:
Good afternoon, everyone.
We're here pursuant to the order of reference made on Wednesday, December 2, 2008, to study .
I'd like to welcome our four witnesses today. From Imagine Canada, we have Madam Cathy Barr, vice-president of operations. We have Madame Susan Manwaring, a partner at Miller Thomson LLP. From the Canadian Red Cross Society, we have Madam Pam Aung Thin, who is the national director of public affairs and government relations, and Mr. Alan Reid, general counsel. Welcome to all of you.
I want to let members of the committee know that you've been given two documents, in both official languages. The first is a submission from Imagine Canada, and the second is a very in-depth comparison of the various iterations of this bill in front of us from previous Parliaments, which our analyst has prepared for us.
Thank you very much for that work.
She's also indicated that you will get an electronic copy at your office at some future time.
Without further ado, we'll start with Imagine Canada. You have 10 minutes for your opening statement.
:
Thank you, Mr. Chong and members of the committee.
I am here today presenting the submission that was actually written by the National Nonprofit Sector Task Force on the Modernization of Federal Not-for-Profit Corporations Law, which is a task force of representatives of the non-profit sector and various professionals, lawyers, etc., with expertise on non-profit law who came together to prepare this brief to the committee. They were brought together by Imagine Canada, which is the organization I represent.
I'd like to begin by congratulating the government on understanding the need to update the federal not-for-profit corporations law, which is pushing 100 years old at this point. I'm sure we're all in agreement that something needs to be done about that situation. I'd also like to congratulate all of you on your perseverance in bringing this act forward again. Again, as most of you probably are aware, it's been quite some time that all of us collectively have been working to get some new legislation passed. So we're very grateful to see this before us once again.
Having said that, however, the task force that we brought together did feel, upon its review of the act, that the government would be missing a major opportunity to reduce red tape if it allowed the act to pass as it stands right now. Therefore we are recommending that some changes be made, and ideally that perhaps the bill could be sent back for some more consultation with the non-profit sector. We do realize a lot of consultation has taken place in the past, but very little has taken place on this current, new iteration of the bill, and we think there are some flaws in it that might be improved upon if some more consultation took place.
Specifically, I'll bring your attention to the five different areas that we highlighted in our submission. The first relates to voting rights. We feel in this case that it would be best if it were up to the not-for-profit corporation itself, through its board of directors, to determine what the voting rights of members should be. This should not be put into the legislation. It would be better left to the non-profit corporation itself, which would allow it to change the rules in this area as needed and over time.
Secondly, we feel that as the act is written right now, there is a distinction made between soliciting and non-soliciting corporations. We feel this distinction is not particularly helpful, that it could be eliminated from the act with no diminution in the value of the act, and in fact that it would be preferable for non-profit corporations to simplify the act in this way. There are other ways in which the fundraising as an activity that charities engage in are regulated through the Canada Revenue Agency and through various provincial statutes, and we don't feel that this act needs to look at those things. Therefore we would prefer that distinction be eliminated from the act. That would also serve to simplify the act quite a lot, which would be helpful for non-profit organizations.
On that point I should note that research conducted by Statistics Canada and Imagine Canada shows that over half of all non-profit organizations have no paid staff at all. Many of these organizations are very small, volunteer-run organizations, so any way in which we can make the act simpler for them would be beneficial.
Thirdly, and this sort of speaks to the same point, there are references throughout the act to various remedies that are available to members. We feel in this case that this is a situation where, again, the act could be simplified, that it would be better to create a single remedy section rather than have references to various types of remedies throughout the act. This seems to have become a part of the act because it's part of the Canada Business Corporations Act. But businesses, and shareholders in businesses, have many different concerns than do members of non-profit organizations. Therefore we feel that all these mentions in the act of various remedies are unnecessary, that we could put one section in and refer to what remedies might be necessary for members and leave it at that. It would simplify the act a great deal.
Fourth, we feel it would be beneficial to move more of the content from the articles of incorporation to the bylaws of a corporation. The act as now written requires that many aspects of the way in which a non-profit corporation is run be written into the articles of incorporation. Again, this will create challenges for many non-profits, especially the small ones and the ones without paid staff, because they will have to engage a lawyer and go through a big, long process to change their articles of incorporation.
It would be much easier if many of those aspects of the corporation, such as the voting and non-voting, the number of directors, and that sort of thing could be put into the bylaws of the corporation. It would be much easier, simpler, and cheaper for non-profit organizations to change those rules if they were in their bylaws.
Finally, and this goes to an overarching point, specifically we're asking that three parts of the act, parts 6, 7, and 8, which we feel are largely not relevant for most non-profit organizations, be removed. The issues addressed in these sections arise only rarely, and we feel they could be dealt with through a statutory reference to the relevant provisions of the Canada Business Corporations Act. Again, this would simplify the act a great deal. It would shorten it, and it would reduce confusion for the largely volunteer boards, etc., that run Canada's non-profit organizations and charities.
Those are the five specific points of recommendation. But our major point is to simplify the act and make it clearer, shorter, and easier to use for small and medium-sized non-profit organizations and the volunteers who run them. That's one point.
The second point is that we feel this statute should be designed to facilitate the creation of non-profit organizations and give them basic rules for how they should constitute themselves, but it should not be a regulatory statute to regulate the various ways and means in which a non-profit corporation could act.
Those are our two main points. However, we don't want any of that to suggest that we aren't interested in moving the act forward, because we definitely want that, above all.
Thank you.
:
Thank you, Mr. Chair and members of the committee.
[Translation]
On behalf of the Canadian Red Cross Society, I would like to thank you for allowing us to appear before the committee today.
First, let me tell you briefly about the Canadian Red Cross Society mandate before I give the floor to our General Counsel, Mr. Alan Reid, who will provide you with our comments on Bill C-4.
The Canadian Red Cross Society is a volunteer-driven, non-profit, humanitarian organization dedicated to improving the situation of the most vulnerable in Canada and throughout the world. This would be impossible without the dedicated support of its more than 30,000 volunteers and members, as well as its 3,500 employees.
The society has a unique mandate: to support public authorities at all levels in Canada. The Canadian Red Cross Society plays a pivotal role in providing a link between governments, civil society and the communities we serve.
The Canadian Red Cross Society is a member of the largest humanitarian network in the world, made up of over 100 million volunteers and members throughout the world. It is a member of the International Red Cross and Red Crescent Movement. This includes the International Committee of the Red Cross, the International Federation of Red Cross and Red Crescent Societies and the 186 national Red Cross and Red Crescent societies around the world.
We are here today on behalf of the Canadian Red Cross Society to pledge our overall support of Bill C-4.
I will now let Mr. Reid present our comments and recommendations in more detail.
[English]
Mr. Reid.
Good afternoon, Mr. Chair and members of the committee.
I think the gist of our message is that the Canadian Red Cross recognizes the need for new legislation governing not-for-profit corporations in Canada. I want to underscore that; I think just about everybody would be in support of that. The Canadian Red Cross participated in consultations organized by Industry Canada in, I think, 2002. We recognize that those consultations have influenced, in many respects, the form and content of . In fact, those consultations went on over a significantly longer period than that.
In 2005 the Canadian Red Cross appeared before the committee to express its support of Bill C-21, a forerunner to Bill C-4, as well as to make some general observations that we believe still largely apply. At that time and again today, I want to mention a few particulars of the legislation that we consider to be important and things that will help us in our operations.
They include specific authority for telephone and electronic meetings and voting; the authority to make binding, unanimous resolutions without actually having to come together for a meeting; tighter conflict of interest requirements; the broadening of indemnification authority, including indemnity advances, which may become increasingly relevant given the current public appetite for enforcing government's accountability; and, overall, the increased deference Bill C-4 extends to corporate bylaws on many issues that were formally regulated by the Canada Corporations Act and ministry policy directives.
While we support the “as of right” approach to incorporation, and welcome the fact that the new corporate model will eliminate upfront government regulation—for example, there will no longer be ministerial approval of articles of incorporation or bylaws—we do note that the new corporate model places a large emphasis on self-regulation and on checks and balances resting upon enhanced legal rights and access to courts.
Bill C-4 is detailed and difficult legislation and will be complemented by lengthy regulations. It will pose compliance challenges, not just for small not-for-profits that operate without legal departments and/or sizable legal budgets but even for large organizations, such as the Canadian Red Cross, with easier access to legal assistance. In that respect, I am sympathetic with the points that have been made by Imagine Canada with respect to the voluntary sector and the difficulties some organizations will have adjusting to this.
However, every new comprehensive piece of legislation presents interpretive and operational issues and Bill C-4 is no exception. It calls upon not-for-profits to address many new challenges: systems for tracking and allowing access to a large and changing membership, especially in the case of an organization such as ours, which has a large membership and growing; procedures to meet enhanced accountability thresholds; adjustments to new financial procedures; and the redoing of bylaws, all of which will require careful efforts to ensure that governance provisions and practices measure up to the new legislative standards.
Because there is a lot of room for error and dispute in adapting to this new model, we encourage the government to support and build upon current Industry Canada initiatives to educate the not-for-profit sector—in particular, the voluntary sector—through publications, websites, model bylaws, workshops, and non-binding administrative opinions on key issues, all of which will assist not-for-profits, both large and small, in their due diligence and other compliance efforts.
While it is noted in the accompanying explanatory text that the bill provides directors with an express due diligence defence against potential liability, we also note that the bill equally promises to enhance and protect members' rights and gives members additional power to enforce their rights and to oversee the activities of their organizations as well as to monitor the director's activities. Finding ways of satisfying due diligence will become even more challenging and critical for directors than it is today. Arguably, this bill may heighten tension between membership and directors, increasing the risk of liability rather than reducing it.
While we have no doubt that well-qualified directors will continue to come forward to serve the not-for-profit and charitable sectors, it will be interesting to see how insurance underwriters will assess the balance of risk and rights and what impact this legislation will have on already steep premiums for liability insurance for directors and officers.
In part, this question may be influenced by the extent to which the new corporate model stimulates resorting to courts to resolve corporate governance issues. Given our concern that enhanced members' rights, coupled with broader judicial remedies, could elevate dispute resolution costs for not-for-profits and charitable organizations, we would have preferred to see overt legislative encouragement of administrative process and alternative dispute resolution mechanisms in the legislation.
Clause 293 gives the director authority to “make inquiries of any person relating to compliance with this Act”, but for the most part the director, like everyone else in the new model, may feel compelled to rely on courts to enforce compliance. We hope that the legislative model will prove flexible enough to allow for less formal and less costly means of resolving member/board/management tensions, as well as compliance issues raised by the director. We would encourage the government to create and finance a mandate for Industry Canada to assist not-for-profits in developing efficient and humanitarian approaches to resolving compliance issues, in lieu of engaging the courts.
The Canadian Red Cross, in preparing for this presentation, has chosen not to single out particular sections and clauses of for specific criticism. Doubtless there are sections that might be improved, but a lot of work has gone into this bill over many years by many experts in the field. We choose not to repeat before this committee comments we may have made in the reform process that have not found their way into .
Notwithstanding small concerns that we may have about some of the details of certain provisions of the bill, our primary message to the committee today is that we view as an important legislative initiative, and we support the change that it will bring. We will undoubtedly gain a deeper understanding of its complexities as we work through our governance and financial procedures in an effort to bring the society into compliance with the new regime.
The bottom line is that we would like to see the bill move through the legislative process as quickly as possible. We've watched it die too many times on the order paper. Reform of this area has been a long time in coming, and we are anxious to get on with the task of adjusting to the new regime.
Thank you once again for inviting us to appear before you. Merci beaucoup.
Thank you to both organizations for presenting before us today. It certainly is an important piece of legislation, and one that I understand has come before this committee and the House on numerous occasions, so I appreciate the fact that you're both in general support of the legislation, but you do have some concerns.
I want to speak to those concerns, if you wouldn't mind. I want to ask a couple of questions with regard to the membership issue. Both of you had addressed this issue.
I did take the opportunity, last week, to speak to the concerning membership and the “one member, one vote” kind of concept that the bill contains. I was given assurance that each corporation has to decide what voting rights will exist for its members—I understood that quite clearly—and that you could have everybody vote, or you could have nobody vote. It's “structure it yourself”. I'm using the exact term that I received, and of course that's in the public record.
I want you to speak to the issue that I know Imagine Canada has.
Also, Mr. Reid, you commented on the interaction between directors and members and some of the concerns about membership. I want to ask specifically--if what I'm understanding is that you will have maximum flexibility around memberships--what your further concerns are, noting what was said last week to us.
Thank you.
:
Good afternoon, Mr. Chairman and members of the committee. It's certainly a pleasure to be here supporting Imagine Canada today.
Thank you very much, Madam Coady, for your inquiry. The bill, as it's tabled, contains a number of provisions that deal with what I would call significant changes to a non-profit corporation, whereby it is possible for a non-voting class of membership to be required to support a change. They are not all kinds of changes. They deal with dissolution. It's very technical--some substantive changes to do with dissolution.
The voluntary sector, as I think you all know, is made up of many different types of organizations that are structured very differently. The one thing that is, by and large, consistent—but for, perhaps, private golf clubs and some certain associations or sporting clubs—is that members don't have proprietary rights in the assets of the entity. The entity is structured for a public purpose, whether it be a charitable purpose or a non-profit purpose somehow. Many organizations choose to have members who have non-voting rights, for any reason, and in most instances when the entity has non-voting members, that's what those people want. They want to be able to say they support the organization, but they're really not interested in the governance question. A concern, I think, that is raised by the voting rights really comes to that, and it gets into that place where you may want to facilitate volunteers being able to say they're members, but these are not people who are interested in governance or in coming to an AGM or in supporting or not supporting things.
So are we making it simpler or are we complicating the way things are done with the non-profit?
I think the other issue that comes out on the voting rights is that in the for-profit corporations, voting rights and shareholder classes, which deal with how you own your proprietary interest in the entity, are in the articles of an entity, and they require certain separate-class voting, which is understandable because you can adjust the proprietary interest of the shareholder if you don't require that. Bringing that concept into the non-share capital world is perhaps part of the concern, because you end up perhaps making it more difficult for organizations to govern themselves and then make it more difficult for them to understand the system and how to make changes.
Currently, membership classes are in bylaws. They're not required to be in the incorporating document, and they don't have to be set out in a way that you have to file amending documents to change them. I think the way the act could easily deal with these things is to say, unless otherwise provided for in a bylaw, this will be the way you should do it, but give the entities the ability to structure themselves in a way that will make it work for what they are, if they're a sports club, if they're a charity, if they're a foundation.
:
I guess our concern wasn't the concern of Imagine Canada. I recognize that they have a more difficult task than we do, because they represent a broad constituency of member organizations. They have to look right across the spectrum.
I think our membership approach at the Red Cross is compatible with the provisions of the bill. There are some unique facets of our membership structure in the bylaws. Maybe I'll find out differently when the bill is passed and I have to sit down and start redoing some of this, but my initial view of it was that it wasn't going to cause us a lot of concern.
The concerns I have are really more generic. I think there's more of an emphasis on member rights now than there has been in the past. There are more avenues of access by members to what's actually going on in the organization. The requirement for maintaining membership lists is more stringent in the new legislation than in the current CCA.
All of that is to satisfy a sense that members who want to become more involved in the governance of their organization--at least to check, run, or monitor what's going on--should have access to more information. I think the more information you give people, the more room there is for conflict and dispute. There probably will be more tension between the director level and the membership level on certain issues.
I think the concern was...or my concern is--I guess I could speak for a lawyer--is that I'm not a big fan of resolving these things in courts. It's too slow, too expensive, and usually it doesn't lead to anybody coming out terribly happy.
I guess I was trying to perhaps push in the direction of saying, well, in terms of administering this new law, maybe the government should be putting more emphasis on structures to facilitate dispute resolution, without having to go down that road. That can be done informally. It doesn't have to be in the legislation. But from my point of view, it would be nice if Parliament, in the legislation, were to at least give a nudge or some support toward government taking a less court-based adversarial approach to resolving things that I think will come out of this legislation.
:
In the Ontario act? Well, I think it was kind of the same reasons that we made the same recommendation here. We really believe the complexity of the non-profit sector is too large for one act, which perhaps only gets changed every 50 or 100 years, to really take into consideration.
The reality is that the non-profit sector encompasses universities, hospitals, food banks, animal shelters, international aid organizations, political parties, actually, in some respects of how the sector is defined, and professional organizations. There are all kinds of examples of organizations for various professions. They're all part of the non-profit sector, and they can all incorporate as organizations without shared capital.
We feel that any time an act tries to classify, as in this case, the soliciting and non-soliciting organizations--in the proposed Ontario act they had a variety of ways--it's easier and more efficient not to do that. The added benefit is so small that it's not worth the added complexity.
Susan, do you have something to add?
:
If I had to have a classification system, what would I prefer? I think Imagine Canada has been consistent in saying that we don't think there should be a classification system at all.
From my recollection of the process in Ontario, for which extensive consultations were done, they laid out a variety of options. The committee we put together for that piece of legislation said that if we had to have classification, they would prefer that the corporation itself, or the board of directors of the corporation, make the decision rather than some government entity.
But I think that was a fallback measure. Really, our position is that we feel the non-profit sector is better off without these classifications being placed in the acts. I did mention this the first time, that the non-profit sector changes a great deal over time. Fifty years ago we wouldn't have been envisioning the non-profit sector we have today. Acts change very infrequently, so we're concerned that whatever classification we come up with today won't necessarily be relevant in 2060, or 2090 maybe, when we're still living under the act that we pass today.
I think that's really the more important message, that we just don't think there should be classification at all in the acts.
:
I don't recall the Canadian Bar Association submission suggesting a classification system. I don't believe that's a fundamental aspect. I'm not sure which part of the brief.... There are comments on the soliciting corporation, and there are comments on the definition and how it doesn't work.
The Canadian Bar Association concluded, having had their discussions, that rather than completely removing that, the suggestion would be to make amendments. They thought that the bar discussions would be a more effective submission.
The background on the Canadian Bar, whom I know you will be hearing from on Thursday.... Originally, if you have copies of the submission on Bill , it came from the charities and not-for-profit section, the section that talks about the voluntary sector. That submission suggested that the soliciting corporation not be included in the statute.
The discussions this time were with both the for-profit and not-for-profit groups together. It was felt, because changes had not been made to the legislation over the course of time, that our objective would be to make some concrete suggested legislative changes that we were hoping could be implemented before the bill was passed, which would make it more effective, rather than repeating the same submissions that have not been accepted or adopted in the past.
:
Thank you, Mr. Chairman.
I want to thank our guests both from Imagine and from the Red Cross for coming today. I'm familiar with both organizations. You obviously do great work for Canada and around the world, and we appreciate your efforts.
Also, Mr. Chair, I want to say thanks with regard to the submission from the analyst. It's excellent, and I appreciate it. I was having a look at it in terms of the comparisons.
I'm new to the committee, so just for my understanding, it looks like we've had this bill in front of us since at least 1992, eight or nine years. We have Bill C-21, Bill C-62, and now Bill C-4. Did both organizations get the opportunities to comment on its development prior to today?
I have a couple of questions about your recommendations. If I have further questions, I may call upon you later. But first, on the voting rights, I just want to be clear on something.
I've been involved with numerous non-profit or charity organizations, including a political party. Telling my members that they couldn't vote would be a difficult thing to do. Your concern is that membership now in many volunteer organizations is so...I don't want to say “simple”, but it's not the structure that it might need that...not everyone should be entitled to vote.
I've been on an economic development organization that was volunteer--but only board members on it got to vote. Not every member got to vote.
Your concern here is that the legislation says that everyone who is technically a member gets a vote. Is that basically what you're telling me here?
Welcome to our guests. I want to welcome both organizations. In the five years prior to being elected, I was the executive director of the United Way in Sudbury, so I know both organizations quite well.
I want to talk initially to Imagine Canada. There was an initial excitement--because you can take the guy out of the United Way, but you can't take the United Way out of the guy--when I went through the bill. And yes, there is a need for revitalizing and getting this new regulation into place because it is so old. But the first thing I thought of was the 60-some organizations we were funding in Sudbury--and one of them is the Red Cross, I might add--and I can see these three-person shops, with an executive director and part-time staff and a volunteer, who have been doing this great work for our community, and we're going to drop these new regulations on them.
If we do anything to inhibit the great work of these organizations, are they going to be able to provide the services? Before I get to the next part of that question, maybe you can comment on that.
:
Well, it's certainly true. Your own experience is obviously very representative of the non-profit sector. The vast majority of these organizations are very small. Over half of them have no staff at all; another big chunk, about a quarter, have less than five staff. When they do have staff, they tend to be generalists, people with a wide variety of skills, who maybe have been promoted up through the ranks to become executive director, etc. So anything that adds red tape and paper, or things like that, to their lives is time they're not going to be spending delivering the services they really want to deliver.
Also, for many of these organizations, their funding does not actually provide them with any time to do this sort of thing either. So it is very difficult.
When we were looking at the act, and our task force was looking at the act, although its stated aim was to make things simpler and to reduce red tape, we weren't so sure it was going to accomplish that. In fact, it wasn't likely to reduce it, and maybe it would, as Susan was saying, in some of its sections, actually add to the red tape, or make it more complicated. A lot of that stuff doesn't apply to a lot of organizations, but they have to spend time figuring out that it doesn't apply to them. So that's definitely a challenge.
Susan, did you have anything to add?
:
That goes to my next question, and I'll direct it towards the Red Cross.
We're talking about the small shops here, and this legislation wants to help all not-for-profits and charities, from a small three-person shop to international airports, which are not-for-profits.
The Red Cross would be in a little better shape—though I don't want to make an assumption—than some of these smaller shops, because you do have the resources to be able to move forward on a lot of the things outlined here.
Is there any consideration, when you're talking about moving forward on this with the smaller branches of the Red Cross—or even some of the smaller organizations who work with the Red Cross—on how you're going to be able to implement a lot of this information in the act, when we're talking about the fact that all you're going to get is a brochure and to be told that you're on your own to implement this?
:
Speaking for the Red Cross, we are a national organization that is incorporated under the Canada Corporations Act. And although we have 300-odd branches and zones and regions, that's all internal organization. So we are one corporation, and we respond as one corporation to the act.
That said, we're a large not-for-profit organization. There are vast sections of the act that don't apply to us. It's a matter of sorting through and finding out what applies to us and what doesn't.
I think what's going on here is that Parliament is enacting a law that covers a very broad range of corporations. It's giving us the package and leaving this, potentially, to everybody by saying, “Sort out what applies to you, and do what you have to do under the act. What you don't have to do, don't do.”
I don't see an obvious solution to this at the legislative or parliamentary stage, but I do see—this is what we tried to emphasize in our brief—a tremendous role for education. I think with anything, or with any new policy you put out, education and training are vital components. We often fall down on that. I would like to see the government put some resources into Industry Canada and get them to help people with sorting this out. Industry Canada could help administratively in terms of parcelling this thing out so that people could work with it.
I also see roles for Imagine Canada, organizations like that, to help their constituents. I'm sorry to put that on you, but....
:
I mean, that's the nature of the world today. Information, and helping people to manage that information, is really what it's all about.
I don't see any solution by saying, “Send it back to the drafters to tell them to come up with something that's going to be simpler.” I'm not convinced that's possible; it's a complex world we live in. On my part, I would rather see the resources put into education and support. Maybe they can give you more money, so you can....
There are a lot of ways to approach this kind of issue. Ultimately, it seems to me, it's a matter of education and training and letting people know what they have to do. I think once people find out what they have to do, it's probably not that complicated. It's just that you look at a 200-page bill and say, “What am I supposed to do with this? What applies to me and what doesn't? We don't have any lawyers.”
Yes, it's a problem, and the question is, how do we get over that? But I don't think the secret is in redrafting the legislation because it's a complex topic and it covers such a broad range.
But that's life. That's what we have to deal with--sorry, Cathy.
I have a question for Imagine Canada and also one for the Red Cross.
For Imagine Canada, my first reaction in reading your brief was, wow, this is very good, because it's going to simplify what is, after all, a very complicated document. I'm not a lawyer. I'm not an auditor. I'm not an accountant. I'm a simple engineer, and--
Voices: Oh, oh!
Mr. Marc Garneau: --being a new MP, I have not yet mastered the skill of speaking before I think. My questions are probably very basic and perhaps you've explained them already, but it's number two that I wanted to focus on. Just for our information, what roughly is the percentage of non-soliciting corporations versus soliciting?
:
Thank you, Mr. Chairman.
Thank you to our witnesses for coming today.
I've served on a number of non-profit corporation boards over the years, so I have a little bit of familiarity with it. I'm sure all of you are glad the government is moving ahead to see this legislation put in place after many years.
There is going to be a change to the NGO structure in Canada, and since it's going to be easier to incorporate new organizations, do you think there is going to be an increase in new charitable organizations?
My questions are general, so if I could hear from both organizations that would be great.
Welcome.
My question is for Mr. Reid. Last week, I questioned the minister about the bill she has introduced to replace the old C-54. In clause 4 of the new bill, the question of a budget required to set up a not-for-profit organization is not dealt with. As a result, anyone can register. You contact the Government of Canada, you register, and you get permission to establish a not-for-profit organization.
If I set up an organization with an operating budget under $25,000 and myself as president, vice-president and member all at the same time, there is no investigation.
Is that a shortcoming of the bill? With the wording of the new bill, is it possible that organizations like that could be laundering money?
:
The translation wasn't coming through very well, but I think you're asking about these eight organizations that we consulted.
I don't think it's that we feel that Imagine Canada wasn't consulted by the government. Imagine Canada is a national charitable organization that's relatively well connected to these sorts of activities. We've come before this committee before.
What we're saying--and perhaps it didn't come through clearly enough--is that the vast majority of small and medium-sized non-profit organizations across the country are not even aware that this bill has been introduced. It's not Imagine Canada; we feel adequately consulted, I think. But there are 161,000 non-profit charities across this country, and probably 0.0001% of them even know that this bill exists. That's what we're saying.
As I mentioned about the process in Ontario, there was a consultation process. The committee that was looking at it, or the officials who were involved in it, travelled around the province and consulted with hundreds of non-profit organizations in their communities. It's that kind of consultation process we're alluding to that did not take place in this case.
There really is a severe lack of awareness about the bill.
I thank you for coming, both organizations, to testify before us this afternoon.
I'd like to broach the issue of voting. I think there may be, at least on my part, a necessity to understand the concern that was brought forward, specifically by Imagine Canada.
I'm trying to understand what your concern is with regard to the actual text of the bill. My understanding is that there are two different ways an organization can go. They can either have a single class of members, with every member having the same rights, or they can go to a second type of framework, in which you have different classes of membership--you can have 12 people who vote and 150,000 people who don't. That is simply left to the organization. That's the way I read the bill.
Do you have concerns with regard to the way it was constructed in the bill? I'm just trying to grapple with it so we can better understand and have a bill that better reflects your needs.
:
Thank you, Mr. Chairman.
I'd like to make some observations. Probably 30 years ago people sat on non-profit boards and it was easy in those days to recruit people to sit on boards. Nobody even knew about directors' liability insurance in those days. I started hearing about people 20 years ago refusing to sit on boards unless the directors' liability policy was in effect. So non-profits went looking for them, and they were astounded when they realized how much they cost and how many hoops they had to go through to get them.
Very few insurance companies sell them, to begin with. Deductibles are $5,000. You have to submit financials every year. That goes well when the insurance markets are reasonably priced, but every three to five years the insurance markets get themselves into big trouble and your premium can turn in the space of just one year from $5,000 to 20,000. You tell me how a small non-profit is supposed to pay for these things. It's totally impossible.
So we have to find a way to limit the liability of non-profits. I don't know how possible that is, but we should certainly look at that option. We're going to be scaring people off. People will not sit on the boards.
Compliance costs are also a big issue. We've run into this even in our own province of Manitoba in our election laws. We practically strangled ourselves with compliance costs of the parties, trying to get it right. The laws had to be brought in, but this is one of the realities of bringing in these types of laws. So we saddle you with compliance costs that almost shut you down, and we're not really accomplishing what we want to do.
I'm familiar with a non-profit fiddlers club from Ontario that had 83 members and a couple of thousand dollars in the bank. They were senior citizens. They were having a meeting of their fiddlers society and one of them tripped and fell walking out of the building. That person hired a lawyer. The lawyer decided they were going to sue all 83 members of the fiddlers club, and that's what they did. They had to go to their home insurers and collect.
Most people don't know about these issues, but when they do hear about them it certainly scares them.
I'd also like to ask the members whether anybody made an effort to contact these 161,000 charities. Were letters sent out to let them know about this? The witness mentioned that a lot of small charities wouldn't even be aware that we are going through the third version of this bill.
I'd like to address it to Mr. Reid, because he was talking about the directors' and officers' liability issue.
:
Perhaps I can first touch on the consultation issue. Industry Canada did run a very extensive consultation process, not with 160,000 corporations, but with a representative group of corporations over a period. I don't know how you would consult with 160,000. I guess you can send them a letter saying this is coming down the tubes.
In terms of insurance, yes, insurance is a big issue. A corporation such as the Canadian Red Cross can afford that. We don't like to have to pay the insurance, but it's part of our operation; within the budgets we have, it's just an operational expense we have to bear.
I don't know whether you've done a survey, Cathy, of the percentage of corporations that do have insurance.
I'm sure there are many not-for-profits in this country that operate without directors' liability. I personally sit on the board of one that doesn't have directors' and officers' liability, but that doesn't keep me awake at night because of the nature of the activity. I think many not-for-profits operate in activities that probably have very limited risk, but with others, of course, there's greater risk. Insurance is available, but at a cost, and not everybody can afford it.
Yes, that's a problem, but it's not a problem that is created by this bill.
:
I'll start by thanking you for coming out today and taking this time.
It's interesting; I was looking through your report here, and in appendix 1, it lists the National Nonprofit Sector Task Force. The first name on that list is Jacqueline Biollo, one of my constituents. It's been my pleasure to have an ongoing and productive discussion with her on some of these issues.
I have a couple of questions. I guess the time issue has come up. Mr. Reid mentioned this. The political reality is that we're in another minority Parliament. My colleagues across the way might be able to indicate when the next election's going to be. They may have some knowledge of that, I don't know. It seems to me that it's constantly around the corner. This bill has come up time and time again and not been passed.
You have 161,000 people whom we're talking about consulting with, potentially. The danger in this sector is that if you invited 161,000, there's enough passion out there that they would probably all want to come. Obviously there's only so much time that we have to dedicate to consultation. We had 350 members of the public take part in the consultations between 2000 and 2002--many of them probably part of your organization. There was an additional round of consultations in 2005. The committee studied this between 2004 and 2005.
This question is more for Imagine Canada. Mr. Reid can comment, although I think I know the answer from Mr. Reid.
If you had the choice right now between the bill as it is or no bill at all because time expires again, which would you take?
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Looking at the five recommendations for improvement from Imagine--for example number three, number four to some extent, and number five--it seems to me that we're just talking about some housekeeping in terms of those things. They don't seem overly substantive.
Regarding the remedy section, it seems to me that if the bill were to pass as is, based on what you're saying here, you could probably solve that problem simply through your organization being representative of other organizations by putting on your website a catalogue of remedies in one place that they could refer to if they had to.
I want to come back to the two-tier approach, the soliciting versus non-soliciting. I want to get some clarification. Most people would see the need for accountability for organizations that are raising money. Further to Mr. Warkentin's point, it doesn't seem to make sense to hold organizations that aren't asking for money from other people, from members of the public, to the same standard.
Are you suggesting that there should be less accountability, that looser standards should be in place for everybody?