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Senate Banking Committee Speaks on Corporate Governance

June-23-2003

Area Corporate Finance and Securities

Summary


On June 19, 2003, yet another voice was added to the growing debate regarding Canada’s corporate governance framework. Specifically, the federal Senate Committee on Banking, Trade and Commerce released a report following its study of the likelihood of corporate scandals of the type seen in the United States occurring in Canada and, more importantly, of how such scandals might be avoided. Given the initiatives in this area being announced by various regulatory bodies, including the Ontario Securities Commission (the “Commission”) and the Toronto Stock Exchange, there is some potential for confusion in the regulation of corporate governance in Canada. The Committee stated:

“The Committee is fully aware of the actions taken recently by a number of stakeholders in Canada, including professional organizations, securities commissions, stock exchanges, governments and others. We applaud their initiatives, feeling that they will contribute to restored investor confidence. Nevertheless, we feel that regimes that involve mandatory disclosure and voluntary compliance, voluntary rules, or policies developed by boards and self-regulating organizations do not go far enough and do not have the same effect as legislated and regulatory requirements….It was for this reason that, in a number of areas, the Committee has recommended legislative initiatives.”

Certain of the recommendations made by the Committee appear to be beyond the ambit of the Canada Business Corporations Act which, in any event, is applicable only to federally incorporated companies, while others are similar to anticipated rules of the Commission. The recommendations do, however, reflect a serious consideration of governance issues. It remains to be seen to what extent the recommendations do find their way into the CBCA or influence provincial legislation.

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