INDY Committee Meeting

STANDING COMMITTEE ON INDUSTRY

COMITÉ PERMANENT DE L'INDUSTRIE

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, November 20, 1997

• 0911

[English]

The Chair (Susan Whelan (Essex, Lib.)): I call the meeting to order. We will proceed pursuant to an order of reference of the House dated Wednesday, October 22, 1997 in consideration of Bill C-5, an act respecting cooperatives.

We have before us a number of witnesses today from the Canadian Cooperative Association and from the Conseil canadien de la coopération.

Which group has decided to start?

[Translation]

Mr. Bernard.

Mr. Léonce Bernard (Treasurer, Conseil Canadien de la Coopération): Madam Chair, honourable Members of Parliament, we would like first of all to thank you for inviting us to take part in this meeting of the Standing Committee on Industry to consider the Canada Cooperatives Act.

I will begin by introducing myself and the people who are here with me today. My name is Léonce Bernard. I am a former Member of the Legislative Assembly of Prince Edward Island, and a former provincial cabinet minister. I have been involved in the cooperative movement for almost 30 years.

Currently I am Executive Director of the Coopérative Le Village in Abram Village. As a volunteer, I chair the Conseil de la Coopération de l'Ile-du-Prince-Édouard and also serve as Treasurer of the Conseil Canadien de la Coopération, and it is in that capacity that I am here before you today, representing our President, Mr. Gilles Lepage.

Accompanying me are Sylvie St-Pierre Babin, Executive Director of the CCC, Réjean Laflamme, in charge of cooperative development with the CCC, and Majella St-Pierre, President of the Conseil de la Coopération du Québec. After my short presentation, we will be delighted, all four of us, to answer any questions you may have.

Founded in 1946, the Conseil Canadien de la Coopération (CCC) is an organization dedicated to promoting the interests of French-speaking members of cooperatives in Canada. Through its member provincial councils, of which there are nine, and their affiliated cooperatives, the CCC represents some 6.9 million cooperation members and thus has more francophone members than any other movement in North America. We comprise more than 3,700 francophone co-op businesses in all regions of Canada. These co- ops have almost $90 billion in assets and employ more than 62,000 people.

Our mission is to promote cooperation with a view to the socio-economic development of Canada's French-speaking community.

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We do this by promoting the cooperative ideology, supporting development initiatives taken by the provincial councils, coordinating development initiatives that involve more than one province, and representing nationally the interests of French- language co-ops.

As a member of the International Co-operative Alliance (ICA), the CCC is the international spokesperson for francophone co-op members in Canada. The ICA is made up of more than 207 affiliated organizations in 90 countries. A Canadian representative, Claude Béland, currently sits on the ICA's Board of Directors.

The CCC coordinates its actions with the Canadian Co- operative Association (CCA) on national cooperative initiatives concerning the interests of the entire cooperative movement in Canada.

The CCC first became involved in the revision of the Canada Cooperatives Act in the fall of 1992. At a joint meeting of the executive committees of the CCC and the CCA in September of 1992, the CCC made a commitment to work with the CCA to come up with a single vision in this important area.

In July 1993, after consulting with its member provincial councils, the CCC's Board of Directors adopted a detailed position on the first draft of the proposed cooperatives legislation. The same process was subsequently followed for each version of the proposed legislation drafted over the next three years. French-language cooperatives in Canada were thus consulted extensively and repeatedly in the initial process of developing a proposal that would be submitted to the federal government.

In June of 1996, the Minister of Industry, the Honourable John Manley, and the Minister for Cooperatives, the Honourable Ralph Goodale, announced that the government would be going ahead with its revision of the Canada Cooperatives Act and that consultations would be held in the fall of 1996 so that a Bill could be introduced in early spring of 1997.

Industry Canada and the Cooperatives Secretariat conducted a nation-wide consultation tour from October 21 to October 30, 1996. On November 1, representatives of these two government organizations invited CCA and CCC executives and responsible staff to a meeting, to report on the findings of the consultations. We were told that a few points still needed to be clarified and that a list of questions would be sent to us in the following days.

On November 8, 1996, after two special meetings of our Board of Directors, we sent Industry Canada a common CCC-CCA position on the questions the Department had sent us. This common position had been hammered out after lengthy negotiations and compromises by both the CCC and the CCA. A few days later, we were asked to reconsider our position on what was a key point for the CCC. On November 26, the CCC's Board of Directors reaffirmed its support for the common position of November 8, 1996. After further consultation, Mr. Manley and Mr. Goodale tabled the new Canada Cooperatives Act in the House of Commons on March 24, 1997.

Here are some of the key elements of the agreement of November 8, 1996. The Act is appropriate because it allows cooperatives to select the provisions that suit them and especially because it gives members more control over their cooperatives. In addition, the Act ensures that cooperatives incorporated under the Act will indeed operate on a cooperative basis, because it contains a definition of "cooperative" and principles updated on the basis of the declaration on cooperative identity adopted by the ICA in 1995.

The agreement also affirms that the remedies proposed for members, including the right to dissent and the right to request a meeting, are perfectly adequate. The Act must stipulate that a minimum of 66% of the directors be members and that a board of directors may not meet unless a majority of the members are present. The Act must allow cooperatives to acquire outside capital so that they can realize their full development potential, and cooperatives must be permitted to issue shares with or without par value so that they have maximum flexibility to ensure their long-term financing.

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The most important element in the agreement for the CCC is that a cooperative must carry on its activities in more than one province to be incorporated under federal law. This means that a cooperative should normally be incorporated under the corporate laws of the province in which it is located if it does business in only that one province; however, if it does business in more than one province, it may be incorporated under the Canada Cooperatives Act.

As Mr. Manley said when he introduced the Bill on September 25, 1997,

One of the main functions of any good government is to ensure that our cooperatives and other businesses, and the people and institutions who invest in the potential of these businesses, have the most competitive legal framework possible.

The Act that the government is proposing will give federally incorporated cooperatives a legal framework appropriate to the changes that these cooperatives are experiencing in today's markets and that they will face in the markets of the future.

In closing, we would like to thank Mr. Manley, Mr. Vanclief and Mr. Goodale, and all the public servants who were involved directly or indirectly in making this project a reality, for their tremendous work. We would also like to thank the four opposition parties for supporting the Bill when it was tabled at First and Second Reading. We are all counting on your cooperation to ensure that the new Canada Cooperatives Act is passed before the Christmas recess.

Thank you for your attention. We are ready to answer any questions you may have.

The Chair: Thank you, Mr. Bernard.

[English]

We'd like to turn to the Canadian Cooperative Association before we go to questions, because may have similar questions for both groups. Mr. Tully.

Mr. Glen Tully (Board Member, Canadian Cooperative Association): Thank you very much for the opportunity to speak to the industry committee on the Canada Cooperatives Act.

I am a member of the board of CCA, the Canadian Cooperative Association and the vice-chair of Federated Co-operatives Ltd., which is a federally incorporated cooperative. I might just add that Federated Co-operatives is in the Financial Post's top 100 of the top 500 listing of non-financial cooperatives. We service about 900,000 members from Thunder Bay right through to Vancouver Island. I also serve as chair of the Manitoba Co-operative Council.

New federal cooperative legislation has been a top priority for our members for the past decade, and as you know, the cooperative sector has devoted considerable resources and attention to it. We will be brief in our remarks this morning to allow more time for discussion with committee members. Nora Sobolov, our CCA executive director, and I will share this presentation with you this morning.

Our legal counsel on this matter, Mr. J.J. Dierker, and our director of policy, Mary Pat MacKinnon, will be happy to respond to your questions as well. Bringing extensive knowledge of the legal and operational aspects of the cooperative organization, Mr. Dierker has been closely involved with this file since the 1990s, and has worked with Industry Canada and the cooperatives secretariat officials on the proposed legislation.

The Canadian Cooperative Association is the national umbrella association of cooperatives conducting business primarily in English. Created from the merger of the Co-operative College of Canada and the Co-operative Union of Canada, the CCA is celebrating its 10th anniversary.

On behalf of its members, the CCA promotes cooperatives and credit unions as distinct enterprises that pursue economic and social goals. The CCA supports the success of its members by developing current and future leaders for Canadian cooperatives and by supporting cooperative development in Canada and abroad. The CCA works closely with its francophone counterpart, le Conseil canadien de la coopération, on matters of mutual concern, such as this new federal cooperatives legislation.

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CCA's 37-member organizations are active in agriculture and agrifood, finance, insurance, retail and wholesale merchandising, housing, health, child care, and the service sector. Collectively, our member organizations have in excess of $56 billion and serve more than 5 million Canadians.

Through its membership in the International Co-operative Alliance, the CCA connects to a network of more than 750 million members, in close to 100 countries.

Why does our sector need a new act? Our cooperative members are doing business in an increasingly competitive domestic and foreign marketplace. For some time our members have indicated the need for federal legislation that provides them with a more level playing field on which to compete. The existing federal Canada Cooperative Associations Act of 1970 is growing increasingly outdated. Unlike the Canada Business Corporations Act, it has not been amended in any significant way since its introduction. Based on the outdated legal concept that the government must provide cooperatives with close direction, the current act demands complex, time-consuming, and costly procedures, and it is burdensome and restrictive for cooperatives.

Bill C-5 enables cooperatives to modernize while enhancing and enshrining in statute cooperative principles. It strengthens members' rights and protections while providing cooperatives with the tools they need to grow and prosper in today's and tomorrow's marketplace. New legislation will facilitate the expansion of the cooperatives within the Canadian economy and help sustain an internal reform of economic participation that emphasizes greater equality, democratic principles, and mutual self-help.

I will now ask Nora to move on with the key features of the bill.

Ms. Nora Sobolov (Executive Director, Canadian Cooperative Association): From our perspective the key features of the new legislation are as follows.

First, modernization of the co-op statute law for cooperatives.

Second, enhancement of the cooperative nature of cooperatives by strengthening the co-op basis test. This ensures that a co-op is carrying on business in accordance with co-op principles. This was very important to our membership throughout our seven years of consultation on this bill. These principles are: open membership; one member, one vote; no proxy voting; limited interest on member loans and member shares; to the extent feasible, provision of the capital required by the cooperative by members; use of surplus funds from the cooperative to develop its business, provide or improve common services to members, provide for reserves or payment of interest on member loans or dividends on member shares and investment shares, for community welfare or the development of cooperative enterprises or as a distribution among members as a patronage return; and education of members, officers, employees, and the public on the principles and techniques of cooperative enterprise.

Third, strengthening of membership rights and controls over business decisions and members' protection. Dissent rights and remedies are examples of those.

Fourth, provision of greater flexibility and choice to the members in the methods of financing the co-op, including the choice of issuing equity on the market.

Fifth, provision of an array of modern corporate tools, such as amalgamations, reorganizations, and arrangements that competitors use in carrying on business effectively.

Sixth, making directors subject to a statutory duty of care and fiduciary duty; modernizing, clarifying, and limiting those duties.

Seventh, requirements that at least two-thirds of the co-op directors be members of the co-op; one-third of the directors may be outside directors. If the co-op issues shares to non-members, the members of the co-op have the right to authorize non-member investment shareholders to elect or appoint no more than 20% of the directors.

Eighth, requirement that a co-op must carry on its undertaking in least two or more provinces and have a fixed place of business in more than one province to be eligible for incorporation under the federal act.

Over the past decade CCA and our counterpart Le Conseil canadien de la coopération have collaborated to develop a consensus among our respective members on the essential elements of a new federal co-op act. The two national associations and our members have participated in extensive internal consultations on the development of the draft proposals. Our consultations have extended to other interested parties, such as the provincial co-op regulators and co-op academics. The culmination of this process occurred when a draft proposal was submitted to the federal government through Industry Canada and the Co-operatives Secretariat in the spring of 1996.

In the fall of 1996 the federal government then undertook its own cross-Canada consultation, using a discussion paper based on the co-op sector's draft proposal. As you have heard, CCA and CCC member organizations participated in that consultation process.

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Following this process, CCA and CCC met with Industry Canada and the Co-operatives Secretariat to review the consultation results and discuss revisions. The two national associations then submitted to the two government departments a joint memorandum that provided the co-op sector's response to the policy issues raised during the consultations.

Following further consultations with the co-op sector, a new Canada Cooperatives Act was tabled as Bill C-91 on March 25, 1997. However, this bill died on the Order Paper with the federal election call. And as you know, federal co-op legislation was reintroduced, with some minor technical amendments, as Bill C-5 on September 25, 1997.

On Tuesday, two CCA members, Alberta Wheat Pool and Manitoba Pool Elevators, appeared before this committee in support of Bill C-5, but requesting an amendment to a subclause of clause 302. We want to express our support for these two pools' proposed amendments.

As you heard from Mr. Hains from Industry Canada on Tuesday, we've been working with the pools and government officials to reach an agreement. Providing for the possibility of an additional five years for pay-out and setting out the interest rate in regulations are, in our view, reasonable requests.

In closing, we'd like to emphasize the important role played by the co-op sector itself in developing a policy framework for new legislation, and the positive relationship the sector has had with the federal public servants throughout the process of bringing in a new act. I can speak to this personally, having been through this for seven years, and I have to say we are extremely pleased at the level of cooperation and our ability to work together.

We believe this collaborative process has served both the public interest and the co-op sector interest and is a good example of partnership between government and industry. We'd like to acknowledge the support and cooperation of the Co-operatives Secretariat and Industry Canada officials, and the commitment of Ministers Vanclief, Manley, and Goodale in supporting the creation of the new Canada Cooperatives Act.

With the advent of this new legislation, we believe the co-op sector will be able to make an even larger contribution to the social and economic well-being of Canadian communities.

We thank you for your attention and we look forward to your questions and comments.

The Chair: Thank you very much for those very thorough presentations.

We'll begin with Mr. Pankiw.

Mr. Jim Pankiw (Saskatoon—Humboldt, Ref.): I'd like to go to this proposed amendment to extend the pay-out to a dissenting member from five to ten years.

The Chair: Well, you can ask the witnesses a question on the amendment if you want, but after the witnesses are finished, we'll have the Industry officials before us to explain the amendments before we go to clause-by-clause. But if you want to ask them, go right ahead.

Mr. Jim Pankiw: I'd just like you to restate what you said about that.

Ms. Nora Sobolov: What I said is we support this amendment. We worked with them and we feel it's a reasonable amendment at this time.

Mr. Jim Pankiw: But who proposed that amendment, the cooperatives?

Ms. Nora Sobolov: Yes.

Mr. Jim Pankiw: I heard you say you thought it was reasonable, but I missed your logic for why you think it should be possible to extend that over a ten-year period.

Ms. Nora Sobolov: We'll let Mr. Dierker go through that with you.

Mr. J.J. Dierker (Legal Counsel on Bill C-5, Canadian Cooperative Association): When we carried out the cross-Canada consultations with Industry Canada, one of the matters that was addressed to us was the concern of a number of the cooperatives regarding the pay-out of their capital under dissent rights. We recognized that some accommodation might be required, and we looked at a reasonable period of five years to pay out those claims.

On analysis, some of the cooperatives, particularly the pools, have determined that may not be adequate to protect the capital of those cooperatives, and they are simply increasing the time limit from five years to a maximum of ten years. It's not that it has to be paid out over ten years; that's a maximum that the members will permit.

Mr. Jim Pankiw: The interest has also been changed, or the clause for that. It refers here to interest rates “prescribed by or calculated in accordance with the regulations”.

Mr. J.J. Dierker: Yes, that is correct. There was some concern that a flat interest rate of 10% might not reflect market economics at all times. It may be too low at some times. We've seen interest rates at much higher than 10%. We've also seen interest rates substantially less than that.

Mr. Jim Pankiw: In accordance with which regulations?

Mr. J.J. Dierker: There will be regulations promulgated under this act. It will be the regulations that are brought in by order in council. It will be the regulations under the Canada Cooperatives Act.

Mr. Jim Pankiw: Okay. I'll save the remainder of my comments.

The Chair: Okay. Thank you, Mr. Pankiw.

Mr. Lastewka.

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Mr. Walt Lastewka (St. Catharines, Lib.): Thank you, Madam Chair.

I want to thank the witnesses for their detailed presentation and the way in which they consulted with all their groups. I know that takes time, but in the end implementation is much easier.

As Mr. Bernard was speaking, it came to light for me to understand the differences that you found when you were talking about the consultation done with your groups in the various provinces. Did you find a difference of opinion from one area of the country to another area of the country? You gave much detail on how you consulted and how you gained agreement and so forth, but one of the things we've been looking at is where there was disagreement on this. Was there a concern that the objectives of the cooperatives would be lost?

Ms. Sobolov talked about protecting the principles of the cooperatives. That question has come up over and over again: as we're doing these changes—which are some major changes that could happen in cooperatives—are we maintaining the principles of the cooperatives as originally intended?

Mr. Léonce Bernard: We certainly are. I don't think this act in any way weakens that position.

The consultation was done because the CCC is organized by each council in each province. Each council had the opportunity to express its opinions on the act, and its objections or modifications if it wanted to. Each council could then come back to the executive. We agreed on some of the recommendations that some of our councils proposed to us, and we then presented them to our counterpart, the CCA. We kind of agreed with them on that also, in order to make sure that we had a united voice when it came to part of industry.

But the consultation was made through our members and then our council members, who represent the francophone cooperatives of all the provinces.

Mr. Walt Lastewka: Did I correctly understand Mr. Tully to say that at a point both organizations came up with a similar paper that was worked through?

Ms. Nora Sobolov: Yes, that's correct.

Mr. Walt Lastewka: So what I heard both of you say, then, is that you worked with the various organizations across the country that are in your organizations. You then melded a common paper together and went back through the whole organizations, and then back up again.

Ms. Nora Sobolov: Yes.

Mr. Walt Lastewka: I'm really impressed with the detail that both of you have expressed in how you eventually came up with agreement and so forth. I want to make sure that any of your concerns have now been run by the department and, as Mr. Pankiw has said, that you're both in full agreement with the changes that have come forward. Am I right on that?

Ms. Nora Sobolov: Yes.

Mr. Walt Lastewka: Thank you.

Thank you, Madam Chair.

The Chair: Thank you, Mr. Lastewka.

Mr. Dubé.

[Translation]

Mr. Antoine Dubé (Lévis, BQ): I would like to start with a comment. Mr. Lastewka's question is the final proof that these two cooperative federations are functioning the way Confederation could have worked. We could have had two nation states getting along fine, operating on different bases but in complete equality.

As a Quebecker and the MP for Lévis, where the Mouvement Desjardins [credit union network] has its head office, as does the Conseil de Coopération du Québec, I would like to ask Mr. St- Pierre if the people in Quebec fully share the views of the majority, agreement or no agreement.

Mr. Majella St-Pierre (President, Conseil de Coopération du Québec): The Conseil de Coopération du Québec participated fully in the consultation organized by the CCC and the CCA, even though there are very few co-ops in Quebec that come under federal jurisdiction. The reason for that is very simple. The whole start-up and support structure for co-ops in Quebec is provided by bodies that are governed by provincial law. Moreover, there is excellent cooperation from the Quebec government. So it is normal and natural that co-ops that are getting started would organize themselves according to Quebec law.

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However, we wanted input into the proposed federal legislation because it is possible that certain co-ops in Quebec that are expanding may at some point need new legislative tools that will enable them to pursue their development. So we proposed a certain number of amendments or improvements to the Bill, or to the proposals that were put to us by the CCC and the CCA.

As in any discussion, obviously, there were points that were agreed on by everybody and others on which we were in a minority position. We accept this situation because we understand the concerns that other cooperative organizations can have. We stand together. But one thing we don't like, and on this there is a different of opinion, and that is the administrators who represent the investors being appointed directly to co-op boards as a function of their capital holdings. We would have liked the Bill to find a way of preserving the powers of the general meeting of the co-op members.

That aside, the Conseil de la Coopération du Québec supports the Bill overall, while regretting that this change could not have been made.

The Chair: Ms. Lalonde.

Ms. Francine Lalonde (Mercier, BQ): Hello, and thank you for being here this morning. I too have been involved in the cooperative movement, and reading the Bill made me realize that it has evolved considerably. A number of the clauses surprised me, and I made a real effort to understand the reason for them. There are professors in Quebec, in two chairs of cooperation, who participated in writing an international pamphlet on the revision of legislation governing cooperatives in every country where they exist. These professors established a number of principles they felt were essential for safeguarding the cooperative ethos.

I think there are problems with this Bill as regards two of these principles. There has to be a rule on the membership/enterprise relationship, in other words the definition of the enterprise's activity in terms of the activity of the individuals. Since the objective need not necessarily be spelled out in the charter, problems could develop. I'm not saying that you intended this, but problems could develop.

The other principle relating to the enterprise is that of long-term community property. There too there could be problems, because of the use of the reserves.

So I would be interested in hearing your thoughts on this. I know there is lots of debate inside cooperatives, as in all group endeavours, and that if you have reached these conclusions it's for reasons that you find convincing, but I would like you to elaborate, because there would seem to be risks inherent in this, at least to my way of thinking.

[English]

The Chair: Mr. Dierker.

Mr. J.J. Dierker: I'd like to address the last question, that is, the distribution of the retained earnings of the cooperative. I'll use the English nomenclature, if I may.

The proposed legislation does permit the distribution of dividends of the retained earnings by the payment of dividends. There are two rules. The distribution of dividends on membership shares must be set out in the articles so that all of the members must agree to the manner by which dividends will be paid, and they must set it at a specific rate. It is not an open distribution to the members. The distribution of earnings on investment shares will also be set out in the articles.

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So the members of the cooperative will have two controls over that. The first is that they must approve the amendments to the articles to establish the investment shares, but in addition they must also adopt a philosophy or a policy for that cooperative that it in fact will have investment shares.

I do understand the difference between the federal act and the Quebec act in this regard. We have had discussions with our confrères from the Quebec ministry and the Quebec interests. We have provided in the legislation that the cooperative must operate under the cooperative basis. It can't be simply a stock company operating under the name of cooperative.

We have given to individual members the rights to cause an investigation to be done of the cooperative. If the cooperative is simply running as a stock company, the members can cause an investigation to be held and can ask for a court order that it be turned over into a business corporation.

We have tried to put all of these controls in the hands of the members so that it is the members who will control those decisions in the cooperative. And I must say, Madam Chair, that some of the improvements of this legislation came from the consultations with CCC and helped us focus on a number of those matters.

[Translation]

Mr. Majella St-Pierre: I'm going to let Mr. Dierker answer first in the hope that he'll answer the first question, because I would like to respond to the question about the reserves.

There is a far-reaching debate going on in Quebec, over the Constitution and over distribution of the reserves. It has to be said that the co-op movement in Quebec hasn't succeeded in reaching a consensus.

Our position on the federal legislation is the one that was reached by the Quebec movement as a whole: because a consensus cannot be established, let's keep the status quo.

The debate is complicated, because it raises the possibility of sharing out significant assets, such as in the case of housing co-ops or credit unions that have accumulated extremely valuable and extensive assets over many years. It's hard to allow one generation to confiscate and share out a legacy that was accumulated over many years.

At the same time, there are different sorts of cooperative. Let's suppose you have a workers' co-op, where people have invested 25 or 30 years of their lives to build up a business and that this group, at the end of their working lives, decide to retire. There isn't necessarily anyone who wants to take over the co-op. I would find it hard to say to those people that after working for 25 or 30 years to accumulate a reserve they can't benefit from it themselves or leave it to their children, to benefit them.

This is a complex question and there's going to be a major debate on it. We'll consult the International Co-operative Alliance, which has done studies in this area. There is also work being done at universities. The legislation has been amended before. The impossibility of distributing the reserves was not always in Quebec law, because one sector, the farm sector in Quebec, has the right to distribute reserves. But it's unthinkable. It's unthinkable that enterprises that have accumulated assets worth tens of millions dollars can at a certain pont just cease to be. So it's a non-problem in the case of . . . [Editor's Note: Technical difficulties]

Hon. Sheila Finestone (Mount Royal, Lib.): [Editor's Note: Technical difficulties] . . . isn't settled, or did you settle the difference between you satisfactorily?

Mr. Majella St-Pierre: We accept the position in the federal legislation even if the debate is still going on in Quebec. For reasons of solidarity, we are prepared to work with the provisions of the Bill as proposed.

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Mrs. Sheila Finestone: I think what Ms. Lalonde referred to had to do with international rules as against pan-Canadian rules, if I may put it like that. Is that accurate? You were speaking of the question of this Bill in terms of what happened in Europe with the European Union, weren't you?

Ms. Francine Lalonde: A number of countries have changed and have tried to modernize, and a number of different avenues have been tried.

Mrs. Sheila Finestone: I ask because I noted during the presentation that Mr. Claude Béland is on the international executive. He is definitely a man who knows the subject inside out and has worked for many years in the cooperative movement. He is an excellent person to advise you on distribution of reserves and assets. If I understood correctly, you are all satisfied because what Canada is proposing now matches what is happening in Europe. Is that the case?

Mr. Majella St-Pierre: Mrs. Finestone, I would say that, given the state of the debate both in Quebec and internationally, the proposal you have before you seems acceptable to me because it provides that the members of a co-op can decide whether their co-op will be non-distributable. Instead of relying on a law, the responsibility is being transferred to the members of each co-op, which seems perfectly appropriate to me.

If you will allow me one comment, I would like to say that the proposed legislation, in its general approach, is going to demand a lot of education in cooperative for co-op members if their co-ops are going to respect the cooperative principles endorsed by the ICA.

Mrs. Sheila Finestone: There's a saying in English that one glove doesn't fit everybody. The co-ops will be choosing how to fit their fingers in, is that it?

Mr. Majella St-Pierre: In this case, as far as the debate is concerned, the glove is still being knitted.

Mrs. Sheila Finestone: That means that things are making progress, doesn't it?

Mr. Majella St-Pierre: Yes, for the moment.

Mrs. Sheila Finestone: Granted. But the fabric is well made, if I have understood correctly.

Mr. Majella St-Pierre: Yes.

[English]

Mrs. Sheila Finestone: Madam Chair, as a substitute in this committee today, I have to tell you that although I don't know as much about cooperatives as your witnesses and certainly some of your members, I do know something about them. I am absolutely struck with the incredible model that we have before us, with the example in the two presentations of Mr. Léonce Bernard and Mr. Glen Tully. I must say that the partnership is an incredible example that might well be a model for other kinds of legislative procedures. The participation, collaboration and transparency struck me so hard that it is the example of the civic society, and I'm so glad to welcome Quebec into this Canadian civic society, where it belongs and should stay.

The Chair: Thank you, Madame Finestone.

Do you have any other questions for these witnesses right now, Mr. Pankiw?

Mr. Jim Pankiw: No.

The Chair: Madame Lalonde.

[Translation]

Ms. Francine Lalonde: You haven't answered my first question. I asked about the relationship between the member and the cooperative, about the fact that a member is not required to be a user of the cooperative's services. This kind of ownership relationship is not in the true cooperative spirit. Then there is the fact that the cooperative's purpose doesn't have to be spelled out in its charter.

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[English]

Mr. J.J. Dierker: I think one of the first comments I would make—and this goes back to the comments made by the honourable member who spoke just before Madame Lalonde—is that the act has incorporated right in the preamble that cooperatives must comply with the principles of the International Co-operative Alliance. We have structured that as the basis for the legislation.

The concept we have in the legislation—and this is not necessarily coming at your question directly—is that the cooperatives are structured together as a form of partnership among themselves to provide services for themselves. This is the structure we have put into this legislation, which is there to provide services for the members of the cooperative and to ensure that the cooperative operates as a cooperative.

[Translation]

The Chair: Mr. St-Pierre.

Mr. Majella St-Pierre: In Quebec, when the provincial legislation was revised, a process that ended a year ago, they authorized the participation of non-user members in cooperatives. This was done particularly for what are known as "coopératives de solidarité", which are cooperatives set up to enable people in disadvantaged circumstances to form a co-op, but with the help of people who may not necessarily use the cooperative's services or work for it.

The cooperative principle has been adapted to today's situations, to make it possible for groups or individuals to participate who may not be users but who have an interest in seeing that a cooperative achieves its objective and is a success. These people are called "membres de soutien"—supporting members in the "coopératives de solidarité".

Ms. Francine Lalonde: When you read the legislation, you can tell that that's not the rule.

Mr. Majella St-Pierre: I beg your pardon?

Ms. Francine Lalonde: When you read the legislation, you can tell that the rule doesn't deal with that type of member but with members who use the cooperative's services.

Mr. Majella St-Pierre: They're still called members, supporting members, but they don't use the co-op's services.

The Chair: Thank you, Mr. St-Pierre. Mr. Bellemare.

Mr. Eugène Bellemare (Carleton—Gloucester, Lib.): It warmed the cockles of my heart to hear Mr. St-Pierre talk about credit unions.

During the 1970s, I was vice-president of an Ontario credit union that had more than $100 million in assets. So I have a certain fondness for the cooperative system, without being an authority on it.

Do you find, Mr. St-Pierre, that there is a difference between cooperatives as you understand the concept and the farm cooperatives such as the Saskatchewan or Alberta Wheat Pools? This legislation comes primarily from your groups. In specific cases, when can a member withdraw his money and how much time does it take?

You spoke of heirs. It is very important that a person be able to leave his heirs something. If the money is frozen for five or ten years, the heirs would have the time to die and leave other heirs in their turn.

Do you think there could be two time periods in the law? For certain kinds of co-ops, one might have to wait up to ten years to withdraw his investment and in other cases one would wait for five years. Let's talk about this provision first.

Mr. Majella St-Pierre: I would start by saying to Mr. Bellemare that in a cooperative there is no one authority as there is in—say—the Catholic Church. The truth is sought collectively in the cooperative movement.

I'm not sufficiently familiar with the situation of our counterparts in the West to be able to pronounce on your suggestion. I would rather let them voice their own views.

• 1000

[English]

Mr. J.J. Dierker: Perhaps I could respond to that.

There are two different ways in which a member may withdraw an investment in a cooperative. First, a cooperative is a form of partnership, so a member in a cooperative may at any time apply to withdraw from membership. When they withdraw from membership, they have a right to apply to have their equity in the membership paid back to them. So their membership shares are callable, if you will, at the behest of the member. Most cooperatives structure their bylaws to set out a process for paying out the equity in the cooperative so that the equity in the cooperative essentially relates to the use that the member makes of the cooperative.

Most of the members in a cooperative come in with a very small equity, and they increase their equity by investing their patronage refunds over the years as they use the cooperative. So when they stop using the cooperative, these funds come to them automatically.

The discussion that was had with you on dissent rights is a situation where someone has to move out of the cooperative voluntarily, and that's because the cooperative is changing its business activities. It's a dissent situation, and dissent happens only in small circumstances. So they can still withdraw in the ordinary course, but in dissent they can also withdraw and they get a fair value for their investment at that time, whereas otherwise they simply get their money back. Because they get a fair value, they get an increase in their investment, and that is why the cooperative needs a longer time to pay it out.

But the ordinary pay-out that happens as a cooperative operates will continue on a year-by-year basis.

Mr. Eugène Bellemare: So when we talk of an amendment to raise the time from five years up to ten years, is that reasonable in your mind?

Mr. J.J. Dierker: That amendment only applies in the circumstances of a dissent, not in the ordinary course. In those circumstances, we have always recognized that there was a requirement to have some time period. Our initial proposal was, as I said, five years. The present proposal is to give the cooperatives up to ten years, if the members wish it.

Mr. Eugène Bellemare: You made reference to the market fluctuation a while ago in your presentation. Yesterday I made the suggestion that perhaps 10% interest was something that was fixed in stone and that would be very regrettable after a while because of market fluctuation.

My suggestion was that perhaps it should be a certain percentage above prime; for example, if 10% today is the right figure, then perhaps 3%, 4%, 5% above prime, so that it could follow the fluctuation constantly throughout the years, without having to try to amend the bill hastily to accommodate cooperatives due to a market problem all of a sudden. What do you think of that?

Mr. J.J. Dierker: I believe we agree that there should be some type of market test to the interest rate.

Mr. Eugène Bellemare: Another question is, I understand that people would be investing in cooperatives without having a right to vote by shares.

Mr. J.J. Dierker: In investment shares; that is correct.

Mr. Eugène Bellemare: Do you think that's proper?

Mr. J.J. Dierker: Do I think it's proper? Many enterprises, including many cooperatives at today's date and in every province of this country, in fact can issue capital that is not voting capital. This is capital that people wish to leave with the cooperative so that the cooperative can provide services to the members.

If people wish to invest in the co-operative and they have a full disclosure on the investment, yes, I think it's proper.

Mr. Eugène Bellemare: Why would anyone invest in a cooperative and not have a right to vote? It's like investing in General Motors without having a right to vote.

• 1005

Mr. J.J. Dierker: I do think, in fact, General Motors does have preferred classes where you don't have a right to vote. They do.

Mr. Eugène Bellemare: Yes. Absolutely.

Mr. J.J. Dierker: Many other corporations do as well.

The Chair: Last question, Mr. Bellemare.

Mr. Eugène Bellemare: Can you explain briefly what the Rochdale model is, and if your group has a concern with that?

Mr. J.J. Dierker: The Rochdale model is in fact the model that is now incorporated in the International Co-operative Alliance principles. It basically says that the cooperative is there to provide services to the members.

Mr. Eugène Bellemare: Thank you.

The Chair: Thank you, Mr. Bellemare.

I thank the witnesses for their wonderful presentations—they were very thorough—and for answering our questions today.

As well, to pick up on what Mrs. Finestone said, your work on this with the departments, and your cooperation, makes our job much easier as members of Parliament. We appreciate that. We know seven years is a long time, but we do appreciate that.

Officials from the Department of Industry are now going to explain the proposed amendments to the bill. I understand several of them are technical. One speaks specifically to the issue that the wheat pools raised before us on Tuesday.

Mr. Hains, please proceed.

Mr. Jacques Hains (Director, Corporate Law Policy Directorate, Department of Industry): Thank you very much, Madam Chair, and good morning, members of the committee.

The package in front of you proposes six amendments to Bill C-5. Four of them are very technical, correcting grammatical errors in French. Another one is reinserting in the bill a line that was omitted when the bill was printed. Again, it's the French version.

A third technical amendment was brought to our attention by the counsel to the pools after their hearings last Tuesday. The bill in clause 2 should refer to “membership” share as opposed to “member” share.

The fourth one is of that nature as well, bringing clarification to the bill.

If you want, Madam Chair, I can go through them specifically and indicate to you what they are.

The last two are also technical. They aim at bringing more precision to the language in Bill C-5. One deals with the marketing boards or marketing commissions—that is, when members of cooperatives by provincial law have to render their services or deliver their products through a marketing board, the wording we have in Bill C-5 is ambiguous and could lead to confusion and misinterpretation. The cooperatives have brought that to our attention and this amendment proposes to fix that.

• 1010

The last amendments are the ones the pools were looking for when they appeared before the committee last Tuesday. The motion you have in front of you slightly departs from the—

The Chair: I apologize, Mr. Hains. Before you went to the change to clause 302, were you talking about clause 176?

Mr. Jacques Hains: On the marketing boards?

The Chair: Yes. I'm just trying to follow along in the order the amendments were given to us.

Mr. Jacques Hains: It was clause 159 dealing with the marketing boards issue. As I said, I can take no more than five minutes to go through them one by one, if you'd prefer.

The Chair: That's what I would prefer.

Mr. Jacques Hains: Sorry for the misunderstanding.

The Chair: No, that's okay.

Mr. Jacques Hains: The first amendment is on page 5 of the bill. It's clause 2 on line 20 of the English version of the bill. That line in the bill now reads “member share issued at par value.”

The pools brought that to our attention on Tuesday and said we should refer to membership share and not member share. This is because, if this is an equity issue in cooperatives, a member of a cooperative could possess membership shares and investment shares. So let's be crystal clear about what we're talking about here. It's membership shares. They were right, and this is the first amendment.

The second amendment would be on page 10 of the bill, and it's clause 5. This is in the French version on line 4 of that page. We are talking about

[Translation]

"le membre qui en est propriétaire, d'après le registre des membres de la coopérative, ou qui a le droit d'être inscrite"...

[English]

Madam Chair, I can attest that this is bad French. It should be inscrit. So we're correcting this grammatical error.

The next amendment is one of the marketing board amendments on page 91 in clause 159. It deals with line 16. I will ask our legal policy analyst, Jennifer Elliot, to explain that amendment, if I may.

Ms. Jennifer Elliot (Legal Policy Analyst, Corporate Law Policy Directorate, Department of Industry): As Mr. Hains said, it's basically an interpretation question and it was brought to our attention by the cooperative sector. I'll just give you the example it provided us, to illustrate.

If you have a dairy cooperative operating in Ontario, for example, and a dairy farmer is required to send both the eggs and milk he produces to the marketing board as opposed to through the cooperative first, but the cooperative of which the farmer is a member only deals with eggs, the cooperative would like to have the ability to specify it's really only dealing with eggs as opposed to eggs and milk. So this amendment gives it the ability to put in its by-laws a more specific definition of goods and services rendered through a board.

The Chair: Thank you.

Mr. Jacques Hains: The fourth amendment is on page 109 of Bill C-5 in clause 176, and it's on line 35 in the French version. Part of the sentence was omitted when the bill was printed. The way the French paragraph reads now doesn't make sense and doesn't correspond to the English version. So it's just a part of a sentence that was omitted in the printing.

• 1015

The next amendment, the fifth amendment, is the pools' amendment, if I may refer to it in that way. It's on page 173 and we know it now as clause 302. It deals with the pay-out period for paying out dissenting members. It corresponds to what the pools were suggesting to your committee, although the words of the proposed motion here are slightly different.

As you know, Madam Chair, and no doubt members of the committee know, drafting legislation, and therefore drafting amendments to legislation, is a specialization within the Department of Justice, so we first met with the Justice drafters and submitted to them the text on the pools and worked with them through that text. They arrived at this alternate formulation, which accomplishes the same thing.

We then met last Tuesday, after the hearings with the pools, and we also submitted the drafters' text to the CCA and CCC, saying what we were told, that this corresponds to the pools' amendment, and asking do you agree with that? As Ms. Sobolov said earlier this morning and others have confirmed, they are in total agreement with that text. They are happy even though it departs from their text; they are not Justice drafters and it accomplishes the same thing.

The Chairman: Mr. Hains.

Mr. Jacques Hains: This will be very rapid, Madam Chair, because there's only one other amendment on page 204, in clause 349. This is on line 30 of the English version, line 33 of the French version of that same paragraph. One clause of the bill was omitted as giving rise to offences and it has been corrected. It's just a drafting oversight, one that drafters saw only after the bill was introduced in Parliament.

Those are the six, Madam Chair.

The Chairman: Thank you.

Mr. Pankiw, you had a question.

Mr. Jim Pankiw: It's maybe not so much a question. It's pretty clear what they want, what the amendment is asking for, so I don't have a question. I'll save this for our discussion on this one. We will come to that, right?

The Chairman: We're at that discussion stage now. I will just explain the process. What we will do after this is done is go to clause-by-clause. This part is discussion. The department is here, so....

Mr. Jim Pankiw: Okay, I would like to make some points, then, and you can comment if you like.

I think it's unreasonable to extend it, because you have to consider the rights of a dissenter. Someone who wants to be paid out shouldn't be subject to such a long period of repayment. Mr. Bellemare raised the point that their estate may never...it will be passed to another generation before that money is ever paid out.

That raises the point that one of the gentlemen, Mr. Dierker, said dissent is actually not very common. If it's not common, why wouldn't the cooperatives just be obligated to pay them out at the time they dissent?

Then he made the point, well, but we would possibly need time to pay them out. But the counter-argument could be made, then go finance that pay-out. Why should the dissenter be forced to finance you?

But this is a unique situation. Other than that, we're entirely in support of all the legislation. I want to make that clear to all the observers here. But I really think it's unreasonable to give them that kind of leeway.

They said the pools asked that this be put in. Well, sure they would ask that. Who wouldn't say, give me as much leeway as possible? I think this just becomes unreasonable on the right of the dissenter to be paid out what they have a legitimate share in.

The Chairman: Mr. Hains, do you have a response to that?

Mr. Jacques Hains: Yes. I think this was long debated by the cooperatives movement when they were developing their proposal, that there should be a right to dissent for members as a very fundamental right. I went through that history a bit last Tuesday. When we toured the country afterwards, the concern was raised that the cooperatives absolutely agree with this, but they can't ignore that it might have an impact on their viability as cooperatives. Although the right to dissent is fundamental for a minority, it should not harm the well-being and viability of what the majority members want to do. This is a democratic organization, so that was the debate, that was the struggle.

• 1020

We came back with that issue, back to the cooperative movement, and the movement went back and did its work again. The cooperatives then came back and said they understood. They appreciated and agreed that there should be safeguards and there should be a pay-out period if it is determined that immediate payment to these dissenting members would put the viability of the cooperatives in jeopardy. Let's save the bigger amount, and perhaps the minority will have to wait a little bit. That was the five years.

What we have heard since then is that for some bigger pools, where the decapitalization might be quite significant and would not apply to the majority of the cooperatives—but to the bigger ones it's very important—five years might be too short a period. They originally wanted to take the five and make it ten. In discussing with them and in discussing with CCA and CCC, we said we should wait a minute, that they might be the pools, but there are 7,000 other smaller cooperatives that are concerned about this and are on that side, Mr. Pankiw, that would like a shorter period.

The beauty of the world of cooperatives is that they always compromise and arrive at consensus. The compromise that was arrived at in this case was to say in the proposed amendments in paragraph (b) that when a member dissents he should be paid out immediately. However, in clause 302, we say that if the board of that cooperative determines that by so doing it would be so bad as to adversely affect the well-being of the co-op, it can trigger paragraph (a), five years. The norm is five years, and no more than five years. The amendment here, and the compromise with the pool, is to put in paragraph (b), which says that if members of the cooperatives consent to put in their by-laws—or their articles, rather—that for their cooperative the five should be six, seven or eight, but in no circumstances higher than ten, members will decide that.

It's a democratic organization. Members know they will have the right to dissent, but they agree that given who they are and the cooperatives that they are, if they exercise that right and it puts the viability of the cooperative into question, the period for us will be eight years. It's their decision. The law will not dictate that for them.

The Chair: Does that answer your question, Mr. Pankiw?

Mr. Jim Pankiw: Yes, and I just want to finish up with two comments.

First of all, I can understand that logic, but ten years does go beyond any reasonable financing. If you go to a bank to finance any project, usually five years is standard and seven years is pushing it. It's very hard to get any financial institution to finance you beyond seven years for any kind of venture. I don't know why we'd extend that in this case.

I'd like to speak in support of Mr. Bellemare's suggestion on setting interest at prime plus a certain fixed amount. That just makes a lot more sense to me.

The Chair: Thank you.

[Translation]

Ms. Lalonde.

Ms. Francine Lalonde: With respect to the same clause, to respond to my colleague, the people who join a co-op know the rules. They know they can't withdraw their investment just any old time and any old way. That's no surprise to them. In reality, this is a significant change.

But I was wondering why you had taken out the reference to a single date [in the French] and just speak of dates in the plural. The board of directors might want to leave it at one date or to spread it out, and the Act shouldn't remove the possibility of having just the one date.

Mr. Jacques Hains: Replacing "une date" by "aux dates" gives greater flexibility. It can be spread out instead of waiting for a day that might be five years in the future. It enables cooperatives to say, "No, it will be the first anniversary of the resolution in which the members voiced their right to dissent." The plural includes the singular and gives greater flexibility.

• 1025

Ms. Francine Lalonde: Not in legislation. If you have a plural, that excludes a singular. I've never seen that. I've done a lot of collective agreements and when something's plural, it's plural.

Mr. Jacques Hains: Our colleagues at the Department of Justice have confirmed that the plural adds flexibility and still allows members to say in resolutions that it will be on such-and- such a day. There doesn't have to be more than one.

Ms. Francine Lalonde: I'm sure there must be two schools of thought on that. The members who see the plural during a smoky meeting are going to say, "Mr. Chairman, this is in the plural." It wouldn't be committing you to anything to add the singular. If the plural includes it already, why not spell it out?

Mr. Jacques Hains: Because it does include it. Just to have one would be very restrictive.

Ms. Francine Lalonde: That's what they did have in their original text: "à ou aux dates". They included both.

Mr. Jacques Hains: The legal drafters at the Department of Justice told us those were superfluous words, because the plural embraces the singular.

Ms. Francine Lalonde: You shouldn't always listen to hem.

Mr. Jacques Hains: Well, after all, they are legal counsel with expertise in drafting legislation.

Mr. Eugène Bellemare: Madam Chair, what harm would it do if we added what Ms. Lalonde is proposing?

Ms. Francine Lalonde: That's just it, there wouldn't be any harm, because it will be used for statistical purposes.

[English]

The Chair: I'm not sure I'm clear about what Madame Lalonde is proposing. Maybe Mr. Hains...I'm assuming it's something in the French section. Or is it?

[Translation]

Ms. Francine Lalonde: I'll explain. In the text proposed by the Wheat Pool, the [French] said "à ou aux dates", [which means "on the date or dates"]. It's in the singular in case the decision is to make the payment at a particular time, and in the plural in case the board decides there will be two, three or four dates.

[English]

The Chair: I'm sorry, but I'm still not following this. I see in the proposed resolution “that begins on the day on which the resolution was adopted”. Is that what we're talking about here?

[Translation]

Ms. Francine Lalonde: It's true that this is a characteristic of the French language. In English, is it "the date" or do you put "the dates"? I didn't look.

[English]

The Chair: In English it says “the times”.

[Translation]

Ms. Francine Lalonde: "The times" in the plural?

[English]

The Chair: So we're talking about the French in the plural: “aux dates”.

Mr. Jacques Hains: And we're also talking about the English, Madam Chair, if I may—

The Chair: Why?

Mr. Jacques Hains: —because what you have to do is look at the text that was proposed by the pools. If I use the English version proposed by the pools, they were saying, “at such time or times”. The French was the same, therefore:

[Translation]

"à la date ou aux dates".

[English]

This is what Madame Lalonde is proposing we go back to. When we took the pools' text to the drafter, as I was saying, they were advising us—and they are the drafting experts, but I agree with them—that the plural includes the singular, so you don't need to say “at such time or times”. You say “at times” and it could be one time—

The Chair: That's right.

Mr. Jacques Hains: —and it would be the members' decision. That's what the drafters have advised us and this is what they've come up with, and the pools can live with that because they understand the rationale.

The question was put by Mr. Bellemare about whether there would be any harm in going back to the previous version. My answer is no, there wouldn't be any harm, but it's just that according to Justice drafters it is not eloquent drafting; they say that one includes the other. But both say the same thing, so we could go back to it if this is the wish of the committee.

The Chair: Can you tell me, Mr. Hains, if throughout the bill the consistency is such that we always refer to the plural when it can be both?

Mr. Jacques Hains: That's right. That's what—

The Chair: I'm not sure this committee is going to want to go through each section clause by clause to determine where we have the use of the plural and the singular. And if the plural includes the singular and that's been determined by the justice department, I think that as a committee, unless we have before us every section to change.... There should be some consistency throughout the bill. If you can assure us that the justice department has read the bill with consistency—

Mr. Jacques Hains: It's not only this bill, Madam Chair. I understand that this is a convention for all federal legislation, that when they refer to “a time or times”, they use English and it covers the singular; the one single time is included in the plural.

I can't guarantee you that all federal legislation that was enacted in 1930 is written that way, but this is the new convention of the justice department drafters; from now on that's what they do, and it includes the singular.

The Chair: All right. Thank you.

Does that answer your question, Madame Lalonde?

• 1030

[Translation]

Ms. Francine Lalonde: I was explaining that this legislation will not just be used by lawyers. It will be used by co-op members. Laypeople aren't always going to know that the plural includes the singular in cases like this. In any event, I'm going to try and make sure that this legislation doesn't apply to Quebec.

The Chair: Mr. Dubé.

[English]

Mrs. Finestone hasn't done anything, Mr. Dubé. Do you have a question about the amendments?

[Translation]

Mr. Antoine Dubé: Mr. Hains was telling me in private the other day that this question of five or ten years . . . I grasped the explanation. I had asked what the provision was in the current legislation. I would like you to repeat the answer, which is that there isn't any provision in this regard.

Mr. Jacques Hains: In the existing federal legislation, and in most of the provincial acts, cooperative members have no right to dissent.

Mr. Antoine Dubé: So what's being proposed is an improvement.

Mr. Jacques Hains: Absolutely. I think that the witnesses who preceded us at this table, the CCC and the CCA, both stressed that this is

[English]

one of the key features.

The Chairman: Mr. Shepherd, did you have a question on the amendments specifically?

Mr. Alex Shepherd (Durham, Lib.): Yes, two points. This is on clause 302.

The words you've put in here speak about adversely affecting the financial well-being of the cooperative. Is there a definition for what that means?

Mr. Jacques Hains: There's no definition of what that means, but somewhere else in the same clause, clause 302, in another subclause, it talks about the solvency of the cooperatives. I understand that has a particular meaning in certain other federal legislation. The bankruptcy act, for example, defines what is meant by solvency. There is an acid test, and there are all kinds of other tests. I understand you may be an accountant by background and you know these. But that terminology here, which is over and above the solvency standard somewhere else in clause 302, is not defined, no.

Mr. Alex Shepherd: So “adversely affect” could be anything. You could just walk right through this, could you not?

Mr. Jacques Hains: That's right. There is also jurisprudence that has defined what an adverse consequence is and things like that. But exactly as you have said, we've been through it with the pools and the cooperatives on that and they have agreed with that standard, as they have agreed with the solvency standards found in another subclause of clause 302, yes.

Mr. Alex Shepherd: So it would be up to a court to decide what the definition is.

Mr. Jacques Hains: I think members would talk about that amongst themselves, and only where they disagree would they have to go to court, yes. But the essence of the position was let's leave it like that and we'll talk about it whenever that particular clause is triggered. You have to remember that clause will be triggered only in a minority of cases, in exceptional circumstances.

Mr. Alex Shepherd: My concern is protecting those members from abuse of the proposed section and whether we shouldn't have spent more time trying to define what “adversely” means.

Mr. Jacques Hains: That's right. These standards were very carefully talked about and consulted on, and amongst the members themselves, given that this is a totally new right, a right to dissent, and a totally new feature. When they took seven years to discuss these things, it was because those concepts are difficult.

It's always a question of a balancing act between the right of members to be paid out immediately, which shall be the norm, and then providing safeguards to protect the de-capitalization of the cooperatives that would ensue. I'm told by them that these discussions haven't been easy, necessarily, and they have come up with these kinds of standards, which as perhaps the CCC witnesses have said, they can now live with. But the debate goes on.

Mr. Alex Shepherd: The second question deals with the aspect of the interest rate. I think your approach to this, then, is basically to mandate it by regulation, which presumably means somebody within the Department of Industry is going to decide what that interest rate is. Is that what you're saying?

• 1035

Mr. Jacques Hains: Not quite correct, with all due respect. A proposal will be developed that I'm told will include a proposal, made here last Tuesday by one of your colleagues, of prime plus whatever. The proposal, because it will be in the regulations, will have to go through a very rigorous, transparent public consultation process, as do all regulations.

It has to be published first in Canada Gazette, part I. There has to be a minimum period of time involved for people affected to respond. Ms. Ringor and her colleagues will proactively consult on that with stakeholders, following which the proposed regulations are revised, if there are revisions to be made. They are published again, in Canada Gazette, part II. Then they come into force. This process takes several weeks in all, and again involves extensive consultations with the clients.

So it won't be a bureaucrat deciding; it'll be proposals being put to the public. Extensive consultations on them will be held.

Mr. Alex Shepherd: Why is that method superior to one where the legislators actually dictate what the method should be?

Mr. Jacques Hains: I think it is a little easier to amend regulations than it is to amend legislation. This particular act has not been attended to for 27 years—it came into force in 1970—whereas regulations tend to be looked at and amended a lot more frequently.

This goes to the issue brought up by the pools and by some members of this very committee, that to put a rate in the statutes is not optimal. For flexibility reasons it should be in the regulations. There are consultations required in the regulations, and it'll be easier to change later, if need be, than to put that in a statute.

The Chair: Thank you, Mr. Hains, and thank you, Mr. Shepherd.

I'd like to proceed to clause-by-clause now, if there are no other questions on the amendments. We will proceed as we normally do. If we have consent and there are no amendments we'll pass a group of clauses at one time.

Clause 1 is postponed pursuant to Standing Order 75(1).

(On clause 2—Definitions)

The Chair: Clause 2 has an amendment.

Mr. Walt Lastewka: I so move the amendment.

(Amendment agreed to—See Minutes of Proceedings)

(Clause 2 as amended agreed to)

(Clauses 3 and 4 agreed to)

(On clause 5—Membership share ownership)

The Chair: We have an amendment.

Mr. Walt Lastewka: Madam Chair, I move to amend clause 5.

(Amendment agreed to—See Minutes of Proceedings)

(Clause 5 as amended agreed to)

(Clauses 6 to 158 inclusive agreed to)

(On clause 159—Marketing plans)

Mr. Walt Lastewka: Madam Chair, I move to amend clause 159.

(Amendment agreed to—See Minutes of Proceedings)

(Clause 159 as amended agreed to)

(Clauses 160 to 175 inclusive agreed to)

(On clause 176—Distributing cooperative)

Mr. Walt Lastewka: Madam Chair, I move to amend clause 176.

(Amendment agreed to—See Minutes of Proceedings)

(Clause 176 as amended agreed to)

(Clauses 177 to 301 inclusive agreed to)

(On clause 302—Right to dissent)

Mr. Walt Lastewka: Madam Chair, I move to amend clause 302.

[Translation]

The Chair: Ms. Lalonde.

Ms. Francine Lalonde: I would like to move a subamendment. I would like to add to the French version of clause 302(24)(a) the words "ou aux dates déterminées par les administrateurs".

[English]

The Chair: Are you amending the amendment?

[Translation]

Ms. Francine Lalonde: It's a subamendment, yes.

• 1040

[English]

The Chair: There is a subamendment now to the amendment before us. Is there any discussion on Madame Lalonde's subamendment?

Mr. Walt Lastewka: Is this a repeat of our discussion on the Justice ruling?

The Chair: We changed it from “the dates” to “the date or the dates”, and the same in French.

Mr. Lastewka, do you have any comments on that?

Mr. Walt Lastewka: I'm not a lawyer or a translator, but I tend to go with the convention. Maybe at a future date we'll need to have some clarification to this committee on that subject. So I would go against the amended amendment.

The Chair: On the subamendment as proposed by Madame Lalonde, all those in favour; all those opposed? The subamendment is defeated.

[Translation]

Ms. Francine Lalonde: Madam Chair, I have a question of privilege. Just because someone on the Liberal side didn't vote doesn't mean we have to call another vote. We're going to have to agree on how we operate here. That was three in favour and three opposed. Your duty is to cast the deciding vote. But instead you called for the vote again because Mr. Shepherd didn't vote.

[English]

The Chair: We'll ask for another vote, Madame Lalonde.

[Translation]

Ms. Francine Lalonde: Madam Chair, I simply want to point out that it seems to me that a minimum corpus of rules has to observed, the basic rules of a democracy.

Mr. Eugène Bellemare: Madam Chair?

The Chair: Mr. Bellemare.

Mr. Eugène Bellemare: I understand your impatience, but this is an issue of sensitivity. The three francophones on the Committee are asking for a change in language. The government side—and I say this with all respect—always votes as a block, but on a question like this one, given that Mr. Hains told us earlier that the change would do no harm . . . It's a question of convention. Who establishes the conventions? Is it civil servants or MPs?

The francophone MPs here want a change that would not affect the English text but respects the French language. Ms. Lalonde says the vote was taken and it was three against three because one of the Committee members had fallen asleep. So it's up to you to cast the deciding vote.

[English]

The Chair: Mr. Bellemare, just to clarify, I asked Mr. Hains earlier about all the other clauses in the bill. So are you proposing to change all the other French clauses in the bill as well where the plural is used for the singular? We'll have a problem with inconsistency in this bill. That was my concern originally about amending the amendment. The bill has been drafted in the plural form wherever it means the plural or the singular for every other clause. So we'll have an anomaly for clause 302 if we accept the subamendment in the bill.

It has nothing to do with not recognizing the linguistic rights or the feelings of the francophones at this committee. With all due respect, it has to deal with all the other clauses in the bill in trying to have a bill that proceeds with consistency. We may have to change every other clause in the bill then.

I understand what Madame Lalonde is saying and I understand what you're saying. I'm just trying to ensure that as a committee we pass a bill that is consistent throughout. If we disagree with the terminology and the drafting, as Mr. Lastewka has said, perhaps we should have the Department of Justice come before this committee in the future to explain to us this new convention it now has that is being applied throughout the entire bill.

I'm just concerned that if we accept one subamendment on changing one terminology that refers to the plural that is to include the singular, we will have one clause in the entire bill that is different from all other clauses.

Mr. Dubé.

[Translation]

Mr. Antoine Dubé: Your assertion surprises me, Madam Chair. I 'll have learned something today, anyway. But I'm not sure that's what is being applied. Let's do the same thing from the feminine angle, to draw an analogy. It is sometimes said that the masculine includes the feminine. This is one aspect of the Bill. It doesn't mean that all the rest is changed. I'm not convinced by your interpretation.

I think Mr. Bellemare's comments are very sensible. The English text isn't changed at all, and neither is the application of the French text. It's simply an aspect of the language. I heard Mr. Hains say repeatedly that it wouldn't change anything. It's more respectful of what people read and understand in French.

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The Chair: Mr. Bellemare.

Mr. Eugène Bellemare: I respect your concern. First of all, you raise two interesting points. The first is that at a subsequent meeting we ought to invite the government's legal drafters to come and explain this new convention to us.

Second, you said that a number of other clauses in the Bill might have to be changed. I don't want to contest that assertion, but rather I would like to ask if the officials agree that a number of clauses would have to be changed or if they think the change would apply only to this clause.

[English]

The Chair: Mr. Bellemare, we can ask Mr. Hains. I had asked a question earlier of Mr. Hains. The response I was given was that there are other terms in the bill that would use the plural and the singular. Mr. Hains, perhaps you'd like to address it.

Mr. Jacques Hains: I think this is an excellent question, Madam Chair. The answer is that given that the plural is used throughout—it includes the singular—if we were to amend only one clause to go back to singular and plural, some people might wonder why we did it in that clause and not somewhere else. They might think the legislators had something in mind. So you have to be consistent. This is under the drafting conventions. This is why drafting legislation is very particular. It's done very carefully by both French and English drafters, who work side by side, Madam Chair.

But I want to go back. I've been on record as saying say that legally, fundamentally, one formulation or the other has exactly the same legal effect.

The Chair: Right.

Mr. Jacques Hains: This is what Justice is saying. But the convention is very important.

[Translation]

The Chair: Mr. Bellemare.

Mr. Eugène Bellemare: Madam Chair, I think that's a very good explanation. Could we solve the problem by adding a rider to the Bill indicating that the singular also includes the plural and vice versa?

Ms. Francine Lalonde: But that's not true in all cases.

[English]

The Chair: Mr. Bellemare, I don't want to become a Justice expert here, but I think Mr. Hains has explained it. There is a convention in all bills that is drafted by Justice presently. The convention has been for several years that the plural includes the singular.

What he's now said to this committee quite clearly is that if we change the clause, we're going to imply that all the other clauses in this bill that use the plural to mean both the plural and the singular could be interpreted to mean only the plural, which then causes a problem in all the other clauses.

I think we addressed this today. I'm going to call the vote again to satisfy everyone.

[Translation]

Mr. Eugène Bellemare: Point of order, Madam Chair. I agree with what you've said and what Mr. Hains said. But as Ms. Lalonde pointed out, when you took the vote before it was three to three. We don't need to vote again. It's up to you to cast the deciding vote.

[English]

The Chair: You're right: it's a three-to-three vote. I was going to allow everyone to vote again. You're right. The motion's defeated, as I vote against it.

(Subamendment negatived)

Mr. Eugène Bellemare: Merci.

The Chair: On the amendment, all those in favour of the original amendment as proposed by Mr. Lastewka.

Mr. Jim Pankiw: I would like to propose a subamendment. We should delete paragraph 302(24)(b). This is because paragraph 302(24)(a) allows up to five years. So they can pay out immediately or have up to five years. Imposing upon a dissenter the fact that they would have to wait more than five years is just unreasonable. It gives the cooperative ample leeway within that five-year period. Going beyond that is unreasonable. So for that reason, I move that we delete paragraph 302(24)(b) from the amendment.

The Chair: Okay. Is there any discussion? Mr. Lastewka.

Mr. Walt Lastewka: The cooperatives are the ones that did all the work. They had this discussion with their members. They have come back. They're the ones who made the proposal.

I'm not sure Mr. Pankiw understands, but this will, as far as I understand—Mr. Hains may correct me—allow each cooperative to put in their specific articles, whether that's five, six or ten. The previous write-ups limited the cooperatives to five years. They specifically came to us and said to leave it higher so that it's flexible and the cooperatives can decide on their own as members. It would be in their articles, so a member of a cooperative would know what the rules are. They specifically came back to us and said, leave a little more to let us, the members of the cooperatives, decide.

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To go against what they've asked of us would be contrary to all the continued work they have done with their cooperatives. As members of Parliament who have heard what they have said to us on how they consulted with their organizations, I don't think we should now go against that.

[Translation]

The Chair: Ms. Lalonde.

Ms. Francine Lalonde: I've raised a number of questions about different aspects of this Bill. In a few years we'll see if my questions were justified.

I respect the work the cooperatives have done, including the negotiating among themselves. In the circumstances, to protect the principle of community property—and that's the characteristic of cooperatives, to hold community property for the long term and even indefinitely—it seems to me that the amendment not only allows cooperative members to dissent but also ensures that the more fragile cooperatives won't be damaged unreasonably by such dissent. So it seems to me that we ought to vote in favour of amendment G-5

[English]

The Chair: Mr. Pankiw, did you have a final comment?

Mr. Jim Pankiw: It's just in respect to what Mr. Lastewka said.

Making this amendment in no way undermines any other part of the bill or any other work that the cooperatives have done. In no way does it show lack of support for any of the other parts of the bill. But if someone is currently a member of a cooperative that now becomes subject to this legislation, you're imposing upon him unreasonable terms of repayment of equity in that if they're allowed to pay it out over that length of time.

The Chair: Mr. Lastewka.

Mr. Walt Lastewka: I don't agree with Mr. Pankiw. What this legislation does is give a framework within which the cooperatives can work. By taking out paragraph (b), you're saying to them that their framework is not going to be up to ten years, their framework has to be less. Your amendment is then restricting them, as members, to make their decisions on how they want to operate their cooperatives, and that's what they told us.

My subsequent question to each of the cooperatives has been whether or not this still protects the principles of the co-op, wherein the members decide. In each case, they answered in the affirmative. By tampering with that, we're now taking away what their members have said the legislation should be.

The Chair: Mr. Dubé.

[Translation]

Mr. Antoine Dubé: I would like to repeat that under the existing legislation, there is no right of dissent. What is new is the right to dissent. This new right constitutes a step forward in the spirit of protection for cooperatives, but they mustn't be condemned to death by being forced to do more.

[English]

The Chair: Mr. Pankiw, do you understand that this right of dissent does not exist in the legislation as it exists today? This whole clause on the right of dissent is new, as Mr. Dubé was just explaining, and paragraph (b) specifically addresses what wheat pools from Manitoba and Alberta brought before us on Monday.

Mr. Jim Pankiw: But if someone in those pools wants to dissent, you're talking about the minority rights of a—

The Chair: They don't have that right until this legislation passes, though.

Mr. Jim Pankiw: But under this legislation, though, the cooperative will then have the right to impose these terms of repayment upon a minority group that may want to leave the cooperative, and these terms are unreasonable.

The Chair: Mr. Pankiw, just to clarify this so that you understand it, it will be specified in the articles of the cooperative. The articles of the cooperative are the reason and basis on which the cooperative exists. Before you join the cooperative, which is your choice, you will know what the articles say, whether they say five, six, seven, eight, nine or ten years, or you will have a vote to change those articles as a member of the cooperative, as a democratic process.

• 1055

It's not as if someone can force this upon you. It's your choice to join the cooperative. It's your choice to analyse the articles before you join the cooperative. It will be your choice as a member of the cooperative to vote to change those articles. The members of the cooperatives brought this amendment before us.

I just wanted to make sure you are clear on why you are proposing this subamendment.

Mr. Jim Pankiw: Let me ask you this, then. What happens to current cooperatives? What if you are currently a member of a cooperative that now becomes subject to this legislation?

The Chairman: Mr. Pankiw, according to the legislation as it's written, the cooperative will have the right of dissent for up to five years as it was written before this amendment was made. Before this legislation that is before us, there was no right of dissent.

Mr. Peric.

Mr. Janko Peric (Cambridge, Lib.): When the cooperatives appeared, we had an opportunity to ask them those questions, and we did. They have given us the answers, and they are happy.

There's a motion. Let's have a vote, please.

Mr. Jim Pankiw: As a final comment, I would like to say if what you are saying is right, why would you limit it to 10 years? Why would you have any limits?

The Chairman: The cooperatives asked for up to 10 years.

Mr. Pankiw, your points have been made.

The subamendment to the amendment before us now from Mr. Pankiw is that we delete paragraph (b).

(Subamendment negatived)

The Chairman: Now the original amendment as proposed by Mr. Lastewka.

(Amendment agreed to—See Minutes of Proceedings)

(Clause 302 as amended agreed to)

(Clauses 303 to 348 inclusive agreed to)

(On clause 349—Offences with respect to this Act)

Mr. Walt Lastewka: Madam Chair, I move the amendment as circulated for clause 349.

(Amendment agreed to—See Minutes of Proceedings)

(Clause 349 as amended agreed to)

(Clauses 350 to 386 inclusive agreed to)

The Chairman: Shall clause 1 carry?

Some hon. members: Agreed.

The Chairman: Shall the preamble carry?

Some hon. members: Agreed.

The Chairman: Shall the title to the bill carry?

Some hon. members: Agreed.

The Chairman: Shall the bill carry?

Some hon. members: Agreed.

The Chairman: We now have to order the bill to the House. Shall I report the bill to the House?

Some hon. members: Agreed.

The Chairman: We want to thank the departmental officials for being with us. We appreciate your help.

Mr. Lastewka, you have a question.

Mr. Walt Lastewka: Thank you, Madam Chair. I don't want to repeat the previous discussion. I'm sure the department heard the questioning. I would ask that the research people also do a paper on this for us so we could all understand the convention and the reasons in respect to the previous discussion.

The Chairman: Mr. Lastewka, how about my asking the researchers to see if there already is a paper that explains this convention, instead of having them repeat something that may be there for the committee?

Mr. Walt Lastewka: Yes. That's fine too.

The Chairman: I want to thank the cooperative and the department again for all their work on this bill, and I thank the members of the committee. It has been a very interesting discussion today.

The meeting is adjourned to the call of the chair.