44th Parl. 1st Sess.
April 28, 2023 10:00AM
Madam Speaker, I rise today to speak to a bill that is of crucial importance to the Quebec and Canadian economies, specifically, Bill C-42, an act to amend the Canada Business Corporations Act and to make consequential and related amendments to other acts.
Bill C-42 was introduced in the House of Commons to modernize the Canada Business Corporations Act and make it more competitive and adapted to the current needs of businesses. The amendments to the act seek to enhance the transparency, responsibility and sustainability of Canadian businesses while ensuring their competitiveness on the international stage.
The bill has several important provisions. First, it introduces an obligation for corporations to declare their real economic interests to enhance transparency and fight money laundering and terrorist financing. This provision will also help prevent corporations from hiding their true ownership behind opaque structures and improve the public's confidence in the integrity of the corporate system.
The bill also brings in a new corporate social and environmental responsibility strategy. Corporations will be held accountable for social, environmental and governance factors in their decisions and their trade action. The purpose of this provision is to encourage businesses to adopt a long-term vision and make a positive contribution to society in addition to generating profits.
My colleague from Joliette, who is also our finance critic, had questions the last time this bill was introduced. His question was the following: If business A belongs to company B, which belongs to corporation C, can we find out who the beneficial owner is? What happens when a business is in another, less co-operative country where information is not automatically shared, like in a tax haven? Will Bill C‑42 allow us to identify the true owner?
This question needs to be answered. Countless reports and investigations on multinational corporate activities indicate that organizational charts and operational structures are not always clear. The takeover of national security sensitive sectors or sectors that might jeopardize our supply chains is a real concern for our party.
The example we are talking about here of a company that is owned by a chain of other companies can create a situation where it is difficult to identify the real owner, particularly if one or more of the companies are located in countries that do not have automatic information-sharing agreements.
For example, I am thinking of two places in particular from a case I was looking at recently, where, at the centre of the company's complex structure were shell companies located in Labuan, a territory of Malaysia, and the British Virgin Islands, two places where strict laws and secrecy prevent the public and foreign courts from accessing information about the real owners of these companies.
The two shell corporations were involved in transactions in France, Brazil and the United States. How are those countries managing this issue right now? Does the existing legislation provide tools for better monitoring and more flexibility in dealing with the challenges of the ongoing technological transition? I hope so.
Although the new provisions of the bill improve the transparency of Canadian companies, they do not necessarily make it possible for Canadian authorities to identify the real owners of Canadian companies owned by entities located in uncooperative countries or tax havens.
In such cases, Canadian authorities may have to rely on other methods to identify beneficial owners, such as requesting information from foreign authorities, using agreements for mutual legal assistance or relying on other sources of information such as media reports or leaked documents. It is therefore important that the teams monitoring and conducting assessments are well equipped.
In February 2020, the Quebec government announced its intention to create a registry of beneficial owners of companies. Bill 78, an act to modernize legislative provisions respecting legal auditing, was introduced in the Quebec National Assembly in June 2020 and passed in December of the same year. Bill 78 contains provisions to create a registry of beneficial owners and make it public.
We could take a closer look at the challenges of setting up such a registry and determine where the various provinces stand on this issue. How will the registry work? I look forward to hearing from officials on this issue.
It is important to note that Canada has a number of information exchange agreements with other countries, including tax information exchange agreements that would allow Canadian authorities to access information from foreign companies operating in Canada.
These agreements have made it easier for Canadian authorities to identify beneficial owners, even in cases where companies are owned by entities located in uncooperative jurisdictions or tax havens. I would really like to have a chance to hear the opinions of experts, as well as some recommendations for conditions that could be considered for the next round of negotiations with certain countries.
The bill also includes amendments to strengthen shareholders' rights. It gives shareholders the right to vote on executive compensation and management succession plans. This provision will ensure greater transparency and accountability to shareholders, while increasing board members' accountability. We are pleased that some of our recommendations caught the attention of the department and have been included in Bill C‑42.
Finally, the bill introduces amendments to facilitate access to capital for Canadian corporations. It simplifies the process for issuing shares and eliminates some existing restrictions, making it easier and more efficient for companies to raise capital. In short, the act to amend the Canada Business Corporations Act and to make consequential and related amendments to other acts is a crucial bill for the future of our economy in Quebec and in Canada.
The proposed amendments aim to strengthen the transparency, accountability and sustainability of Canadian companies, while enhancing their ability to compete internationally. As a member of Parliament, I am certain that this legislation is necessary to protect the interests of Quebeckers and Canadians and to ensure long-term economic growth.
In conclusion, I would like to draw a comparison related to my duties as critic for sport, a field in which good governance has been raised as an issue. Governance and accountability are key factors in sport. Governance refers to the way sport organizations are managed and led, while accountability refers to the way actors involved in sport are held accountable for their actions.
In terms of governance, sport organizations must be managed transparently, effectively and fairly. Decisions must be democratic, and all stakeholders must have a say in the decision-making process. Governance structures must also be accountable to their members and to stakeholders.
Accountability in sports has to do with how those involved are held responsible for their actions. That can include the responsibility of athletes when it comes to fair play and following the rules and the responsibility of coaches and the heads of sports organizations when it comes to keeping players safe and promoting a healthy sports environment.
In the end, good governance and accountability are essential to ensuring the integrity and durability of sports. Sports organizations must be transparent in how they operate, accountable to their stakeholders and held responsible for their actions in order to maintain the trust and respect of fans and sports communities. It is unfortunate that the funding was established without a full understanding of what sports organizations would have to do to demonstrate real change. Obviously, I am thinking here of the government restoring funding to Hockey Canada.
We need to ensure that the intentions of Bill C‑42 live up to expectations, particularly those that will be expressed before the Standing Committee on Industry and Technology.
I therefore call on all members of the House to support this important bill and to work together to pass it as quickly as possible.
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Mr. Speaker, I will be sharing my time with the hon. member for Richmond Hill.
I rise to speak to Bill C-42, which would implement a public and searchable beneficial ownership registry of corporations governed under the Canada Business Corporations Act.
We have an issue with money laundering and terrorist financing. To deal with this, we need tools and mechanisms in Canada that are in line with international best practices. Creating a public and searchable registry would increase the transparency of beneficial owners of federally regulated Canadian corporations, which would increase corporate accountability and improve public trust in corporate institutions.
These measures would help protect Canadians against money laundering and terrorist financing, deter tax evasion and tax avoidance, and make sure Canada remains an attractive place to conduct business.
I will take a moment to mention what corporations are. Corporations exist basically to allow individuals to channel their capital for the benefit of making profits. The corporation, as we know, came into existence in the 1844 act in Britain, and the shareholders were granted limited liabilities in 1855. In 1866, the United States court declared that a corporation is a natural person. Basically, while the corporation channels the resources for investment in a commercial enterprise, it limits the liability of the person to the capital contributed.
I will quote from an article published in New Internationalist:
What is a corporation? Ambrose Bierce's Devil's Dictionary defines it as “an ingenious device for obtaining profit without individual responsibility”. It is a legal construct, a charter granted by the state to a group of investors to gather private funds for a specific purpose. Originally, charters were granted in the service of a public purpose, and could be revoked if this were not fulfilled. The relationship between state and corporation is a complex one. Over the past 400 years corporations have conquered territory and brought in resources for the state, breaking laws put in place to constrain them and gaining in power and privilege. History shows a repetitive cycle of corporations over-reaching, causing such social turmoil that the state is forced to rein them back in through regulation.
Now, corporations are being created for no other purpose than to evade or avoid taxes. Supreme courts around the world have ruled on the difference between tax avoidance and tax evasion, and mentioned that if there is any transaction followed by an individual or a corporation that does not have any impact or consequence other than to reduce or eliminate tax, the transaction can be declared null and void.
We need to take all steps to rein back and plug the loopholes that are exploited by individuals and corporations to avoid or evade paying their fair share of taxes.
In budget 2022, we committed to implementing a public and searchable registry of beneficial ownership information. The registry would cover corporations governed under the Canada Business Corporations Act and would be scalable to allow access to the beneficial ownership data held by provinces and territories that agree to participate. The objective of the registry is to provide relevant authorities with timely access to accurate and up-to-date information about the true controlling individuals of corporations in order to combat illegal activities, including money laundering, corruption and tax evasion.
Greater transparency would also improve corporate accountability more generally and thus help protect the public, improve trust in corporate institutions and ensure a well-functioning marketplace. As it currently stands, corporations are already obligated to compile some beneficial ownership information. Upon the entering into force of this new piece of legislation, corporations would need to collect additional information from their beneficial owners, like citizenship and residential address, and send the information in their register of individuals with significant control to Corporations Canada on an annual basis and within 15 days of the day on which a change is recorded in their register.
There are a couple of shortcomings in the current bill, which can be overcome. One is with respect to fully publicly disclosing the names and citizenship of shareholders or members of corporations. The fundamental question is this: Why should the public not be aware of who is investing in a corporation, 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 state through various acts, so why should the public not be aware of individuals who are shareholders, including their citizenship?
I do understand the need for their privacy of information like the address of the shareholder, which is something that has been addressed, but there is no reason why the names and citizenship of the shareholders of any corporation should be kept from becoming public. Especially, we Canadians should be aware of foreign nationals investing in Canadian corporations; disclosing their citizenship is a must.
There is another solution, which is that the information may be disclosed only if a threshold of ownership is significant and exceeds a certain mark. For significant shareholding, the threshold is 25% in some jurisdictions and 10% in other jurisdictions. However, using a threshold to limit disclosure requirements creates a loophole that can easily be exploited. If the threshold is fixed at 25%, five people could form a corporation with 20% each or 11 people could form a corporation if the threshold is 10%.
On the positive side, through this bill, we have sought to limit administrative burden by leveraging existing intake and reporting mechanisms that federal corporations are already familiar with. For example, federal corporations are already required to update Corporations Canada within 15 days after a change of directors occurs and to file an annual return.
We have carefully considered domestic and international best practices in developing the proposed beneficial ownership registry regime, including the U.K. system. We also made sure the proposed model would meet and exceed the standards for beneficial ownership transparency maintained by the Financial Action Task Force, a global anti-money laundering and anti-terrorism financing body of which Canada is a founding member.
In closing, I want to reiterate that this is a good bill that is very much required. We have to bring Canadian standards in line with international best practices. However, there are certain shortcomings, which I think should and must be addressed at the committee stage. I am sure that with the co-operation of all parties in this House, this bill will get passed and will become legislation sooner rather than later.
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