New corporations laws looser than The Bahamas

The BC Liberal regime has made it legal for companies to file no statements, disclose no stock sales and employ a completely foreign board of directors

by Robert Broughton

The Liberal government of British Columbia takes great pride in its friendliness to corporations, and we know that their corporate friends include Accenture, CN Rail, SNC Lavalin, Maximus, and Teck Cominco.

They also have a lot of corporate friends with much lower profiles. One of them is Port Alice Specialty Cellulose Inc.

Port Alice Specialty Cellulose was registered as a corporation in Victoria in May 2004. In September, the union representing their employees discovered that the company wasn't making required payments for dental and health insurance premiums, even though this money was being deducted from the pay cheques. They also were not paying the Canada Revenue Agency for income tax withholding and Canada Pension Plan contributions. A month later, the company went bankrupt, stiffing the employees on two weeks' pay

An RCMP investigation quickly ensued, and the investigators recommended a long list of charges, including fraud, misappropriation of funds, and breach of trust. It will be a long time (possibly eternity), before any of the directors of Port Alice Specialty Cellulose stand trial, however. That's because all three directors, John Sullivan, Randall Rhodes, and Christine Sengpiel, live in the US.

Now, I don't know if any of these three people have ever been to one of Fred Latremouille's parties on Maui. I checked the records at Elections BC to see how much money they contributed to the Liberal Party of BC in 2004, and didn't find anything. What I am telling you is, the Liberals did these people a huge favour less than two months before they purchased the Port Alice mill for $1.

What the Liberals did was pass a new Business Corporations Act. One of the significant changes between this Act and the previous one was the removal of the requirement that at least one corporate director must be a BC resident, and a majority of the directors must live in Canada. It is now legal for a BC-registered company to have a complete set of directors living outside of Canada. It's a very convenient arrangement for directors like John Sullivan.

The Business Corporations Act contains a couple of other new provisions to help corporate looters buy new cars and bigger homes. Corporations no longer have to produce annual financial statements if the shareholders unanimously agree to this. The shareholders can also waive annual meetings, and annual meetings can take place outside of BC. Directors may be added or removed at any time, and there is no need to register the change in Victoria. There are no requirements for disclosing shareholders or major sales of shares. A corporation can be dissolved without eliminating liabilities as long as “adequate provision” has been made for them. (You can read a report on this by McCarthy.)

The person who has sounded the alarm on this is Bruce Bowie, a former RCMP officer who now has a company called Investigative Solutions Inc. When he was with the RCMP, he participated in the Financial Action Task Force, an international body set up by the G-7 in 1989 to combat money-laundering.

The Business Corporations Act contravenes two of the recommendations of the Financial Action Task Force. Recommendation 5 states that financial institutions should undertake customer due diligence measures, including identifying and verifying the identity of their customers.

Recommendation 33 states that countries should ensure that there is adequate, accurate and timely information on the beneficial ownership and control of legal persons that can be obtained or accessed in a timely fashion by competent authorities.

BC now has less stringent corporate reporting requirements than The Bahamas. This has made BC more attractive to “jurisdiction shoppers” and organized crime interests involved in money laundering. Bowie also warns that the Business Corporations Act also ties the hands of the Canada Revenue Agency, the RCMP, and those seeking civil restitution in attempting to access money, judgments or jail sentences from foreign registered companies. It makes it difficult for courts and law enforcement authorities to identify exactly who is liable.

What about extradition? In the case of Port Alice Specialty Cellulose, it might happen, because millions of dollars are involved. However, extradition is an expensive process and it won't happen in a typical cut-and-run situation. Employees and suppliers who are owed money will be out of luck. As for the Canada Revenue Agency, they will have to absorb the loss, which means that we hard-working taxpayers will end up covering it.

It's clear that the Liberals carried their “open for business” attitude too far in this case. They should be called upon to clean up the Business Corporations Act, and they should also be asked about who was calling the shots when it was passed.

****

Robert Broughton has a political blog at broughton.ca/blog