44th Parl. 1st Sess.
March 31, 2023 10:00AM
moved that Bill C-42, An Act to amend the Canada Business Corporations Act and to make consequential and related amendments to other Acts, be read the second time and referred to a committee.
He said: Madam Speaker, I am pleased to be here this morning to talk about Bill C-42, which is a very important bill. I am pleased to have the opportunity to speak to Canadians about the important role Bill C-42 will play in combatting money laundering and bringing greater transparency to corporate Canada.
Today, I am proud to speak to Bill C-42, which deals with amendments to the Canada Business Corporations Act as well as other acts, to create a public beneficial ownership registry for businesses incorporated federally. Our government is committed to a robust and effective regime that will combat money laundering and tax evasion, improve Canadians' trust in the marketplace and make Canada a leader in corporate transparency. Creating a free, public and searchable registry of beneficial owners of federally regulated Canadian corporations would increase corporate accountability and improve public trust in corporate institutions.
Why do we need a public beneficial ownership registry?
Corporations are the driving force behind our economic growth, innovation and competitiveness. They are the primary source of jobs and prosperity for Canadians. They are the means for entrepreneurs to make strategic investments and take calculated risks without jeopardizing their financial stability.
Unfortunately, bad actors can misuse the legal structures of corporations to engage in illicit activities such as money laundering, corruption and tax evasion. Corporate entities can be misused to avoid economic sanctions and to impair the tracing or freezing of assets. This reprehensible conduct can in turn have serious negative consequences for Canadians, notably impacting crime rates and tax revenues. For these reasons, Canada's federal and provincial finance ministers agreed in 2017 to pursue legislative amendments to improve transparency with regard to the individuals who ultimately control businesses incorporated in Canada.
Shortly thereafter, the Canada Business Corporations Act was amended to require federal corporations to hold accurate, up-to-date information on their beneficial owners. Additional changes were enacted to allow law enforcement and tax authorities to requisition this information when they believed it would be relevant to an investigation. All of these changes came into force in 2019. Since then, nearly all provinces have followed suit and enacted similar amendments in their respective jurisdictions, and now our government is taking a significant step toward a more transparent marketplace.
Through this bill, we are seeking to implement a pan-Canadian registry of the beneficial ownership information collected by corporations. This is a bold and significant undertaking that we are doing as a government.
First and foremost, it would strengthen Canada's efforts to prevent and combat financial crimes by providing law enforcement agencies with timely leads on potential suspects, witnesses and evidence. The registry would also facilitate tax administration and the identification and seizure of suspected proceeds of crime and terrorism financing. More generally, the registry would improve corporate accountability and thus help protect the public, improve trust in business institutions and ensure a well-functioning marketplace.
Simply put, increasing beneficial ownership transparency will enhance Canada's good international reputation as a safe, fair and competitive place to do business and provide even greater legitimacy to law-abiding Canadian businesses.
Unfortunately, over the years, some individuals have managed to take advantage of Canada's corporate framework to try to hide assets and hide other criminal activity. We need to work together to tackle this unacceptable practice.
In budget 2022, our government announced plans to accelerate the creation of a public beneficial ownership registry. Obviously, since corporate law is a shared jurisdiction, the registry will apply to the approximately 500,000 entities governed by the Canada Business Corporations Act. However, in developing the registry, we will ensure that provinces and territories that agree to join forces with us to combat tax evasion will have access to that shared data.
I will note what Bill C-42 would amend.
The amendments proposed in Bill C-42 represent the second series of changes to the Canada Business Corporations Act in relation to the creation of the registry. The first series of amendments, which were adopted by Parliament last June, would require federally incorporated companies to proactively submit information on their beneficial owners to Corporations Canada on an annual basis or when a change of control occurs. They would also allow Corporations Canada to disclose all or part of that information to an investigative body, the Financial Transactions and Reports Analysis Centre of Canada, otherwise known as FINTRAC, and other prescribed entities.
Furthermore, the amendments proposed in Bill C-42 would require corporations to collect and send additional information about their individuals of significant control, namely residential address and citizenship. They would also require that Corporations Canada make publicly available a portion of this information, while introducing an exemption regime for certain at-risk individuals, including minors. The bill also includes protections for whistle-blowers, bolsters investigation powers of Corporations Canada and creates new penalties to ensure robust compliance with the new regime.
Bill C-42 further proposes consequential amendments to other federal statutes, namely the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and the Income Tax Act, to facilitate information sharing and data validation in order to maintain the accuracy of the information in the registry.
Let me elaborate now on a few key features of the upcoming registry that deserve highlighting.
First, Bill C-42 would adopt a charter-compliant, made-in-Canada balance between corporate transparency and the protection of privacy. A number of key elements of information, including the name and address of each individual with significant control, would be publicly accessible and searchable. Other more sensitive data points, such as date of birth and citizenship, would only be available to law enforcement and certain authorized entities.
In addition, Bill C-42 proposes to permit exemptions from publication for minors as well as individuals who are incapacitated or who fear for their safety. All in all, this would ensure the registry is useful to foreign law enforcement agencies and regulated entities under anti-money laundering legislation, as well as media and not-for-profit organizations, while ensuring that it is not being misused for fraud, discrimination or other nefarious activities.
Second, the government is making a significant effort to ensure the integrity of the data available to law enforcement and the public. The experience of other jurisdictions has shown that the value of a registry is directly correlated to the accuracy of the data it contains. If the information is not current or reliable, police, tax authorities and financial intelligence analysts will stop relying on it, which would defeat the purpose.
For that reason, the government is proposing a rigorous system to ensure compliance, and it will include administrative and criminal penalties.
For example, companies that fail to provide information about beneficial ownership to Corporations Canada may be prevented from obtaining a certificate of compliance, which is often required to support a loan application or to enter into a contract with a supplier or even a potential buyer.
Corporations Canada also has the power to carry out the administrative dissolution of a business, which is a powerful deterrent to repeated and extended lack of compliance.
From a criminal law perspective, an administrator or manager of a business who knowingly violates the requirements for beneficial ownership transparency could be fined up to $200,000 or be sentenced to six months in prison. These are among the harshest penalties in the world for this type of offence.
The government is also taking a robust ecosystem approach to data verification and validation. The director of Corporations Canada would, to begin with, be empowered to request proof of the steps taken by a corporation to verify its beneficial ownership information, enabling the creation of a risk-based audit system. Whistle-blowers would be explicitly protected to incentivize the disclosure of corporate wrongdoings, and consequential amendments would ensure that the information can be cross-referenced with relevant data collected by the government pursuant to the Income Tax Act and the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
Third, I want businesses to know that we have made and will continue to make every effort to limit the administrative burden of the new requirements. The government is well aware that the vast majority of business corporations are small and law-abiding and wants to ensure Canada remains a place of choice to invest and grow.
The bill would minimize the administrative burden by leveraging existing intake and reporting mechanisms that businesses incorporated federally are already familiar with. Corporations would, for example, have to report their beneficial owners on an annual basis, which aligns with the annual updates they are already required to file on other corporate matters. The requirement for corporations to report information within 15 days of a change also aligns well with the requirement already in place for directors.
The government would also assist corporations by publishing guidance documents and engaging in education efforts to ensure corporations are not unwittingly failing to comply with their new obligations.
Now let us talk a little about collaboration with the provinces and territories.
We started working on beneficial ownership transparency with the provinces and territories just over five years ago, and that successful collaboration continues to this day.
We recognize that corporate law is an area of shared jurisdiction and that any legislative amendment to facilitate the collection of information on beneficial ownership under that umbrella would ultimately be up to the discretion of each legislature within the Canadian federation.
That being said, we are very aware of the importance of maximizing coverage to ensure that the pan-Canadian registry reaches its full potential.
That is why we are working hard to ensure that the federal registry is scalable and provides access to the beneficial ownership data held by provinces and territories that agree to participate, as we committed to doing in budget 2022.
I am pleased to see that the Government of Quebec will soon launch its own beneficial ownership registry, and my department is in regular contact with the Quebec teams to ensure the interoperability of our registries.
One of my colleagues in the House even told me that the registry was online as of today. We will do the same with all of the provinces and territories that have this same objective of enhancing corporate transparency.
Let me say a word about international best practices. Canada is working closely with many of its international counterparts that have introduced or are about to introduce a beneficial ownership registry. The majority of the G7 and Five Eyes countries, as well as 112 other countries, have promised to put this in place, but few have finalized the implementation. With financial crimes being increasingly cross-border, which I think all colleagues can agree on, we need to contribute to the global fight against these crimes.
Indeed, as a founding member of the Financial Action Task Force, which is the intergovernmental standards-setting body for financial transparency led by the G20, it is incumbent upon Canada to act in tandem with other countries and international partners to stem further proliferation of illicit corporate activity. Strengthening beneficial ownership transparency, as we are doing through this bill, would allow Canada to do its part in the global fight against financial crimes and align with international best practices.
Let me conclude with a few remarks.
The government has committed to protecting Canadians from money laundering, terrorist financing and tax evasion and avoidance, while ensuring that Canada remains an attractive place to do business.
Making beneficial ownership information publicly available supports broader corporate transparency, good governance and trust. Police and tax authorities will have ready access to the data they need to enforce the law; regulated entities such as banks and realtors will have a new tool to support their due diligence obligations; investigative journalists and NGOs will be better equipped to trace ownership across entities and jurisdictions; and entrepreneurs and consumers will know whom they are doing business with, injecting more trust in the marketplace.
We are already hearing from transparency organizations that this bill would be a massive blow to money launderers. I call on my colleagues in the House from all sides to join forces and support it. I think Canadians expect that from all of us.
I encourage all parties to support Bill C-42 and work with the government to ensure that it is passed quickly. I think that is necessary and it is exactly what Canadians want. The sooner the legal framework is in place, the sooner we can launch the registry and reap the benefits of enhanced transparency.
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Madam Speaker, I want to thank my colleague. Every one of his colleagues holds him in high esteem, and he is always there to defend Quebec's interests and to help advance all financial matters and tax measures in the House.
On behalf of the government, I want to note his support for Bill C-42, which is important, because the more time that goes by, the longer we delay implementing measures to combat fraud and various crimes.
To answer his question, I will say that there are now 112 countries that have committed to implementing similar measures to combat illegal activities—that is, various types of fraud—and to ensure greater rigour and enable different organizations to identify the beneficial owners.
The act provides for measures requiring heads of corporations to trace beneficial owners with a positive obligation to ask questions and obtain that information.
It is clear that we will need to continue working with our partners around the world.
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- Mar/31/23 10:25:17 a.m.
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Madam Speaker, proposed subsection 21.303(3), “Exemption on application”, notes, “the Director may choose to not make it available to the public, subject to any terms that the Director thinks fit”. Under proposed subparagraph 21.303(3)(b)(iii), at the top of page 4, it says, “prescribed circumstances apply to the individual.” There is a lot of leeway in the bill, as it is currently written, for the director of Corporations Canada to determine what information could be exempt.
I am wondering if the government is open to some clarification or any type of schedule that we could develop to ensure that the maximum number of corporations that should be in the registry are in fact covered. I would also note that the points on interoperability with the province will likely need some clarification as well, just to ensure that the registry is in fact pan-Canadian.
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- Mar/31/23 10:27:43 a.m.
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Madam Speaker, corporations exist basically to allow individuals to channel their capital for the benefit of making profits. I think the corporation as we know it came into existence in the 1844 act in Britain, and the shareholders were granted limited liabilities in 1855. In 1866, the United States code declared that a corporation is a natural person.
The key thing that I want to focus on is the tax evasion and tax avoidance. Supreme courts around the world have ruled on the difference between tax avoidance and tax evasion and identified that if there is any transaction in the process followed by an individual or a corporation that does not have any impact other than to reduce or eliminate tax, the transaction can be declared null and void.
Coming back to the corporations here, why should the public not be aware of individuals who are investing money into corporations, including their citizenship being known? It is not the fundamental right of any individual that he or she can be a shareholder. It is a privilege offered by the states through various acts, so why should the public not be aware of individuals who are the shareholders, including their citizenship—
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- Mar/31/23 10:47:32 a.m.
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Madam Speaker, regarding penalties, I want to think of the worst-case scenarios. For years, we have heard so many stories in British Columbia about why the Cullen Commission was put in place, about the impact of money laundering and the billions of dollars that have been laundered into corporations, largely at the provincial level.
I do not want any fees or penalties to be seen as the cost of doing business for certain corporations. We need to look at strengthening those penalties. We need to hear from a suite of experts in law enforcement, maybe experts from FINTRAC and law enforcement at CSIS, to ensure that we get this right and that we use this tool to provide some trust for Canadians in our law enforcement institutions to be able to make a difference.
I do not have specifics. All I know is that, at $200,000 or in some cases $5,000, it would be seen as the cost of doing business. We want to make it actually hurt when someone tries to break the law in Canada.
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- Mar/31/23 10:51:20 a.m.
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Madam Speaker, I agree with my hon. colleague on the question of disclosing the citizenship of the shareholders of a corporation. There should not be any legal protection offered to foreigners who invest in Canadian corporations. We have been seeing that corporations are being incorporated with no other purpose than to have transactions and processes that lead to nothing but tax avoidance and, in some cases, even to money laundering.
I want to touch on something the member mentioned about the significant shareholding and the threshold, which is 25% in some jurisdictions and 10% in some jurisdictions. As the member very clearly stated, that is a loophole where, very easily, five people could form a corporation with 20% each or 11 people could form a corporation. Therefore, should there be any threshold at all that prevents the disclosure of the beneficiary?
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- Mar/31/23 10:52:19 a.m.
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Madam Speaker, I appreciate that my colleague from Nepean outlined the issue that probably needs to be studied the most in this legislation, and that is significant interest. I do not have a specific answer to his question right now, but we need to have that debate in Parliament about the impact of significant interest and corporate stacked ownership structures that need to be viewed in the light of money laundering and tax avoidance or tax evasion.
I will just quickly touch upon the impact of addresses as well, which is another point of this bill, and it relates to citizenship. We need to clarify our charter obligations regarding individual privacy, but we also need to make sure to be practical that in some cases Canadian corporations are used for illicit purposes and in some cases we should know the citizenship of those individuals who are using said corporations.
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Madam Speaker, what do the Panama papers, the Pandora papers and the Paradise papers all have in common? They are leaks that revealed who was hiding behind shell corporations in tax havens, those anonymous companies for which it would be otherwise impossible to determine actual ownership. Without those leaks, it was only possible to identify the names of the administrators, typically a big corporate law or accounting firm.
By lifting the corporate veil, these leaks helped identify wealthy fraudsters hiding money from the tax man or criminals hiding dirty money out of sight. When it is impossible to identify who is hiding behind a shell company, that opens the door for profiteers and fraudsters of all kinds, people who refuse to pay their fair share of taxes at the expense of everyone else, people who recirculate ill-gotten gains in the real economy by hiding behind secret companies. It is not normal to need to rely on leaks, whistle-blowers, hackers or journalists to find out what is behind these companies. That information should be public.
There is nothing like transparency for combatting fraud. That is essentially what Bill C-42 addresses. It amends the Canada Business Corporations Act to force the directors of federally incorporated businesses to report their real owners to Corporations Canada. Then, Corporations Canada can create a registry of the real company owners, a public registry that anyone can consult. Bill C‑42 will introduce a bit of transparency, which is a good thing. The Bloc Québécois supports the principle of Bill C‑42, and I encourage all parliamentarians to do the same.
Before I get into the details of the bill, I want to tell members a secret. When I saw that the government had introduced a bill to amend the Canada Business Corporations Act, I was worried. As members know, business ownership and property rights fall under provincial jurisdiction. In Quebec, these things are governed by the Civil Code. Every province has its own securities commission. In Quebec, we have the Autorité des marchés financiers.
However, over the last several years, Quebec and the provinces decided to coordinate and harmonize their respective laws. Since they all have very similar legislation, registration with the Autorité des marchés financiers is automatically recognized by all of the provinces. That means that a Quebec company can easily raise capital and do business outside Quebec through mutual recognition under what is known as the passport system.
Since this works well, Ottawa has no reason to interfere, there is no need for federal securities regulations, and Quebec's jurisdiction over financial matters would be respected. Without that respect, we would likely see Toronto become the centre of financial activity at the expense of Quebec, particularly Montreal's financial sector.
However, this is viable only if governments continue to work together and essentially harmonize their laws. That is why I was concerned when I saw that the government wanted to change the Canada Business Corporations Act. If Ottawa acts unilaterally, as this government all too often does, if it has not aligned its efforts with Quebec and the Canadian provinces, if the laws are no longer similar, the mutual recognition system will not be as successful. Ottawa will then have the excuse it is looking for to justify its desire to centralize everything, as it has been trying to do for three decades.
However, I did breathe a huge sigh of relief when I saw Bill C-42. As I mentioned earlier, Bill C‑42 will establish a searchable public registry of the real owners of businesses. This commitment to transparency reflects a unanimous decision made at the G20. It has been implemented properly in Canada in a manner that respects each party, so I say bravo. The federal government and the finance ministers of Quebec and all the provinces have coordinated their efforts and agreed to work together, while respecting one another's independence.
In 2017, they all independently agreed to change their respective laws to require companies to collect, in their own registries, the data needed to identify the real owners. At the federal level, this was done in June 2022 with the passage of Bill C-19, a budget implementation bill. This data is beginning to be collated and made available to the authorities in the event of suspected fraud.
In 2018, they came to an agreement on how companies were to share this data with their respective governments and how the governments were to make the data public. That is what we are debating today. There was no need for federal standards where Ottawa would put itself in charge and tell Quebec what to do. Everything was done respectfully.
The National Assembly of Quebec passed Bill 78 in June 2021. This legislation reflects the agreements made in 2017 and 2018. Quebec was the first government in America to pass such legislation. It is interesting that this debate is being held today, on March 31, 2023, because Quebec's Bill 78 goes into force today. Since nine o'clock this morning, the registry of real owners can be consulted in Quebec on the site of the Enterprise Registrar.
Since not all businesses have provided their information as yet, the search engine is not yet active, but it will be soon. It will be operational within the year. With the passage of Bill C‑42, the federal government will do the same for federally incorporated businesses. The provinces have passed or are preparing to pass similar legislation.
I see that members' statements will commence momentarily. I will continue my speech once we resume debate on this bill.
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- Mar/31/23 11:21:37 a.m.
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Madam Speaker, Liberals love to suck up to big, oligopolistic corporations that raise prices for consumers and make life less affordable. They get lots of support from the NDP for this corporatist agenda. Lately, the Liberals have been on a real ride. Today, they announced that they think there is too much competition in the wireless and Internet business and that they have allowed for a massive merger.
When will the Liberals start standing up for consumers instead of standing up for price raising and high-cost corporate oligarchs?
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