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Summary
Part 15 describes the powers that an inspector may be granted, or actions
that may be required, by a court order issued under this Part.
Any director, member, debt obligation holder or the Director may apply
to a court for an order directing an investigation of the corporation
and any of its affiliates. The court's powers to make an order are very
broad, and permit, among other things, the appointment of an inspector,
determination of appropriate notice, orders to produce documents or records,
requiring persons to attend hearings, and the cessation of an investigation.
The Director must have reasonable notice of any such application and
has the right to attend and to be heard at any hearing where the application
is discussed. Specific provisions regarding ex parte applications,
some limitations on an inspector's powers if the inspector is not a peace
officer, provisions regarding self-incrimination, and cooperation between
government agencies are also included.
Given the improved remedies, offences and punishment provided in Part
16, it is only proper that strong investigative powers accompany them.
The
powers provided in this Part should be sufficient to address issues
raised in applications made pursuant to the Act. At present, the investigative
powers available pursuant to the Canada Corporations Act are
made by reference to the Canada Business Corporations Act.
Briefing Book
An Act Respecting Not-for-Profit Corporations and
Other Corporations Without Share Capital
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Bill Clause No. 240
Section No. 240
Topic: Investigation
Proposed Wording
240. (1) On the application of a member, a debt obligation holder or the Director, ex
parte or on any notice that the court requires, a court having jurisdiction
in the place where a corporation has its registered office may direct an
investigation to be made of the corporation and any of its affiliated corporations
and may
(a) appoint an inspector to conduct the investigation
or replace an inspector and fix the remuneration of the inspector
or their replacement;
(b) determine the notice to be given to any interested person or dispense
with notice to any person;
(c) subject to section 242, authorize an inspector to enter any place
if the court is satisfied that there are reasonable grounds to suspect that
there is relevant information in that place and to examine any thing and make
copies of any document or record found there;
(d) require any person to produce documents or records to an inspector;
(e) authorize an inspector to conduct a hearing, administer oaths
and examine any person on oath, and make rules for the conduct of the hearing;
(f) require any person to attend a hearing conducted by an inspector
and to give evidence on oath;
(g) give directions to an inspector or any interested person on any
matter arising in the investigation;
(h) require an inspector to make an interim or final report to the court;
(i) determine whether a report of an inspector should be published
and, if so, order the Director to publish the report in whole or in part or
to send copies to any person whom the court designates;
(j) require an inspector to discontinue an investigation;
(k) require the corporation to pay the costs of the investigation;
and
(l) make any other order that it thinks fit.
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(2) The court may make an order on an application under subsection (1)
only if it appears to the court that
(a) the activities of the corporation or any of its
affiliates is or has been carried on with intent to defraud any
person;
(b) the activities or affairs of the corporation or any of its affiliates
are or have been carried on or conducted, or the powers of the directors are
or have been exercised, in a manner that is oppressive or unfairly prejudicial
to or that unfairly disregards the interests of a member or debt obligation
holder;
(c) the corporation or any of its affiliates was formed for a fraudulent
or unlawful purpose or is to be dissolved for a fraudulent or unlawful purpose;
or
(d) persons concerned with the formation, activities or affairs of
the corporation or any of its affiliates have acted fraudulently or dishonestly.
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(3) A member or debt obligation holder who makes an application under subsection
(1) shall give the Director reasonable notice of the application and the Director
is entitled to appear and be heard in person or by counsel.
(4) An applicant under this section is not required to give security for costs.
(5) An ex parte application under this section shall be heard in
camera.
(6) No person shall publish anything relating to ex parte proceedings
under this section except with the authorization of the court or the written
consent of the corporation being investigated.
Rationale
This section deals with investigations of the affairs of the corporation,
either at the request of a member, a debt obligation holder or the Director.
It protects members against mismanagement of the corporation and helps ensure
the public interest with respect to the proper conduct of corporations.
Subsection 240(1) provides that a member, a debt obligation holder or the
Director may apply to the court to have an investigation into the affairs of
the corporation. The hearing may be an ex parte hearing or on any
notice the court directs. In connection with the investigation, the court may
make any order it thinks fit.
Subsection 240(2) provides that if an applicant can satisfy the court that
there are circumstances of wrongdoing, the court may make an order to investigate
the corporation.
Subsection 240(3) requires that the Director Appointed Under the Act be given
notice of the application made under subsection 240(1). It also provides that
the Director may attend, and be heard in person or by counsel at the hearing.
Subsection 240(4) states that an applicant for an investigation is not required
to give security for costs. A requirement that an applicant provide security
for costs would, most likely, deter complaints.
Subsections 240(5) and (6) are self-explanatory.
Present Law
Pursuant to section 157.1 of the Canada Corporations Act (CCA), certain
provisions of the Canada Business Corporations Act (CBCA) apply by
cross-reference to organizations incorporated under Part II of the CCA. The
relevant section is as follows:
Canada Business Corporations Act:
229. (1) A security holder or the Director may apply, ex parte or on such
notice as the court may require, to a court having jurisdiction in the place
where the corporation has its registered office for an order directing an investigation
to be made of the corporation and any of its affiliated corporations.
(2) If, on an application under subsection (1), it appears to the court that
(a) the business of the corporation or any of its affiliates
is or has been carried on with intent to defraud any person,
(b) the business or affairs of the corporation or any of its affiliates
are or have been carried on or conducted, or the powers of the directors are
or have been exercised in a manner that is oppressive or unfairly prejudicial
to or that unfairly disregards the interests of a security holder,
(c) the corporation or any of its affiliates was formed for a fraudulent
or unlawful purpose or is to be dissolved for a fraudulent or unlawful purpose,
or
(d) persons concerned with the formation, business or affairs of the
corporation or any of its affiliates have in connection therewith acted fraudulently
or dishonestly, |
the court may order an investigation to be made of the corporation and any
of its affiliated corporations.
(3) A security holder who makes an application under subsection (1) shall
give the Director reasonable notice thereof and the Director is entitled to
appear and be heard in person or by counsel.
(4) An applicant under this section is not required to give security for costs.
(5) An ex parte application under this section shall be heard in camera.
(6) No person may publish anything relating to ex parte proceedings under
this section except with the authorization of the court or the written consent
of the corporation being investigated.
230. (1) In connection with an investigation under this Part, the court may
make any order it thinks fit including, without limiting the generality of
the foregoing,
(a) an order to investigate;
(b) an order appointing an inspector, who may be the Director, fixing
the remuneration of an inspector, and replacing an inspector;
(c) an order determining the notice to be given to any interested
person, or dispensing with notice to any person;
(d) an order authorizing an inspector to enter any premises in which
the court is satisfied there might be relevant information, and to examine
any thing and make copies of any document or record found on the premises;
(e) an order requiring any person to produce documents or records
to the inspector;
(f) an order authorizing an inspector to conduct a hearing, administer
oaths, and examine any person on oath, and prescribing rules for the conduct
of the hearing;
(g) an order requiring any person to attend a hearing conducted by
an inspector and to give evidence on oath;
(h) an order giving directions to an inspector or any interested person
on any matter arising in the investigation;
(i) an order requiring an inspector to make an interim or final report
to the court;
(j) an order determining whether a report of an inspector should be
published and, if so, ordering the Director to publish the report in whole
or in part or to send copies to any person the court designates;
(k) an order requiring an inspector to discontinue an investigation;
and
(l) an order requiring the corporation to pay the costs of the investigation.
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[...]
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Bill Clause No. 241
Section No. 241
Topic: Investigation
Proposed Wording
241. (1) An inspector under this Part has the powers set out in the order
appointing the inspector.
(2) An inspector shall on request produce to an interested person a copy of
any order made under subsection 240(1).
Rationale
This section states that the powers of the inspector appointed to conduct
an investigation into a corporation are spelled out in the court order appointing
the inspector (subsection 241(1)). The inspector is required to disclose to
any interested person a copy of the court order appointing that person as the
inspector (subsection 241(2)).
Present Law
Pursuant to section 157.1 of the Canada Corporations Act (CCA), certain
provisions of the Canada Business Corporations Act (CBCA) apply by
cross-reference to organizations incorporated under Part II of the CCA. The
relevant section is as follows:
Canada Business Corporations Act:
231. (1) An inspector under this Part has the powers set out in the order
appointing him.
(2) In addition to the powers set out in the order appointing him, an inspector
appointed to investigate a corporation may furnish to, or exchange information
and otherwise cooperate with, any public official in Canada or elsewhere who
is authorized to exercise investigatory powers and who is investigating, in
respect of the corporation, any allegation of improper conduct that is the
same as or similar to the conduct described in subsection 229(2).
(3) An inspector shall on request produce to an interested person a copy of
any order made under subsection 230(1).
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Bill Clause No. 242
Section No. 242
Topic: Investigation
Proposed Wording
242. (1) If the place referred to in paragraph 240(1)(c) is a dwelling,
the court shall not make an order under that paragraph unless it is satisfied
that
(a) entry to the dwelling is necessary to practically obtain
the information; and
(b) entry to the dwelling has been refused or there are reasonable
grounds for believing that entry will be refused. |
(2) In acting under the authority of an order that authorizes entry to a dwelling,
the inspector named in it shall not use force unless the inspector is accompanied
by a peace officer and the use of force has been specifically authorized in
the order.
Rationale
This section restricts the power of the court to make an order authorizing
an inspector to enter a dwelling. The court can only make an order allowing
an inspector to enter a private dwelling where it is satisfied that entry is
necessary to obtain information and entry to the dwelling has been refused
or there is reasonable ground to believe that entry will be refused (subsection
242(1)).
Subsection 242(2) states that the inspector can not use force to enter the
dwelling unless the inspector is accompanied by a peace officer and the order
to enter the dwelling authorizes the use of force.
Present Law
None.
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Bill Clause No. 243
Section No. 243
Topic: Investigation
Proposed Wording
243. (1) On the application of an interested person, a court may make an order
directing that a hearing conducted by an inspector under this Part be heard in
camera or giving directions on any matter arising in the investigation.
(2) A person whose conduct is being investigated or who is being examined
at a hearing conducted by an inspector under this Part has a right to be represented
by counsel.
Rationale
This section deals with procedural matters related to how an investigation
is conducted.
Present Law
Pursuant to section 157.1 of the Canada Corporations Act (CCA), certain
provisions of the Canada Business Corporations Act (CBCA) apply by
cross-reference to organizations incorporated under Part II of the CCA. The
relevant section is as follows:
Canada Business Corporations Act:
232. (1) Any interested person may apply to the court for an order that a
hearing conducted by an inspector under this Part be heard in camera and for
directions on any matter arising in the investigation.
(2) A person whose conduct is being investigated or who is being examined
at a hearing conducted by an inspector under this Part has a right to be represented
by counsel.
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Bill Clause No. 244
Section No. 244
Topic: Investigation
Proposed Wording
244. No person is excused from attending and giving evidence and producing
documents and records to an inspector under this Part by reason only that the
evidence tends to incriminate that person or subject that person to any proceeding
or penalty, but no such evidence shall be used or is receivable against that
person in any proceeding instituted against that person under an Act of Parliament,
other than a prosecution under section 132 of the Criminal Code for
perjury in giving the evidence or a prosecution under section 136 of that Act
in respect of the evidence.
Rationale
This section requires individuals to attend and give evidence to an inspector.
It provides immunity to those providing evidence and is designed to ensure
that the inspector can conduct the investigation efficiently.
Section 244 establishes two rules. First, the rule against self-incrimination
does not excuse a person from attending, giving evidence and producing documents
to an inspector conducting an investigation. Second, except in respect to prosecutions
under sections 132 and 136 of the Criminal Code of Canada, evidence
given by a person can not be used in any subsequent proceeding taken against
the person under a federal statute.
Present Law
Pursuant to section 157.1 of the Canada Corporations Act (CCA), certain
provisions of the Canada Business Corporations Act (CBCA) apply by
cross-reference to organizations incorporated under Part II of the CCA. The
relevant section is as follows:
Canada Business Corporations Act:
233. No person is excused from attending and giving evidence and producing
documents and records to an inspector under this Part by reason only that the
evidence tends to criminate that person or subject that person to any proceeding
or penalty, but no such evidence shall be used or is receivable against that
person in any proceeding thereafter instituted against that person under an
Act of Parliament, other than a prosecution under section 132 of the Criminal
Code for perjury in giving the evidence or a prosecution under section 136
of the Criminal Code in respect of the evidence.
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Bill Clause No. 245
Section No. 245
Topic: Investigation
Proposed Wording
245. (1) In addition to the powers set out in the order appointing the inspector,
an inspector appointed to investigate a corporation may furnish information
to, or exchange information and otherwise cooperate with, any public official
in Canada or elsewhere who is authorized to exercise investigatory powers and
who is investigating, in respect of the corporation, any allegation of improper
conduct that is the same as or similar to the conduct described in subsection
240(2).
(2) An inspector shall not furnish information that was obtained from any
person in the course of an investigation under this Part to a public official
outside Canada unless the inspector is satisfied that the information will
not be used against that person in any proceeding instituted against that person
for an offence.
Rationale
This section empowers an inspector to furnish or exchange information and
cooperate with any public official in Canada or elsewhere who is carrying out
a similar investigation. However, an inspector is not allowed to provide information
to a foreign public official unless the inspector is convinced that the information
will not be used against the person who provided it.
Present Law
None.
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Bill Clause No. 246
Section No. 246
Topic: Investigation
Proposed Wording
246. (1) Any oral or written statement or report made by an inspector or any
other person in an investigation under this Part has absolute privilege.
(2) An inspector shall send to the Director a copy of every report made by
the inspector under this Part.
Rationale
This section provides absolute privilege to the inspector and any person making
an oral or written statement or report in an investigation so that they are
protected from liability for defamation. It also requires the inspector to
provide the Director Appointed Under the Act with a copy of every report produced
by the inspector.
Present Law
Pursuant to section 157.1 of the Canada Corporations Act (CCA), certain
provisions of the Canada Business Corporations Act (CBCA) apply by
cross-reference to organizations incorporated under Part II of the CCA. The
relevant section is as follows:
Canada Business Corporations Act:
230. [...]
(2) An inspector shall send to the Director a copy of every report made by
the inspector under this Part.
234. Any oral or written statement or report made by an inspector or any other
person in an investigation under this Part has absolute privilege.
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Bill Clause No. 247
Section No. 247
Topic: Investigation
Proposed Wording
247. Nothing in this Part shall be construed as affecting the privilege between
legal counsel and their clients.
Rationale
This section ensures that the privilege between legal counsel and their clients
(i.e., solicitor-client privilege) remains and is not overridden by the disclosure
obligations in an investigation or inquiry conducted under this Part.
Present Law
Pursuant to section 157.1 of the Canada Corporations Act (CCA), certain
provisions of the Canada Business Corporations Act (CBCA) apply by
cross-reference to organizations incorporated under Part II of the CCA. The
relevant section is as follows:
Canada Business Corporations Act:
236. Nothing in this Part shall be construed as affecting solicitor-client
privilege.
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Corporate and Insolvency Law Policy
