INST Committee Meeting

STANDING COMMITTEE ON INDUSTRY, SCIENCE AND TECHNOLOGY

COMITÉ PERMANENT DE L'INDUSTRIE, DES SCIENCES ET DE LA TECHNOLOGIE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, June 5, 2001

• 0909

[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): I'm going to call the meeting to order.

We are considering Bill S-ll, an act to amend the Canada Business Corporations Act and the Canada Cooperatives Act and to amend other acts.

This morning we have three groups of witnesses. We have the Groupe Investissement Responsable, Mr. Eric Steedman; the Fédération des travailleurs et travailleuses du Québec, Mr. Réjean Bellemare, the union adviser; Democracy Watch, Mr. Duff Conacher, the coordinator.

What I would propose is that we hear from each of the witnesses their opening statement, no more than five minutes, and then we'll move to questions and go from there.

I'll begin with Mr. Steedman.

Mr. Eric Steedman (Groupe Investissement Responsable): Thank you.

I'd like to thank the committee for the opportunity to speak this morning on behalf of Groupe Investissement Responsable. We're a Montreal-based consulting firm that works in the area of social investment, primarily with institutional investors.

• 0910

Our position is that we support the bill in its current form, and we applaud the committee on the decision to improve the provisions around shareholder proposals and proxy solicitation. We feel this is a big step forward for shareholder democracy in Canada. Furthermore, we think it reflects the changing views and expectations of shareholders in Canada.

On that note, I'd like to refer the committee to a submission that was made by the Shareholder Association for Research and Education, also know as SHARE. This was submitted by SHARE to the clerk on February 27, and it provides a detailed outline of SHARE'S provision. SHARE is a group that we work closely with, and our feelings on the bill are quite similar.

Second, and finally, I'd also like to refer the commission to the upcoming report that will be forthcoming from the Canadian Democracy and Corporate Accountability Commission, chaired by Ed Broadbent. I know they've been working hard across the country to gather views from many of those involved with social investments. It is our position that the findings of the commission will probably be of great interest to the commission, around this issue and others that may influence reforms to the bill in the future.

The Chair: Did I hear you correctly that you said you submitted a report to the clerk on—

Mr. Eric Steedman: Yes. It wasn't Groupe Investissement Responsable, it was an affiliated group of ours called SHARE—the Shareholder Association for Research and Education. It was submitted on February 27 of this year, addressed to Senator Leo Kolber, but it was also sent to the clerk.

The Chair: Was it sent to the clerk of the Senate committee?

Mr. Eric Steedman: It is my understanding it was sent to the clerk of this committee. I have a copy of it with me right here.

The Chair: Okay, clerk, if you'd just take a look at it.... Thank you.

Mr. Eric Steedman: You're welcome.

The Chair: Réjean Bellemare, please.

[Translation]

Mr. Réjean Bellemare (Union Advisor, Quebec Federation of Labour (QFL)): Good morning. First of all, I would like to thank the committee for inviting the QFL to appear before it.

The QFL represents 500,000 workers in Quebec, in both the public and private sectors.

We are particularly interested in issues dealing with businesses and the Canada Business Corporations Act. We created our solidarity fund in the 1980s, during a major economic crisis. We saw companies close down because of the economic crisis, without any regard for the effects on the society they had been in for years. Our response, at that point, was to create the worker solidarity fund of Quebec. The creation of this solidarity fund was not a union response at first, a matter of saying that we would invest in businesses, but as far as we were concerned, that was the case. As a corporate citizen, we wanted to become involved in society and work towards its development. We felt that certain companies could do so as well. We could make this type of investment with what I like to call native risk capital, capital which remains in Quebec and which is there to ensure the development of jobs in Quebec and the growth of Quebec society.

In this regard, I would indicate that even if we are in favour of the bill and hope to see it passed, the legislation as it currently exists does not seem to contain enough indications to allow company administrators to take their social partners into account when their boards make decisions. In my opinion the English term “stakeholders” is a very clear description. Stakeholders in a company are the workers, the company, the population and the suppliers. These are all individuals who are affected by corporate decisions, and the manager of a company who would like to take these stakeholders into account would perhaps have difficulty using the legislation as it is worded as a basis to do so.

We are however totally in favour of the issue of democratizing companies in terms of access to shareholder proposals, the facilitation of submitting proposals to shareholders, the possibility for shareholders to exchange information amongst themselves. In our opinion, these are major improvements.

• 0915

However, in order to facilitate shareholder proposals even further and increase democracy within the business, we would have liked to see an arbitration process when a company refuses to submit a proposal to shareholders. I know that discussions are underway as to possible arbitration committees, but it is not mentioned in the act. It would have been good to do so.

It would also have been good, in the case of a company that refuses to submit a proposal to shareholders, to place the onus clearly on the company, which would have to explain why it refuses to do so. It is in the legislation, but it is not very clear, and we would have liked to see it further clarified.

Lastly, the legislation will specify who can make submissions, the number of shares required, and the requisite duration of ownership of those shares in regulations. Even if we have heard that the regulations could be very supple and allow easy access, we would have preferred that these standards be included in the legislation.

Generally speaking, there a few things lacking in this bill, but we are in favour of the bill.

We have also worked with the Shareholder Association for Research and Education, subsidiary of the British Columbia Federation of labour with whom we often exchange points of view. Therefore I would invite you, as did my colleague, to read the SHARE brief.

Thank you.

[English]

The Chair: Thank you very much.

[Translation]

Thank you, Mr. Bellemare.

[English]

We will turn to Democracy Watch, Mr. Duff Conacher.

Mr. Duff Conacher (Coordinator, Democracy Watch): Thank you very much. Thank you for the opportunity to testify today.

I am here representing the Corporate Responsibility Coalition, which is made up of 32 citizen groups from five provinces. It includes 18 national groups, and in total represents over two million Canadians.

The coalition is concerned about Bill S-11 passing in its current form, essentially because we feel the federal government has completely ignored the concerns of citizens about corporate wrongdoing and irresponsibility. Those concerns have been very clearly expressed through a survey that was conducted by Environics International, which surveyed 1,000 citizens in each of 23 countries on six continents in May 1999.

Canadians ranked as world leaders in support for responsible corporations, ranking only behind Australia, in terms of concern about corporate wrongdoing and a call for corporations to have as their primary role not to make profits, pay taxes or provide employment, but to set higher ethical standards beyond what is required by law, and actively build a better society for all. This is a worldwide phenomenon, but again Canada was second only to Australia, of the 23 countries surveyed. Canadians expressed the greatest concern and the greatest call for corporations to actively build a better society for all.

How will we have this happen? We believe the best way is to change the Canada Business Corporations Act initially and then provincial corporations acts, but also related measures at the federal level.

Hopefully, you have the letter I have submitted. I'm not sure if it has been translated and distributed yet, but if not you'll hopefully receive it before you finish your deliberations on the bill. That's part of why I'm here today. I'm urging the committee to extend hearings and to travel across the country to ensure that Canadians have an opportunity to be heard.

The Corporate Responsibility Coalition certainly has not had an opportunity to be heard. The former Minister of Industry, John Manley, refused to meet with representatives of the coalition, and the current Minister of Industry, Brian Tobin, has failed for three months to even respond to a request for a meeting, despite the fact that the coalition represents over two million Canadians and 32 citizen groups from across the country.

In addition, Industry Canada conducted a very flawed and undemocratic consultation on the issue of corporate directors and executives taking into account stakeholders, an issue that has already been raised by the representative today from the FTQ. That consultation consisted of a letter sent out in July 1998 to over 1,700 corporations, corporate associations, and corporate lawyers, but only 41 citizen groups.

• 0920

Industry Canada decided not to include a measure in Bill S-11 concerning corporations taking into account stakeholders, based on only 68 responses to this letter, of which only four were from citizen groups, while 29 were from corporations, eight were from corporate associations, and 15 were from corporate lawyers.

Essentially, the federal government has completely ignored Canadians' call for strong laws to deal with irresponsible corporations, and has bowed to a powerful corporate lobby coalition that includes Alcan, BCE, Imperial Oil, NOVA Corporation, Northern Telecom, TransAlta Utilities Corporation, and several large corporate law firms. We are calling for citizens' concerns to be addressed, and for the bill to be amended before it is passed.

I would echo a couple of further measures, in terms of shareholder proposals, that have been mentioned by the other two witnesses today. One specifically is the call to create a separate tribunal that would be able to hear cases, when corporations reject shareholder proposals. Also, although we have had it explained to us that the current bill reverses the burden of proof on corporations, and will require them to prove that a proposal by a shareholder put forward does not meet the standard required to circulate such a proposal, it is not explicitly in the bill.

We call for one amendment: that a corporation be explicitly required in the bill to prove that the shareholder proposal does not relate to the business. Make it explicit. Don't leave it to the courts to interpret whether the burden of proof has actually been reversed.

Our main concern is in the area of stakeholder interests. The bill does nothing to address stakeholder interests at all. First of all, we want a requirement added that corporate directors take into account stakeholder interests, when making decisions, and account publicly for how they do so. Secondly, we want disclosure requirements increased greatly, and a single website created by the federal government, searchable for any corporation. We want their compliance record disclosed, with the full range of laws with which they are required to comply, from tax through to environmental and labour laws.

In addition, we want disclosure of their activities overseas, so people can track more closely the sources of products they are buying.

We also want whistleblower protection for all corporate employees. We have it in a couple of acts now, but we are far behind the U.S., which has it in a much wider range of laws. The simple way to extend it to all corporate employees for all situations of wrongdoing is to protect whistleblowers in all CBCA corporations.

We also want to increase the penalties for corporate wrongdoing, including using government procurement. Contracting out and grants should be prohibited to companies that are repeat violators of laws. The government buys a lot of products and services, and this can be used as a very effective incentive for corporations to act responsibly.

In a non-CBCA measure, we would like the Criminal Code changed, as others have called for recently, mainly as a result of the Westray mine disaster situation. Corporate criminal liability standards should also be changed, as a related measure on corporate responsibility.

We also believe that stakeholders should have a right to initiate a review of a corporation's overall activities, following a requirement for corporate directors to take into account stakeholder interests.

Finally, we would like the bill amended to require CBCA corporations to enclose a one-page pamphlet in their annual mailings to shareholders. This one-page pamphlet would invite individual shareholders to join, for a nominal annual membership fee, an individual shareholder association. Such an organization would provide centralized expertise and assistance on shareholder rights issues, and be able to close a gap that is very present right now for individual shareholders, who are facing over 1,000 mutual funds and a wide variety of investment vehicles, but really have no place to call for help on how to shop around or if they have a complaint as an individual shareholder.

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Why are we pushing for all these measures, particularly the measures concerning stakeholders? Simply because the measures that have lowered the barrier somewhat to shareholder proposals, those changes that have been made to the Canada Business Corporations Act in Bill S-11, will do nothing for citizens who are concerned about corporations such as General Motors of Canada, Ford Motor Company of Canada, Toyota, Honda, Chrysler, Volkswagen, IBM, Hewlett-Packard, Mobil Oil Canada, Amoco, Chevron, Imperial Oil, Husky Oil, McCain Foods, McDonald's Restaurants, Zellers, Cargo, Monsanto, Canadian Pacific, General Electric, Bayer, Merck Frosst, Glaxo Wellcome, Purolator, and 3M Canada, just to mention a few corporations in Canada that are wholly owned subsidiaries of foreign or domestic corporations. They therefore have only one shareholder, another corporation, and that shareholder does not need barriers lowered to shareholder proposals in order to hold its subsidiary accountable.

Canadians do need other measures, because they are simply stakeholders of those corporations and they have no right or opportunity to buy shares, become a shareholder, and use the shareholder proposal mechanism. Therefore, simply lowering the barriers to shareholder proposals is going to have a very limited effect on increasing corporate responsibility in Canada. That is why, as the corporate responsibility coalition, we call on the committee, Parliament, and the government overall to amend the bill and include some stakeholder rights measures in Bill S-11 before it is passed by Parliament.

Thank you very much.

The Chair: Thank you very much, Mr. Conacher.

We're now going to turn to questions. Mr. Penson.

Mr. Charlie Penson (Peace River, Canadian Alliance): No questions, Madam Chair.

The Chair: Mr. Brien.

[Translation]

Mr. Pierre Brien (Témiscamingue, BQ): One of my colleagues who is not here this morning, Stéphan Tremblay, has followed this issue with a great deal of attention. One of his concerns is that a lot of things will be defined in regulations and will not be included in the legislation, such as the issue of deadlines, number of days required and so forth.

There are draft regulations. Are you satisfied with the draft regulations or would you prefer that these things appear in the act so that changes be subject to the usual legislative process?

Mr. Réjean Bellemare: As I indicated earlier, as far as I'm concerned, I would prefer that it be written into the legislation. However, we are aware of the regulations and we are quite satisfied with what it contains. It is how changes would be made to these regulations which concerns us. The process is less public and it could be done subject to all kinds of pressures. Therefore, we would have preferred that it be set in legislation and that a true public debate be held. We think that these are important regulations. On balance however, we do support the bill. We feel that it is better to have legislation and regulation than to have no legislation at all.

[English]

Mr. Duff Conacher: We always feel that, especially with rights for individuals who have a much more difficult time lobbying, organizing, and putting on pressure, those rights should be in the law itself, again so that a public review would have to take place if the government decides to back off and once again raise the barriers to shareholder proposals. If it were in the law, as opposed to regulation, that backing off would be a much more public process.

[Translation]

Mr. Pierre Brien: Mr. Conacher, I'm not sure I understood the end of your presentation, when you were talking about single-shareholder companies. No further pressure could be applied. What is your specific suggestion as to these companies which are held by a single shareholder, whether foreign or otherwise?

[English]

Mr. Duff Conacher: Again, because these companies are wholly owned, have only one shareholder, their parent company, there are no shareholders, whether pension funds or individuals, who will be able to put forward proposals to those companies addressing what those shareholders might perceive as wrongdoing by the companies, simply because there are no shares available, they're wholly owned by their parent companies. So that's why we're calling for these stakeholder rights measures that I outlined, such as requiring corporate directors to take into account stakeholders. This would apply to those companies. They are CBCA companies. Also, there's a need for the disclosure of the corporation's compliance record, whistle blower protection for corporate employees, and increasing the penalties for wrongdoing by such corporations.

• 0930

All of these measures are needed in order to move corporate responsibility standards forward and, essentially, require those corporations to act responsibly. Those corporations will not be subject to pressure from shareholders. All corporations always call for a level playing field, and in order to subject those corporations to requirements to act responsibly in any way, you need to put in place these stakeholder measures. What we're calling for is a levelling of the playing field, but at a higher level of citizenship and responsibility for all CBCA corporations, not just the ones that are publicly traded.

[Translation]

Mr. Pierre Brien: I'm going to think out loud and ask for everybody's opinion.

I remember a problem that occurred recently back home. An American company was a shareholder in a project to send garbage from Toronto to Northern Ontario, right on the Quebec border. It was very difficult to have access to this company or to try to understand what was happening in this company, which was being accused of all kinds of things around the world.

Don't you think that companies in certain sectors, such as the environment, should be publicly held? Would it be advisable to prohibit single-shareholder ownership of these companies? We could tell people that they could certainly operate a business in this sector, but that a certain percentage of the shares must be held by the public to ensure that the mechanisms such as those proposed in this bill could function effectively. We could perhaps bring pressure to bear on these people in order to make them a little bit more socially responsible.

[English]

Mr. Duff Conacher: Even then shareholder proposals will always be a very ad hoc strategy for ensuring the corporations act responsibly, simply because there are not that many resources to put forward that many proposals every year. It does take a lot of time and effort to put forward a proposal and to try to see a path at an annual general meeting. So again, it's much better, in our minds, to change the Canada Business Corporations Act and require all corporations to take into account stakeholders' interests, to account publicly for how they do so. Thereby you'll be requiring them to act responsibly.

Currently, the law requires them, essentially, to take into account only the bottom-line, short-term interest of increasing the price of the shares for shareholders. Unless there is an environmental or labour law that requires other considerations to come into account, those corporations are really forced to just focus on that narrow interest of shareholders, while ignoring all other stakeholders.

So that, we believe, is the most blanket way to increase the standard of responsibility for corporations in Canada, as other jurisdictions have. England, for example, requires companies to take into account the interests of employees. Conneticut requires corporate directors to take into account the interests of all stakeholders, and half the U.S. states allow directors to take into account the interests of stakeholders. So Canada is far behind other jurisdictions in this issue. And as I mentioned, Industry Canada simply ignored citizens' concerns and citizen groups when consulting on this issue.

Mr. Eric Steedman: I'll just add that if you look at the experience in the United States, where shareholders have a greater history of activism and the precedent of the Securities Exchange Commission reforms to the laws, which act, I think, as a precedent to what we've seen introduced now with Bill S-11, there has been a great deal of networking and communication among shareholders. And the issue of how to engage with corporations or apply shareholder pressure with corporations that are based in the US or elsewhere involves greater international communication between shareholders, to enable voices to be heard.

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[Translation]

Mr. Pierre Brien: My concern is with wholly owned corporations, s'il n'y a qu'un seul actionnaire.

Mr. Eric Steedman: In the case of wholly owned corporations or private corporations, it is quite hard to find a way to exert shareholder pressure.

Mr. Pierre Brien: This is not my question. Aren't there industries where companies could be prohibited to be privately held, forced to be publicly traded with shareholders?

Mr. Eric Steedman: It's a matter or regulation and not of legislation.

Mr. Réjean Bellemare: I haven't really given any thought to any specific sectors. All I can add to what has already been said—and I share Mr. Conacher's point of view—is that we should allow company heads, as I indicated in my presentation, to take into account the interests of their other partners. For example, since it has been created, the Quebec workers' solidarity fund draws up a social assessment of companies in order to know how they deal with other partners in society, with their employees, issues of pollution, etc.

Therefore, we feel that that should be included. Should that take the form of specific regulation for certain sectors? I really haven't thought about it to that extent.

Mr. Eric Steedman: One idea would be to see what was done in Great Britain. A study was carried out there, the Turnbull report. It's a study dealing with the responsibility of directors who sit on boards of any type of company, whether private or public, but which only have one shareholder.

[English]

The Chair: Thank you.

Madam Jennings, please.

[Translation]

Ms. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): Thank you, Madam Chair. Thank you for your presentations.

I would like to come back to the issue of regulations, and to the fact that some things are in the regulations rather than in the act, as they had traditionally been.

I, also, consider that questions of principle should be in the act. However, my experience before I became a politician has helped me see that it can occasionally be useful to put some things in the regulations, because it takes much less time to amend regulations. Parliamentarians and officials can act much more quickly than they could if they had to have statutes amended.

The points you raised included timeframes. If specific timeframes are included in the enabling legislation and we wish to amend them because they are too long or too short, those amendments might take several years. When the timeframes are in the regulations, they can be tried out to see if they are satisfactory, and if they are not, they can be changed, with the consent of stakeholders, obviously. They can be changed far more quickly, because the legislation does not need to go back to Parliament.

I have no questions for you on this. I just want to ask you to make note of this as one reason for justifying the inclusion of certain provisions in regulations. I think that evolution in legislation is a good thing; by that, I mean evolution in the way we establish statutes and regulations, and the roles of all concerned.

Mr. Conacher, you said that a number of people who would have been interested were not invited to take part in the consultations. Did those organizations have the opportunity to appear at the Senate committee hearings?

[English]

Mr. Duff Conacher: Your committee is not travelling across the country, and neither did the Senate committee. That shuts out many people across Canada. As a result of that and the very flawed and undemocratic consultation Industry Canada did on this key issue of corporate directors taking into account stakeholders, many citizen groups have been shut out of the consultation process on this bill. Given the poll results that Canada is a world leader in concern for corporate irresponsibility, the government is essentially ignoring the concerns of citizens across Canada, and it is not addressing these issues in any way through this bill, which is the most important corporate law in Canada at the federal level because it's the blanket law. It's the basic citizenship law for corporations that want to incorporate at the federal level.

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In the form Bill S-11 is in now, going through with these amendments, Canada will remain far behind other jurisdictions in addressing the issue of corporate irresponsibility.

[Translation]

Ms. Marlene Jennings: Thank you.

In light of the comments, observations and conclusions you have put forward, may I presume that you do not support this bill, that if the bill remains essentially in its current form, Democracy Watch will not support it?

[English]

Mr. Duff Conacher: Yes, the coalition is against the bill, again, because many key issues have failed to be addressed.

[Translation]

Ms. Marlene Jennings: Thank you.

Mr. Bellemare, may I correctly assume that, if the suggestions and recommendations you have put forward on behalf of the FTQ do not appear in the form of amendments to the bill, the FTQ will still support the bill?

Mr. Réjean Bellemare: Yes. We think it is indeed a step in the right direction, though we share many of the fears expressed by Mr. Conacher, including stakeholder access to corporate decisions in Canada. It is a step in the right direction, but it is not enough. We believe that amendments should be made, but we would still like the bill to pass if they are not. At least that one step forward would be taken, and then we could work on the rest.

Ms. Marlene Jennings: Thank you. That's it for me, Madam Chair.

[English]

The Chair: Thank you, Madam Jennings.

Mr. Penson or Mr. Brien, do you have any other questions? No?

Monsieur Bélanger, please.

Mr. Mauril Bélanger (Ottawa—Vanier, Lib.): Mr. Conacher, have you had a chance to appear before the Senate on this?

Mr. Duff Conacher: Yes.

Mr. Mauril Bélanger: Did you make headway in any way, shape, or form?

Mr. Duff Conacher: Part of our concerns were also the stakeholder measures I outlined. In terms of the actual considerations the corporate directors or executives have to take into account when considering a proposal and whether to circulate it, the barriers have been lowered somewhat.

Again, as I mentioned, we've been told by Industry Canada that the burden of proof will be reversed when a corporation rejects a proposal, and a shareholder is forced to go to court to challenge the rejection. We've been told the burden of proof will be reversed and the corporation will be left to prove the proposal does not relate to the business in a significant way, or is being excluded for another justifiable reason.

We don't see it in the bill. We'd like it explicitly set out. It is the only area where there has been progress. Again, as I've mentioned, it means a number of federally regulated, federally incorporated corporations will face no higher standard of citizenship or responsibility because they're wholly owned or private corporations.

Mr. Mauril Bélanger: How do you explain that groups like SHARE and FTQ are prepared to support the bill?

Mr. Duff Conacher: I think you've heard a very reserved statement of support.

Mr. Mauril Bélanger: Nonetheless, it is support.

Mr. Duff Conacher: Groupe Investissement Responsable is simply concerned with the shareholder proposals, not the stakeholder side, as is SHARE. We're concerned with the stakeholders.

Mr. Mauril Bélanger: Can you possibly provide us with a list of the 32 organizations that form this coalition? I didn't see your brief, so I would like to see it if it's available.

Mr. Duff Conacher: Yes, it was also submitted with the brief.

Mr. Mauril Bélanger: Okay. Would it be possible to get the brief?

The Chair: It's coming. It's still in translation. It should be here momentarily.

Mr. Mauril Bélanger: I'd like to see it.

The Chair: Mr. Steedman.

Mr. Eric Steedman: I'd like to add in response that while we do offer support for the bill as it stands, the position is based somewhat on pragmatism. We would like to see the bill move forward, perhaps out of a fear that further delay might cause the reversal of the proposals.

• 0945

However, I would certainly say there is no lack of sympathy for the position of Mr. Conacher in terms of the larger perspective. Our interest, as he correctly states, is more focused on shareholder democracy.

Mr. Mauril Bélanger: I have no lack of sympathy either.

I'm fairly new to the committee. I've not had the years of review of this legislation some of my colleagues might have had. It would be great to have the necessary time. At some point, if you're going to function in a society, you have to rely on the ability of others to do things you can't do. You don't have enough time to do everything.

I suspect your support might be predicated on the same kind of thing. In an ideal world, we would all have everything we want. This is not yet an ideal world. I take it quite seriously that you've decided, reluctantly or not, you will support the bill as it is. It tells me a lot. You have presumably paid a lot of attention to this, more than I have.

Mr. Eric Steedman: Yes, that is correct. We do support the bill. We certainly support the future reforms to the act. We would imagine this process will be ongoing and many of the issues will be addressed in the future. However, yes, we do support the bill as it stands.

Mr. Mauril Bélanger: Thank you.

The Chair: Thank you, Mr. Bélanger.

Mr. McTeague, please.

Mr. Dan McTeague (Pickering—Ajax—Uxbridge, Lib.): Thank you, Madam Chair.

Mr. Conacher, I find myself a little bit like Mr. Bélanger, with recently being on the committee, as far as this issue is concerned. It seems to have been ongoing.

Could you give us a definition of what constitutes a stakeholder, in your mind?

Mr. Duff Conacher: We're prepared to leave it to the courts to define. It is simply to require corporate directors to take into account stakeholder interests when making decisions in the same way as the current provisions. Shareholders can initiate a review of a corporate decision that has been defined by the courts, as well as the challenges that have been launched.

Mr. Dan McTeague: I think we have a fairly good understanding of what a shareholder is. Until a court has an opportunity to give a decision, it would help certain members of Parliament to understand the context of some of the companies you've mentioned.

Are you really referring to a stakeholder as a consumer group? Are you referring to them as an aggrieved group of individuals who may have received a product at a price they don't like, or a product that has created some problems for them financially or otherwise?

Mr. Duff Conacher: It's also employees, communities, and, because the environment cannot represent itself, stakeholder groups who would represent concerns on the environmental degradation caused by a corporation.

This act has not been significantly amended for 25 years. We find it so surprising that when the federal government finally does amend it, over a year-long process, no consideration can be taken into account on this very key issue of corporate directors and executives addressing stakeholder concerns.

It has been raised by the Toronto Stock Exchange and by chartered accountants. It's very fuzzy right now in law. Businesses say they want predictability and surety. It's very fuzzy, based on a very old case called Teck, as to exactly what corporate directors are required to take into account when making decisions and undertaking activities. Why the government has gone through this whole process, completely ignoring this issue, is very much a puzzle to us.

Mr. Dan McTeague: Could you give us an illustration of other nations with which you may be familiar that have the kind of model you may be proposing with stakeholders' rights?

Mr. Duff Conacher: As I mentioned, in England, the Companies Act requires companies incorporated under the act to take into account employees' interests when making decisions. In half of the U.S. states, corporate directors are allowed to take into account stakeholder concerns. In Connecticut, corporate directors are required to take into account stakeholder concerns.

Mr. Dan McTeague: Are there any provinces in Canada that have partially taken this into consideration?

Mr. Duff Conacher: No.

Mr. Dan McTeague: Thank you.

The Chair: Thank you very much, Mr. McTeague.

Ms. Torsney, did you have a question?

Ms. Paddy Torsney (Burlington, Lib.): I have a question for Mr. Conacher.

Is your coalition a national organization?

Mr. Duff Conacher: The Corporate Responsibility Coalition is a nation-wide coalition of 32 groups.

Ms. Paddy Torsney: Did you travel across the country to form your opinion for this morning?

Mr. Duff Conacher: No. We used an electronic means of travelling across the country.

• 0950

Ms. Paddy Torsney: So I guess if a committee invites input from across the country, they could also be consulting from across the country. Certainly we were just handed some other people's perspectives on this bill, so there is a possibility that things could be consulted on, without committees travelling across the country. Is that right?

Mr. Duff Conacher: Yes, if people could in some way find out that the committee was deliberating. But I doubt, given the timetable, that people will have an opportunity, unless you extend it to the fall, which again I've urged you to do. Continue the consultation; there's no rush. This bill hasn't been amended significantly for 25 years—

The Chair: Thank you, Mr. Conacher.

Mr. Duff Conacher: —so another few months will allow Canadians to have their voices heard. For you as a committee, it sounds like—

The Chair: Thank you, Mr. Conacher; we've heard what you had to say.

Mr. Bélanger, do you have another question?

Mr. Mauril Bélanger: How long has this bill been at the Senate?

The Chair: This bill has been at the Senate several times. It was at the Senate over a year ago. It went back for major revisions. It was reintroduced. There were major consultations, and it's been at the Senate since the beginning of this session. It was returned to this committee.

We've received several letters, which I guess have not been circulated, from people who are very supportive of this bill. They have urged the committee to deal with this bill quickly because they've appeared at the Senate twice in the past, and they do not wish to appear again as witnesses in support of it. The clauses in front of us have been well examined. Obviously, there are some concerns that a consensus was not reached, which is why it's not part of this bill at this time.

Mr. Mauril Bélanger: Madam Chair, could you also indulge me and explain the dealings of this committee with this legislation, or previous legislation in the previous Parliament?

The Chair: This legislation was at the Senate in the previous Parliament, and the Senate did major consultations. There were major revisions. If I understand correctly, this is the third revision of this bill, after consultation sessions. We will have the department officials before us, and you can ask them further questions on it.

[Translation]

Mr. Pierre Brien: I cannot let that go by. I have to comment. Madam Chair, the fact that the Senate considered this bill for some time does not excuse Parliament from its responsibility to do the same, particularly since the Senate is a non-elected institution—

Mr. Mauril Bélanger: [Editor's Note: Inaudible]

Mr. Pierre Brien: No, no. This is a comment I already heard in committee, and I would not want the witnesses or other people to get the impression that I share a given opinion or trend because the Senate studied this bill or because I have no responsibility here. I want to make that clear.

I have a question for the witnesses. Even if you support the bill, do you share Mr. Conacher's view that it can wait till fall? In your opinion, must the bill go through now? This may be the last week that Parliament sits: would it be a problem to postpone the bill until fall?

Mr. Réjean Bellemare: If we support the bill, it is because we do not want to lose what is in it. We would not want to delay its passage by six months or a year, and run the risk of losing something when it finally does go through. If you told me that you would postpone passage until autumn to make some positive amendments, we would have no objection. But we have no control over that. You have far more control than I do. I would worry about that. But I have no objection to the principle at the outset. If passage were postponed to make improvements, several months longer would not make a difference.

Mr. Eric Steedman: That is our position as well.

[English]

The Chair: Just on a point of clarification, there was no intention by the chair to suggest that we don't review bills. But you should know that all the witnesses that appeared before the Senate on Bill S-11 were asked to appear before us. None of them wished to appear, other than the three witnesses we have before us this morning. They were asked twice. The invitation was extended, and we received several letters suggesting they had already appeared twice and didn't want to appear again. They believed in the bill, in the letters of support. I cannot force people to appear, so this is the witness session we have for this legislation today.

We want to thank our witnesses for being with us this morning.

We're going to suspend for about two minutes while we bring the department officials back to the table.

• 0954

• 1004

The Chair: I call the meeting back to order.

• 1005

Perhaps I could ask the departmental officials, who have joined us again, to enlighten the committee as to what the process has been for Bill S-11, and how long it's been in the making. That would be helpful.

Mr. Lee Gill (Director, Corporate Law Policy, Department of Industry): We started the consultation process back in 1994. At that time, we went across the country to six cities, I believe. We discussed it and asked everybody what they thought should be changed in the bill and what the problems were with the bill.

We took that information back and prepared nine discussion papers on all of those major issues. We sent those across Canada to the various stakeholders for their comments. We received a number of written submissions. We also went back out again, across the country, to consult with stakeholders on what we'd heard and the various options that had been developed in the discussion papers.

The Standing Senate Committee on Banking, Trade and Commerce also went across the country in 1996, I believe, on the issue of corporate governance. They put together a report on corporate governance, which also covered off many of these issues.

Around that time, the issue of modified proportionate liability was raised. The Minister of Industry asked the Standing Senate Committee on Banking, Trade and Commerce to look at that issue. That committee again went across the country to examine that issue. I believe they also went to Europe, at least once, to talk to some groups there—insurers and that—in England.

Ms. Paddy Torsney: We never do that.

Mr. Lee Gill: In 1998 the Centre for Ethics and Corporate Policy at the University of Toronto brought up the issue of the stakeholder interest clause and a potential change that would allow directors to take into consideration stakeholders in their decision-making. That issue had been discussed at times during the previous two consultations across Canada, but we hadn't dwelt on it.

The centre provided us with some proposals. We sent them to the 2,000-odd groups that had expressed interest in directors' liability, in particular, and had requested papers on directors' liability, as a result of the consultations we'd had. We asked for their comments on this, and received around 65 submissions from stakeholders. A number of them were for a stakeholder interest clause. A good number of them were against it, with a number of explanations, which I could go into later, if you like. That was basically the extent of the consultations.

So we went across the country twice, and the Senate committee went across the country a couple of times, over a period of six years.

The Chair: Could you just explain the introduction? If I understand correctly, this bill has been introduced twice in the past.

Mr. Lee Gill: Yes. This bill was introduced as Bill S-19. Witnesses appeared, and a number of changes were made. It was again introduced as Bill S-11, after the election, and a number of witnesses appeared again. There was ample opportunity, in the Senate, for those witnesses to appear and make comments. We made a lot of changes, as a result of the suggestions we heard.

The Chair: It may be fair to say, Mr. Gill, we are experiencing witness fatigue at this committee. After seven years, some of these witnesses just don't want to come back to talk about it again because they really just want the changes to happen.

Mr. Lee Gill: That's probably a fair comment.

Mr. Reg Alcock (Winnipeg South, Lib.): For the first time you have membership fatigue.

The Chair: Ms. Torsney.

Ms. Paddy Torsney: Can I just get a clarification from Mr. Gill?

Just before the end of the bill there is a series of clauses. I think they're clauses 235, 236, 237, and 238.

Mr. Lee Gill: Yes.

Ms. Paddy Torsney: Were they widely consulted upon?

Mr. Lee Gill: They were not widely consulted upon. They were introduced by a senator in the Senate committee.

Ms. Paddy Torsney: Were they consulted on, in terms of questions and answers during the Senate consultation process?

• 1010

Mr. Lee Gill: No, they were not.

Ms. Paddy Torsney: Thank you.

The Chair: Mr. Brien.

[Translation]

Mr. Pierre Brien: I have a question for Mr. Miller. I have checked my mail every day, and still have not received the legal opinion on section 115. Will I receive it by mail, or not?

Mr. Irving Miller (Senior Counsel, Commercial Law Division, Justice Canada and Industry Canada): What legal opinion do you mean?

Mr. Pierre Brien: I'm talking about the legal opinion on whether section 115 is constitutional.

[English]

Mr. Irving Miller: I consulted with my superiors on this the other day. The position of the Department of Justice is that the policy is not to distribute them outside of government. So unfortunately, I won't be able to provide that to you.

As I tried to assure you the other day, the opinion is quite strong in support of the federal position on this. I might add that it's shared by several private law firms that have also been looking at this issue from the point of view of some of the stakeholders. If you look at the Senate report on the modified proportion liability, you might see there also reference to this issue, which arose in testimony. Again, it was supported by some law firms there.

So I think everyone has more or less agreed on the bottom line on constitutionality. But as I said to you last time, there's always less than certainty on these issues.

[Translation]

Mr. Pierre Brien: Are you aware of the Quebec Bar's position on this? The Quebec Bar has written to the committee clerk, but I do not know whether people have a copy of the letter. Does the Quebec Bar share your opinion?

[English]

Mr. Irving Miller: I have not received anything in writing from the Barreau du Québec, but I did meet with several representatives during the process. What I can say from my own personal experience with them is that they merely questioned it, but they did not offer me their own view on it. So I don't know if they're supporting the position or not. I know they raised the question, and I responded the same way I'm responding to you.

[Translation]

Mr. Pierre Brien: Very well. If I summarize—

[English]

The Chair: Mr. Miller, just to clarify, you should know that we received a letter this morning from the Quebec bar saying that it's an intrusion by the federal legislative authority in a field of provincial jurisdiction.

[Translation]

Mr. Pierre Brien: Madam Chair, the letter is dated May 18.

[English]

The Chair: It's not been translated until this morning, and it's not distributed until it's translated. You know the rules.

Mr. Irving Miller: I was not aware of that.

[Translation]

Mr. Pierre Brien: We could debate the effectiveness—

[English]

The Chair: I just saw it myself right now.

[Translation]

Mr. Pierre Brien: —of the committee's translation service.

[English]

The Chair: I've never seen it.

[Translation]

Mr. Pierre Brien: Very well. The letter was written on May 18. I do not want you to think that it just arrived this morning.

I will try to summarize our position. If I understand correctly, section 115 is constitutional in your view, but you recognize that you are encroaching on what was previously an area under Quebec's provincial jurisdiction.

[English]

Mr. Irving Miller: There are two aspects to this issue. There's the provincial law and there's the federal law. The Code civil du Québec has general application on matters of liability under the civil code of Quebec. What we are doing here is looking at one particular area dealing with federal corporations. Because we have the constitutional authority to deal with federal corporations under the peace, order, and good government provisions of the Constitution, as well as the trade and commerce power, we do have a certain parameter where we can legislate with respect to federal corporations and corporate governance. Our legal advisers in the constitutional area have indicated that this is, in their view, part of the corporate governance regulation of corporations, to determine who shall be liable and how much for financial information that is required to be submitted under the act. So we're only looking at information that's required under the act.

• 1015

Under that framework, the advisers have concluded that we can change the regime of liability for auditors and for directors in those narrow circumstances, and it would, of course, apply to any federal corporation anywhere in the country, notwithstanding that there may be a law of general application that would go contrary to that in other cases.

I hope I'm not confusing the matter, but that is just carving out a narrow, if you will, federal framework for this act, not intruding any more than is necessary on provincial law. In case of conflict between federal and provincial law, the federal law has paramountcy. That's a doctrine of paramountcy the constitutional experts have agreed on as well.

[Translation]

Mr. Pierre Brien: You did not receive the Quebec Bar opinion earlier. I would point out that, in its opinion, this constitutes encroachment into an area of provincial jurisdiction.

[English]

Mr. Irving Miller: I would agree that it is an intrusion on provincial law, but our conclusion has been that it is authorized.

[Translation]

Mr. Pierre Brien: Very well. That's fine.

[English]

The Chair: Again, just to clarify, the section that they say they find intrusive is part 18.1 of the Canada Cooperatives Act and the new part 19.1 of the Canada Business Corporations Act.

Madame Jennings, please.

[Translation]

Ms. Marlene Jennings: Thank you, Madam Chair.

I have a question for Mr. Miller. You state that the Department of Justice is not in the habit of disclosing legal opinions. I can understand that. However, if the constitutionality of a provision in a federal statute has been questioned, we should be able to receive an opinion on that provision's constitutionality in writing, and not only orally, as you have delivered it.

I am aware of the essential aspects of the issue. As you have just said, your position is that this constitutes encroachment into an area of provincial jurisdiction that has been authorized or justified, and is therefore constitutional. I would like you to explain the legal and constitutional aspects of this. What arguments can the government use to counter possible objections and claims that this is simply encroachment?

It is easy to say that this constitutes encroachment into an area of provincial jurisdiction, but we have to do more—we have to explain whether in the Canadian constitutional framework there are circumstances in which the federal government can encroach into areas of provincial jurisdiction. Under what conditions would such encroachment be constitutional? What are the criteria? What makes such encroachment constitutional?

[English]

Mr. Irving Miller: I'll try to answer the last question first and then get back to the—

[Translation]

Ms. Marlene Jennings: I am not asking you to answer. I want something in writing about this matter.

[English]

The Chair: I just want to clarify something. This letter was sent yesterday by fax and by e-mail. It may be dated May 18, but it was sent yesterday to the clerk.

[Translation]

Mr. Pierre Brien: I asked for a legal opinion at the last sitting. Mr. Miller will confirm that.

[English]

The Chair: I understand that. But we've had this issue raised at committee several times, and it's not Mr. Miller's policy, it's the government policy not to release. I don't think we can ask Mr. Miller to defend or explain any further government policy.

[Translation]

Ms. Marlene Jennings: Madam Chair, I said that I was not contesting the department's decision not to disclose a legal opinion. However, whenever a bill or a clause is challenged, I think that the government, through the department, should be able to provide us with written arguments to respond to the arguments raised by those who have doubts about its constitutionality. I appreciate Mr. Miller's verbal argument very much, but this is not enough. Some persons say that this is unconstitutional because it infringes on a provincial jurisdiction. Mr. Miller very briefly explained that this is an infringement...

• 1020

[English]

The Chair: Madame Jennings, we're aware of that.

[Translation]

Ms. Marlene Jennings: I am not asking for the legal opinion of a firm of lawyers or anything like that. At least we can be given written arguments. This is what I want and I insist on having a written version, because if we pass this bill and if in two months or two years someone raises the issue of infringement on provincial jurisdiction, I want to be able to defend the government's position.

[English]

The Chair: I understand.

Mr. Miller, is that possible, that you could provide us with arguments in written form, not necessarily the legal opinion? Because members of the committee have to be able to defend this decision.

Mr. Irving Miller: I suppose what I'm saying to you now we could put down in some form of written form. After I've consulted with my client, I think we can probably have something. It may not be considered an official opinion of the Department of Justice, because that would again infringe on policy, but there will be some supporting documentation.

The Chair: Would that suffice?

[Translation]

Ms. Marlene Jennings: I would also like the document that you will provide to contain the references to the caselaw which could establish, for instance, that the infringement on a provincial jurisdiction is constitutional according to given criteria. I do not only go by what I am told, I also want to have the proper documents in hand. I took constitutional law courses long ago, and I have not practised constitutional law since then. Thus, I would like to be able to consult these reference documents to understand exactly what is at stake. Perhaps I would be more at ease in defending the government's position.

[English]

The Chair: Mr. Miller.

Mr. Irving Miller: I suppose we can put down some general case law that will shed light on this issue.

Let me just say that there are many situations where you have federal laws introduced with some feature that might intrude to some extent on provincial law. This happens all the time. We consider that, we look at that in a constitutional sense, and we determine whether or not there is a supportable federal authority, because once there is a supportable federal authority for that law, then even if there is a—

The Chair: Mr. Miller, do you just want to wait until Ms. Jennings has a chance to listen here?

Ms. Marlene Jennings: Thank you.

Mr. Irving Miller: I was just saying that there are many laws that have double features, if you will, some federal and some provincial aspects. As long as there is a supportable federal authority to it, even if there is—and again I'm repeating my position—a conflict, the conflict is determined in favour of the federal government. That's clear constitutional law and that we can support.

You have a letter from the Barreau du Québec. I'm not sure if any of the other provinces have spoken on this issue in a constitutional framework. I don't think there's been any other—

The Chair: We haven't received any other, Mr. Miller.

Mr. Irving Miller: So we'll do our best to put something on paper, but I can't give you an official Department of Justice opinion, because I'm not the deputy minister.

The Chair: That's fine.

We're going to move on to the next questioner now. I just want to let members know that we're going to run out of time. There's an anticipated vote this morning, so I want everyone to keep that in mind as they ask their questions.

Mr. Lastewka.

Mr. Walt Lastewka (St. Catharines, Lib.): I wanted to ask Mr. Gill about the consultations you had across the country a number of times. Were they publicized? Was the public allowed to provide input for your consultations?

• 1025

Mr. Lee Gill: We didn't advertise them in the newspaper or anything, but we certainly contacted as many people as we could identify who were interested in this bill. Yes, if people had wanted to come, they expressed an interest, they would have been welcome to come.

Mr. Walt Lastewka: Was there public input?

Mr. Lee Gill: Yes. Various organizations, various interest groups came.

Mr. Walt Lastewka: Okay. Thank you.

The Chair: Mr. Bélanger.

Mr. Mauril Bélanger: Madam Chair, do we have a list of the people here and their titles?

The Chair: Yes, it's in your clause-by-clause. It's in your statement this morning.

Mr. Mauril Bélanger: Thank you.

Mr. Miller, you're with the Department of Justice. Am I correct in believing that you've invoked a client-solicitor privilege for not releasing that legal opinion that our colleague was asking for?

Mr. Irving Miller: No, not specifically. There is a solicitor-client privilege, you're correct, but in law that privilege benefits the client, which is the Department of Industry. That's only one aspect of it.

Mr. Mauril Bélanger: So it's not the client-solicitor privilege?

Mr. Irving Miller: It's in part that. If the client prefers not to share it, then there's solicitor-client privilege.

Mr. Mauril Bélanger: May I ask the client, then, whoever is entitled to speak for the client here, whether the client is prepared to release that opinion, yes or no?

Mr. Lee Gill: I have been informed by the Department of Justice, in asking that question before on another issue, that I am not allowed to distribute that.

Mr. Mauril Bélanger: No, I'm asking if the client, the Department of Industry, would be prepared to share that opinion or not. It's not what the Department of Justice is telling you to say, but what the Department of Industry's prepared to do or not.

Mr. Lee Gill: I think it's government policy not to share that opinion. And given that policy, I cannot share that opinion.

Mr. Mauril Bélanger: So you're asking parliamentarians to enact legislation without sharing the legal opinion that you've received from the Department of Justice, correct?

Mr. Irving Miller: Can I just say something?

The Chair: Certainly.

Mr. Irving Miller: Mr. Gill is trying to be consistent with overall government policy on this issue. And the overall government policy, as Madam Chair has indicated, is that the Department of Justice does not distribute opinions outside of the government. I checked this with my superiors, so I'm not speaking from my own personal view. The Government of Canada is our client, no one else, and it's for the benefit of the Government of Canada.

You certainly have the right to take whatever means you see fit to try to obtain these opinions through other committee means. I'm not suggesting you can't vote on these things. I cannot breach Government of Canada policy by volunteering it. That's all I can say.

Mr. Mauril Bélanger: Thank you.

The Chair: We've had this question over and over again, and the reality is we're going to receive something in writing from Mr. Miller on this issue.

Did you have another question?

Mr. Mauril Bélanger: I have questions relating to the letter we've received from Monsieur Gervais. He raises two other issues:

[Translation]

the means tests and the right to dissent. Did you have an opportunity to read this letter?

[English]

Mr. Lee Gill: I haven't seen this letter.

[Translation]

Mr. Mauril Bélanger: Could you do it and could you tell us how the department responds?

Mr. Pierre Brien: This is a Senate committee. I cannot believe that they did not look at that.

[English]

Mr. Mauril Bélanger: No, we're into clause-by-clause.

Mr. Lee Gill: I would need a delay of ten minutes to go over this letter and discuss it with my colleagues. Is that possible, Madam Chair?

The Chair: The vote has not started yet and the bells haven't started ringing.

Ms. Paddy Torsney: May I make a suggestion? We have clause 1 to clause 50 that we could deal with. By then we'll have a chance to vote, you guys can read it, and we can come back and deal with that issue and then go back into clause-by-clause.

• 1030

The Chair: We can do them in one minute when you have them all together. I was intending to deal with them together.

We weren't going to do them one by one, were we, Mr. Brien?

[Translation]

Mr. Pierre Brien: Except for clause—[Editor's Note: Inaudible]

[English]

Ms. Paddy Torsney: Why don't we do all the clauses but that one, and then come back to the clause you have as contentious after the vote.

The Chair: Just so you understand, it's going to be a 30-minute bell when they start, so we could be a good hour away from returning after a vote.

We may be better to allow them a few minutes to consult on the letter, but I don't understand which letter we were talking about. Was it this letter...?

Ms. Marlene Jennings: No.

The Chair: I thought we just agreed that Mr. Miller is going to respond to that in writing—

Mr. Mauril Bélanger: There are three things raised in that letter. Number one is the encroachment possibility. We can't get the opinion that's been written on that. We do have an opinion on it.

The Chair: Mr. Bélanger, just to be clear, we are going to get a letter in writing on Mr. Miller's statement here today.

Mr. Mauril Bélanger: The second one is les tests financiers and the third is le droit à la dissidence. There are three matters raised. We've tried to deal with one. I'm just raising the other two to see if I can get a reaction from the officials.

The Chair: Just so we understand, this letter has been received so late in the seven-year process, as was explained a few moments ago. Let's be honest, it's been seven years, and this letter arrived this past week—

[Translation]

Mr. Pierre Brien: Madam Chair, one moment.

[English]

The Chair: Just a minute, Mr. Brien.

My suggestion would be that we get a written response to this letter from the deputy minister so that you have evidence or something that you can back it up. I don't believe we're going to start the whole debate over again here today.

When we asked for witnesses the Quebec Bar did not ask to appear before this committee. When we asked for a witness to appear we didn't have anybody who wanted to appear. Everybody knew the consultations were going on in the Senate. They went on for three months in the Senate.

We need to be fair to the process here. We have several witnesses who have asked us to deal with this through letters, and I just want to make sure we're clear here on what we're talking about. I want an answer from the department. Have they not been advised of the Quebec Bar's position at all in the past? Do they have any concerns about this legislation?

Mr. Lee Gill: In past discussions with the Quebec Bar we were of the understanding that they felt, as Mr. Miller expressed, that, yes, there was an intrusion into the law here to some extent. We did not get the impression that they were necessarily against this overall as the Quebec Bar.

I have also spoken to my equivalent in the Department of Finance in the province of Quebec. The view that I received there was an acknowledgement that indeed there was a change here that would influence Quebec law, but we had worded the clauses in the bill in such a way as to narrow it sufficiently to federal jurisdiction. And that's why we had done that.

The Chair: My concern, though, is with regard to the financial test and the right to dissent. Has the Quebec Bar not raised this issue in the past with everyone, either at the Senate or at the department? Has this issue not been raised until today?

Mr. Lee Gill: Not to my knowledge.

[Translation]

Mr. Pierre Brien: Madam Chair—

[English]

The Chair: Just a second, Mr. Brien; I'm going to come back to questions.

Okay, Mr. Brien, you have a point of order.

[Translation]

Mr. Pierre Brien: Madam Chair, you made two statements that were not correct. The first sentence of the letter says that on March 8, submissions were made to Mr. Denis Robert, the Clerk of the Banking Committee. This letter was tabled. If, as you said, the Senate process is part of the overall process, we can state that this letter has at least existed since March 8. Thus, let us stop saying that it has only existed since this morning. I wanted to correct that.

[English]

The Chair: That's not what this letter says. It doesn't say we submitted this letter. We submitted a number of preliminary comments. Be careful here. It doesn't make any reference that it's the same letter at all they submitted. This is a different letter—

[Translation]

Mr. Pierre Brien: Do not forget the letter of March 8.

[English]

The Chair: They submitted preliminary comments.

[Translation]

Mr. Pierre Brien: These ones.

[English]

Ms. Veronica Wessels (Senior Project Leader, SBCA Reform, Department of Industry): Madam Chair, I can clarify that we don't have the March 8 letter with us, but that letter, I recall, does not deal with the issues dealt with in this letter. This is the first time these issues are dealt with.

[Translation]

Mr. Pierre Brien: Does this include the responsibility for civil remedy?

Ms. Veronica Wessels: Yes.

• 1035

Mr. Pierre Brien: Not even the letter of March 8?

[English]

Ms. Veronica Wessels: The letter of March 8 does not deal with modified proportiate liability, no.

The Chair: Mr. Bélanger.

Mr. Mauril Bélanger: Thank you, Madam Chair.

Whether it's just come up now or previously is somewhat irrelevant. I saw it for the first time in the last hours. I read that letter from le Bâtonnier du Québec carefully. There are three points raised. We tried to deal with one. I've no problems with the opinion given. I just take exception to the fact that the Department of Justice has a policy of not sharing its legal opinion, even in front of the committee that's deliberating on the legislation they're asking us to consider. That's my problem, but that's a side issue.

The other two issues raised I suspect are legitimate. They raise points that I think deserve to be addressed. They may be addressed by staff satisfactorily. That's all I want to see. I think they do deserve to be addressed. There are two points in that letter, and that's all I'm asking for—an opinion, a reaction, and whether or not what le Barreau raises is valid.

[Translation]

It is as simple as that.

[English]

I'm not necessarily taking sides here; I just want to know.

The Chair: I would think that we have people sitting at the table who can talk about the financial tests that are within this bill, without taking ten minutes to read a letter. If not, then we have a big problem here, Mr. Gill.

Ms. Paddy Torsney: Either way, why don't we give them ten minutes to read this?

The Chair: We've now had ten minutes. We're now going to go to the financial tests.

Ms. Paddy Torsney: We still haven't got the letter on this side.

The Chair: Can we make copies of this letter for people who didn't bring it today?

We're going to suspend for five minutes.

• 1037

• 1049

The Chair: Order.

Let's discuss that letter to see if we have any response to that now.

Mr. Gill.

Mr. Lee Gill: Let me start off by saying that with respect to the first point, on their objection to the overall modified proportional liability, I'm not reading into this that they have a strong constitutional objection. What I am reading into this is that we really don't like the proposal that it might in some way reduce some of the responsibility of the corporation.

This proposal has been studied in detail. A lot of witnesses appeared. It apportions responsibility according to the degree of fault, which generally the witnesses thought was fairer.

• 1050

In the case of solvency of the corporation or of the groups of defendants and of their availability, everything is paid out that would normally be paid out under joint and several liability, which is the case right now. When some of those aren't available, yes, certain parts may not be recovered by the plaintiff. However, all small plaintiffs are protected under the same regime that is there now. Charitable organizations are protected. So it's really the sophisticated investor that it might impact. We did not have witnesses appear who suggested that was really a problem of any significance whatsoever.

With respect to the other two points, I would turn to Daniel Picotte to address those, please.

[Translation]

Mr. Daniel Picotte (Representative of the Department of Justice and Solicitor General of Canada): The first point that was raised concerned means tests. I do not think that the Bar is opposed to the measure proposed in the act to waive means tests for loans to shareholders. It simply wants to know whether we should not waive them in all cases, in all the other situations where companies have transactions with their shareholders. In this case we are dealing with declaring dividends, purchasing or buying back shares, or reducing capital.

But there is a difference between these two sets of circumstances. In the first case, an advance can be made to a shareholder as adequate consideration and in perfectly proper commercial conditions, which does not constitute a distribution of company assets, whereas the second group of operations must involve a distribution of company assets without any other consideration of shareholders. This is the reason why I understand that the bill eliminates means tests where loans to shareholders are involved, but does not eliminate them for other operations.

Regarding the right to dissent, the Bar raises a question regarding the French version of paragraph (6) of section 190 of the act. This bill does not amend anything in subsection 190(6). This is purely an issue of technical interpretation and could, I think, be further amended if the department of industry saw fit to do so, but the current act does not cover this at all.

The Chair: Mr. Bélanger.

Mr. Mauril Bélanger: Thank you, Madam Chair. Here we are dealing with the congruence of the English and French versions.

Mr. Daniel Picotte: To answer the question more fully, there is a problem of consistency between the French and the English versions; we only want to know whether someone can declare his dissent afterwards without having to prove that he had voted against. We must remember that as far as public corporations are concerned, the company does not always know which shareholders voted for and which ones voted against, because their shares are voted by brokers to whom they have been entrusted.

This creates a practical problem and there is a problem in the consistency between the French and English texts. Even the English version should be clarified, as the Bar has noted. This is probably the problem. It is a purely technical problem, and a practical one. There is nothing in the current act to help settle this matter either way.

[English]

The Chair: Do we need to amend section 190, then, today for it to be accurate so it's the same in the English and French—subsection 190(6)?

Mr. Lee Gill: I don't think an amendment is necessary. This has not posed a problem. It's something somebody has suggested at the last minute. It may improve the bill, but it's something that can certainly be done in future amendments to the act. This bill is up for review within five years, for examination.

[Translation]

The Chair: Mr. Brien.

Mr. Pierre Brien: Madam Chair, I would like to make a comment before putting my question. I would like to know if this is an urgent matter. If something must be amended for the sake of consistency, I wonder why we should wait for five years, until the next review, to do it. We have already spent a great deal of time on this bill, so a few hours more won't matter.

You said that subsection 190(6) was not being amended. None of the amendments deal with this section. You are referring to subsection 190(6) in the current act, are you not?

Mr. Daniel Picotte: Precisely. Bill S-11, as it currently reads, says nothing at all about subsection 190(6).

• 1055

Mr. Pierre Brien: But Bill S-11 could very well amend that section. Bill S-11 aims to amend this act. It is the same act.

Mr. Daniel Picotte: It is a question of timing.

Mr. Pierre Brien: Precisely.

[English]

The Chair: Just so I understand, then, subsection 190(6) has existed for how many years in this form?

Mr. Daniel Picotte: I would be tempted to say about 20 to 25 years.

The Chair: And there's never been an issue with it?

Mr. Lee Gill: Not to our knowledge.

The Chair: Okay.

If there are no other questions, I would propose that we begin clause-by-clause.

I propose that we do the clauses together that have no amendments.

(Clauses 1 to 58 inclusive agreed to)

(On clause 59)

The Chair: On clause 59, Monsieur Brien, you have a number of amendments.

[Translation]

Mr. Pierre Brien: Madam Chair, I have a series of amendments which are generally meant, except for the last one, to define the regulatory deadlines foreseen by this bill. This refers to the fact that, in the bill, timeframes will be set through regulation while the amendments that I am tabling, except for the last one, requests that they be defined in the act and not through regulations.

Regarding the last amendment, a mechanism has to be established for contentious cases. If some individuals want to distribute a document that a company refuses to distribute, this will give rise to conflict, and the amendment provides a mechanisms for settling the matter. This should be done by an adjudication committee of three persons rather than by the courts. The amendment also provides for the deadlines that could influence the speed of the procedure.

This amendment seeks to simplify a legal procedure which would otherwise be much more burdensome. I understand that the committee does not want to make amendments. My expectations are not too unrealistic, but I would like to raise these points which will, in my opinion, have to be improved sooner or later.

I hoped that we could do this now. Personally, I do not feel bound by the fact that the Senate has worked on this for years and I would have preferred to do it this morning. But I must face the reality that everyone does not share my point of view. Whether you want to approve them or to reject them all together, I will agree to it.

[English]

The Chair: Okay. We'll begin with your first amendment then, Mr. Brien.

Mr. Pierre Brien: You can proceed with all at the same time, if you want to.

The Chair: We can proceed with all the amendments together? Okay. There are ten amendments.

(Amendments negatived)

(Clause 59 agreed to)

The Chair: Shall clause 60 through and including clause 234 carry?

[Translation]

Mr. Pierre Brien: Well, clause 115—

[English]

The Chair: Clause 115, oh, I'm sorry. That's not in my thing. Is there an amendment to clause 115?

[Translation]

Mr. Pierre Brien: Well, I would propose that we vote against this because I would like it to be withdrawn.

[English]

The Chair: Okay, we'll do it another way.

(Clauses 60 to 114 inclusive agreed to)

(Clause 115 agreed to on division)

Mr. Mauril Bélanger: This is on the condition that we receive, within a reasonable amount of time, the opinion that we've been promised.

The Chair: I certainly will have that opinion within 48 hours.

Mr. Mauril Bélanger: Thank you, Madam Chair.

(Clauses 116 to 234 inclusive agreed to)

The Chair: Mr. Lastewka, you have an amendment for clauses 235 to 238?

Mr. Walt Lastewka: Not an amendment; just call them individually.

The Chair: You're not in favour of them?

Those in favour of clause 235?

Mr. Mauril Bélanger: Hold on. Can we hear some arguments here?

The Chair: Well, the questions were asked several times, but maybe Mr. Lastewka would like to speak to it again.

(On clause 235)

Mr. Walt Lastewka: As you heard earlier, the officials did answer Ms. Torsney's question. The amendments in clauses 235 and 238 we were not consulted on, and this changes the.... I lost my paper, but maybe the department can....

• 1100

The Chair: Mr. Gill, maybe you could just clarify. I understand clauses 235, 236, 237, and 238 were amendments made at the last minute in the Senate. There was no consultation. They affect another bill—

Mr. Lee Gill: That is correct.

The Chair: —and there's been no consultation on that.

Mr. Lee Gill: That is correct.

The Chair: And there's no support from....

Ms. Paddy Torsney: The Department of Industry.

Mr. Lee Gill: Well, yes, and the Department of Transportation has problems with the proposals.

The Chair: Okay.

Mr. Walt Lastewka: It was my understanding, Madam Chair, that there were remarks made in the Senate that there were consultations. When checking it, there were not consultations. My understanding from the department today is that there was not consultation on it.

Mr. Lee Gill: That's correct.

Mr. Walt Lastewka: I'd like to correct that by voting against all four.

(Clauses 235 to 238 inclusive negatived)

(Clauses 239 to 241 inclusive agreed to)

(Schedule 1 agreed to)

The Chair: I understand there's an amendment to the title. Mr. Lastewka, do you have that amendment?

Mr. Walt Lastewka: Having defeated clauses 235, 236, 237, and 238, the title should be amended as circulated: “An Act to amend the Canada Business Corporations Act and the Canada Cooperatives Act and to amend other Acts in consequence”, which would take the title back to its original form as a result of....

(Amendment agreed to)

The Chair: Shall the title, as amended, carry?

Some hon. members: Agreed.

The Chair: Shall the bill, as amended, carry?

Some hon. members: Agreed.

The Chair: Shall I report the bill, as amended, to the House?

Some hon. members: Agreed.

The Chair: There's no reprint necessary for this bill, because we're just deleting; we're not adding to the bill.

Ms. Paddy Torsney: Shall we thank our officials?

The Chair: We want to thank our officials for being here this morning. We look forward to that response within 48 hours in both official languages to the committee.

Mr. Miller, I'm sure you can accommodate us within 48 hours in both official languages.

Mr. Irving Miller: Absolutely.

The Chair: That would be great.

We're now going to suspend until after the vote. After the vote we'll resume in camera to consider the report.

[Editor's Note: Proceedings continue in camera]