Question Period Note: BILL C-25

What is the Government doing to promote increased diversity in Canadian corporations?

• The Federal Government believes that diversity is Canada’s strength and that in the boardroom, as in life, multiple perspectives lead to innovative thinking and better performance;
• We introduced new rules to help more women and other underrepresented groups obtain corporate board and senior management positions;
• We also updated business framework laws to improve transparency;
• These updates will make it easier for companies to use their innovations to grow and succeed.

Bill C-25 was tabled in the House of Commons on September 28, 2016, and received Royal Assent on May 1, 2018. Certain provisions of the Bill came into force immediately, while others will require the promulgation of regulations. Regulations on disclosures with respect to diversity have been passed and will come into effect at the beginning of 2020.

The Bill made targeted amendments to four key federal framework laws: the Canada Business Corporations Act, the Canada Cooperatives Act, the Canada Not-for-profit Corporations Act and the Competition Act. Marketplace framework laws set the ground rules for how Canadian businesses operate, which aim to promote investor confidence and a competitive marketplace.

The Federal Government is committed to promoting inclusion and diversity. Women made up 48% of the workforce yet held only 13.1% of board seats in Canadian companies surveyed by MSCI ESG Research before the introduction of Bill C-25, and 19.1% of those were Financial Post 500 companies.

Bill C-25 requires prescribed corporations to disclose diversity information to their shareholders. Information will be sent concurrently to the Director of Corporations Canada for monitoring. The Bill goes beyond current securities rules by asking corporations to share their policy on diversity beyond gender with their shareholders or explain why they do not have one.

Private sector, non-profit organizations have also worked with corporate Canada to set voluntary targets for women’s participation.

The Bill enhanced business certainty on good corporate governance practices, while aligning with Toronto Stock Exchange rules. Distributing corporations will now be required to hold annual and individual director elections. The Bill also introduced a majority-voting election standard during uncontested director elections for distributing corporations and cooperatives, supported by safeguards to prevent paralysis in decision-making.

Bill C-25 allows corporations and cooperatives to use the “notice and access” system, adopted by provincial securities regulators, which allows documents for shareholder meetings to be consulted online. In addition, certain amendments streamlined the incorporation process to lessen regulatory burden.

The Bill also explicitly prohibited the use of bearer share instruments, i.e., unregistered instruments whose value is derived from physical possession of the document. While rarely used in Canada, these instruments are easily transferrable and untraceable. Abolishing them in clear terms supports Canada’s G20 obligations and compliance under international standards set by the Financial Action Task Force.

Separately, Bill C-25 amended the rules on affiliation under the Competition Act, broadening them so that modern non-corporate business structures, such as trusts and partnerships, are fully taken into account. This update provided certainty and predictability for businesses by ensuring that they will not be needlessly investigated or sanctioned under the law for dealings with their affiliates (such as corporate reorganizations), while reducing regulatory burden.

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