quebec corporate law, and a personal friend, described Quebec’s new law as follows in his treatise entitled La société par actions au Québec:
The new law amends the Act Respecting the Legal Publicity of Enterprises mainly to institute new rules relating to information about the ultimate beneficiaries of corporations and to expand the role of the enterprise registrar to optimize the reliability of the information contained in the enterprise register, improve the transparency of enterprises and enable Quebec’s participation in the international movement to fight tax evasion, money laundering and corruption.
Quebec’s new regime is innovative because it does two things that are not done in most other Canadian jurisdictions. First, it applies to all businesses operating in Quebec, regardless of their constitutional jurisdiction, including federally incorporated companies. Currently, federally incorporated companies operating in Quebec have to provide and make public information about their ultimate beneficiaries. This bill will therefore not change anything for companies operating in Quebec.
In other words, the Quebec legislation applies not only to companies that are incorporated under Quebec law, but also to federal corporations and those created under legislation in another province or even a foreign state, partnerships, limited partnerships, trusts and individuals doing business in Quebec.
The definition of “ultimate beneficiary” is similar to the one found in the Canada Business Corporations Act, which we are amending today through Bill C-42. Essentially, it refers to an individual who controls or holds, even indirectly, or is the beneficiary of 25% or more of the shares of a corporation, voting rights or units of a trust or partnership, or persons who are acting as nominees for another person or a company.
The Quebec legislation also stipulates that the company is required to take the necessary steps — as opposed to reasonable means in the federal law — to identify its ultimate beneficiaries, verify their identity and update the information.
In addition, proof must be forwarded to the registrar of companies regarding the identity of directors by supplying a document from a government authority confirming the name, address and date of birth, such as a passport, driver’s licence or health card. The information provided is verified.
Then, that information is accessible to the general public. Quebec is following the example of the United Kingdom and most countries in the European Union, who make information on beneficial owners available to the public, and that includes not just business corporations, but all companies doing business in Quebec.
I want to specify, however, that the date of birth is not made public and that a person can provide a business address in addition to their home address. In such cases, only the business address will be made public.
Finally, as of March 31, 2024, the registrar of companies can provide anyone who is interested with additional information based on an individual’s name and address, as long as it does not include any information that cannot be consulted under the act, namely, the home address of a person who provided a business address or the person’s date of birth. As a result, it will be possible to find out all of the businesses that a person is connected to by checking the Quebec business registry. This measure seeks to improve transparency. The non-disclosure of personal information, such as date of birth and home address, seek to protect privacy and prevent identity theft.
In conclusion, today we adopt an important amendment to the Canada Business Corporations Act. I hope — as it was the case in the past for the introduction of an internal registry in each company about beneficial ownership — that these important changes that we are going to introduce to the Canada Business Corporations Act will also be adopted by all the provinces and territories in order to ensure public transparency regarding beneficial ownership in relation to the corporations incorporated under their laws. I also invite them to do the same for partnerships, associations and trusts, like Quebec did.
Finally, I hope the other provinces will look at Quebec as an interesting model to achieve more transparency, not only for provincially incorporated entities, but also for all the other entities that are used to conduct business in their provinces.
Thank you. Meegwetch.
