Bill 200, Investor Protection Act (Business Corporations and Public Accountancy), 2002

Versions

Bill 200 2002

An Act to amend the
Business Corporations Act and
the Public Accountancy Act
to protect investors

Her Majesty, by and with the advice and consent of the Legislative Assembly of the Province of Ontario, enacts as follows:

PART I
BUSINESS CORPORATIONS ACT

1. (1) The Business Corporations Act is amended by adding the following sections:

5-year limit

149.1 (1) A person shall not be appointed as the auditor of a corporation if, at any time during each of the five previous fiscal years, any of the following circumstances applied:

1. The person served as auditor of the corporation.

2. An affiliate of the person served as auditor of the corporation.

3. A director, officer, partner or employee of the person or a director, officer, partner or employee of an affiliate of the person served as auditor of the corporation.

4. The person was a director, officer, partner or employee of a person that served as auditor of the corporation or of an affiliate of a person that served as auditor of the corporation.

5. The person is a director, officer, partner or employee of a person and another director, officer, partner or employee of the person or of an affiliate of the person served as auditor of the corporation.

Application of subss. 149 (5) and (6)

(2) Subsections 149 (5) and (6) do not apply if the reappointment of the incumbent auditor is prohibited by subsection (1).

Employment of auditor

149.2 A person shall not be a director, officer or employee of a corporation if, at any time during the two years before becoming a director, officer or employee, he or she served as auditor of the corporation or participated in any audit related to the corporation that was conducted by the auditor of the corporation.

(2) Subsection 158 (1) of the Act is repealed and the following substituted:

Audit committee

(1) A corporation that is an offering corporation shall, and any other corporation may, have an audit committee composed of not fewer than three directors of the corporation appointed to hold office until the next annual meeting of the shareholders.

Restrictions on membership

(1.1) The following persons shall not be members of an offering corporation's audit committee:

1. An officer or employee of the corporation or any of the corporation's affiliates.

2. A person who accepts any consulting, advisory or other compensatory fee from the corporation, other than in his or her capacity as a member of the audit committee.

PART II
PUBLIC ACCOUNTANCY ACT

2. (1) The definition of "Council" in section 1 of the Public Accountancy Act is repealed and the following substituted:

"Board" means the Ontario Public Accountancy Oversight Board; ("Office")

(2) The Act is amended by striking out "Council" wherever it appears and substituting in each case "Board".

(3) Subsection (2) does not apply to the references to the "Lieutenant Governor in Council" in section 17 and subsection 31 (3) of the Act.

(4) Section 1 of the Act, as amended by the Statutes of Ontario, 2000, chapter 42, Schedule, section 24, is amended by adding the following definition:

"public accountancy firm" means,

(a) a partnership that includes or employs one or more persons licensed under this Act to provide services as a public accountant to any person other than that partnership,

(b) a professional corporation, and

(c) a corporation that employs one or more persons licensed under this Act to provide services as a public accountant to any person other than that corporation; ("cabinet de comptabilité publique")

(5) The definition of "qualifying body" in section 1 of the Act is repealed.

(6) Sections 2, 3 and 4 of the Act are repealed and the following substituted:

Ontario Public Accountancy Oversight Board

2. The Public Accountants Council for the Province of Ontario is continued under the name Ontario Public Accountancy Oversight Board in English and Office de surveillance de la comptabilité publique de l'Ontario in French as a body corporate with power to acquire, hold and dispose of land.

Composition of the Board

3. (1) The Board shall consist of nine members.

Appointments by professional bodies

(2) One member of the Board shall be appointed by each of the following bodies:

1. The Board of Governors of The Certified General Accountants Association of Ontario.

2. The council of The Institute of Chartered Accountants of Ontario.

3. The Board of Governors of The Society of Management Accountants of Ontario.

Appointments by Minister of Finance

(3) The Minister of Finance shall appoint six members of the Board.

Majority

(4) A majority of the members of the Board must not be public accountants.

(7) Subsection 5 (1) of the Act is amended by striking out "or election" at the end.

(8) Subsection 5 (2) of the Act is amended by striking out "or elected" at the end.

(9) Subsection 5 (3) of the Act is amended by striking out "or re-election" at the end.

(10) Subsection 5 (4) of the Act is repealed and the following substituted:

Vacancies

(4) Any vacancy in the office of a member of the Board, where more than four months of the term remain, shall be filled for the remainder of the term by the appointment of a member by the person or body that appointed the member whose office is vacant.

(11) Subsection 6 (2) of the Act is amended by striking out "an appointed member" and substituting "a member appointed under subsection 3 (2)".

(12) Section 7 of the Act is amended by adding the following clauses:

(c.1) the establishment and enforcement of quality control and accounting standards for public accountancy firms and public accountants;

(c.2) the establishment and administration of an ongoing program to review public accountancy practices;

(c.3) the investigation of contraventions of this Act and the discipline of public accountancy firms and persons licensed under this Act;

(13) Section 7 of the Act is amended by adding "or" at the end of clause (g) and by repealing clause (h).

(14) Clause 9 (2) (a) of the Act is amended by striking out "clause 7 (h) or (i)" and substituting "clause 7 (i)".

(15) Clause 9 (2) (c) of the Act is repealed and the following substituted:

(c) the exercise of any of the disciplinary powers conferred by this Act, including the suspension, revocation or non-renewal of a licence granted under this Act or the imposition of an administrative penalty; or

(16) Section 11 of the Act is amended by striking out "eight members" and substituting "five members".

(17) Clause 13 (2) (b) of the Act is amended by striking out "revoked" and substituting "suspended or revoked".

(18) Subsection 14 (1) of the Act is repealed and the following substituted:

Qualifications for licence

(1) Any person, on application to the Board in the prescribed manner and upon payment of the prescribed fee, is entitled to be licensed under this Act if the Board is satisfied that the applicant is of good character and that,

(a) the applicant,

(i) has passed the qualifying examination approved by the Board, and

(ii) is a member of,

(A) The Certified General Accountants Association of Ontario,

(B) The Institute of Chartered Accountants of Ontario, or

(b) the applicant was licensed under this Act or a predecessor of this Act before the Investor Protection Act (Business Corporations and Public Accountancy), 2002 came into force.

(19) Section 15 of the Act is amended by striking out "revoked" and substituting "suspended or revoked".

(20) Section 16 of the Act is amended by striking out "revoke" and substituting "suspend or revoke".

(21) Subsection 18 (1) of the Act is amended by striking out "or" at the end of clause (c) and by adding the following clause:

(c.1) has been found on inquiry held by the Board not to be competent to practise as a public accountant; or

(22) Subsection 18 (1) of the Act is amended by striking out "revoke" in the portion after clause (d) and substituting "suspend or revoke".

(23) Subsection 18 (2) of the Act is amended by striking out "revoke" and substituting "suspend or revoke".

(24) Subsection 18 (3) of the Act is amended by striking out "has been guilty of conduct disgraceful to the person in his or her capacity as a public accountant" and substituting "is not competent to practise as a public accountant or has been guilty of conduct disgraceful to the person in his or her capacity as a public accountant".

(25) Section 19 of the Act is amended by,

(a) striking out "revokes" and substituting "suspends or revokes"; and

(b) striking out "refusal or revocation" and substituting "refusal, suspension or revocation".

(26) The Act is amended by adding the following sections:

Effect of suspension

20.1 No person whose licence is under suspension shall be granted a licence under this Act during the period of the suspension.

Administrative penalties

20.2 (1) In any case in which it appears to the Board that a public accountancy firm or person licensed under this Act has contravened a provision of this Act or the regulations, the Board may cause an inquiry to be held.

Notice of inquiry

(2) Where an inquiry is to be held under this section, the Board shall forthwith cause to be served on the firm or person concerned a written notice of the proposed inquiry specifying the time and place at which it is to be held and the subject-matter thereof, and the firm or person is on application entitled to be heard at the inquiry either in person or by counsel.

Power of Board

(3) If the report of an inquiry held under this section concludes that a public accountancy firm or person licensed under this Act has contravened a provision of this Act or the regulations, the Board may impose an administrative penalty on the firm or person in an amount not exceeding $250,000.

(27) Section 21 of the Act is amended by striking out "or" at the end of clause (b) and by repealing clause (c) and substituting the following:

(d) imposes an administrative penalty,

. . . . .

(28) Section 21 of the Act is amended by striking out the portion after the clauses and substituting the following:

the person or firm aggrieved may, within three months from the day on which notice thereof was served on the person or firm, appeal to the Divisional Court and, upon due cause shown, the court may make an order directing the Board to grant the licence, renew the licence, cancel the suspension or revocation of the licence, cancel the imposition of the administrative penalty or alter the amount of the administrative penalty, as the case may be, or may make such other order as may be warranted by the facts, and the Board shall forthwith comply with such order and such order is final.

(29) Section 22 of the Act is amended by striking out "a fine of not more than $10,000" at the end and substituting "a fine of not more than $1 million".

(30) Subsection 23 (1) of the Act is amended by striking out "a fine of not more than $2,000" at the end and substituting "a fine of not more than $1 million".

(31) Subsection 23 (2) of the Act is amended by striking out "a fine of not more than $10,000" at the end of the portion after clause (c) and substituting "a fine of not more than $1 million".

(32) Subsection 24 (3) of the Act is amended by striking out "a fine of not more than $10,000 for a first offence and to a fine of not more than $25,000 for any subsequent offence" at the end and substituting "a fine of not more than $1 million".

(33) Subsection 24 (4) of the Act, as re-enacted by the Statutes of Ontario, 2001, chapter 8, section 212, is amended by,

(a) striking out "revoked" in the portion before clause (a) and substituting "suspended or revoked";

(b) striking out "revocation" in clause (a) and substituting "suspension or revocation";

(c) striking out "revocation" in clause (b) and substituting "suspension or revocation"; and

(d) striking out "revocation" in clause (c) and substituting "suspension or revocation".

(34) Subsection 25 (1) of the Act, as amended by the Statutes of Ontario, 2000, chapter 42, Schedule, section 28, is amended by striking out "a fine of not more than $10,000 for a first offence and to a fine of not more than $25,000 for any subsequent offence" at the end and substituting "a fine of not more than $1 million".

(35) The Act is amended by adding the following sections:

Compliance with prescribed standards

25.1 A public accountancy firm or person licensed under this Act shall comply with the prescribed quality control and accounting standards for public accountancy firms and public accountants.

Prohibition on other services

25.2 (1) A public accountancy firm or person licensed under this Act that provides public accountant services to a client shall not provide any other services to the client.

Examples

(2) For example, a public accountancy firm or person licensed under this Act that provides public accountant services to a client shall not provide any of the following services to the client:

1. Bookkeeping or other services related to the client's accounting records or financial statements.

2. Financial systems design.

3. Appraisal or valuation services.

4. Actuarial services.

5. Internal audit services.

6. Management or human resources services.

7. Tax services, unless the client is a corporation that has an audit committee and the audit committee has approved the provision of tax services by the public accountancy firm or person licensed under this Act.

Offence

(3) Any public accountancy firm or person who contravenes any provision of this section, without prejudice to any other proceedings that may be taken, is guilty of an offence and on conviction is liable to a fine of not more than $10,000 for a first offence and to a fine of not more than $25,000 for any subsequent offence.

(36) Subsection 30 (1) of the Act is amended by striking out "to the qualifying body and to the Attorney General" at the end and substituting "to the Minister of Finance".

(37) Clause 33 (2) (b) of the Act is repealed and the following substituted:

(b) the suspension or revocation of a licence;

(b.1) the imposition of an administrative penalty; or

(38) Section 35 of the Act is amended by striking out "revocation" and substituting "suspension or revocation".

PART III
COMMENCEMENT AND SHORT TITLE

Commencement

3. This Act comes into force on a day to be named by proclamation of the Lieutenant Governor.

Short title

4. The short title of this Act is the Investor Protection Act (Business Corporations and Public Accountancy), 2002.

EXPLANATORY NOTE

Business Corporations Act:

The Bill amends the Business Corporations Act to require a corporation to change its auditor at least once every five years. (See the new section 149.1 of the Act.) It also prohibits a person from serving as a director, officer or employee of a corporation if, during the preceding two years, he or she served as auditor of the corporation or participated in any audit related to the corporation that was conducted by the auditor. (See the new section 149.2 of the Act.)

Other amendments to the Act exclude from membership on a corporation's audit committee any officer or employee of the corporation and any other person who accepts certain compensatory fees from the corporation. (See the amendments to section 158 of the Act.)

Public Accountancy Act:

The Bill makes significant changes to the Public Accountancy Act. It restructures The Public Accountants Council for the Province of Ontario as the Ontario Public Accountancy Oversight Board, consisting of six members appointed by the Minister of Finance and one member appointed by each of the following professional bodies:

1. The Certified General Accountants Association of Ontario.

2. The Institute of Chartered Accountants of Ontario.

3. The Society of Management Accountants of Ontario.

A majority of the members of the Board must not be public accountants. (See the new sections 2 and 3 of the Act.)

The Board's functions are amended to include the following:

1. The establishment and enforcement of quality control and accounting standards for public accountancy firms and public accountants.

2. The establishment and administration of an ongoing program to review public accountancy practices.

3. The investigation of contraventions of the Act and the discipline of public accountancy firms and persons licensed under the Act. (See the amendments to section 7 of the Act.)

The qualifications for a licence to practise as a public accountant are amended to require an applicant to pass the qualifying examination approved by the Board and to be a member of one of the professional bodies referred to above. (See the amendments to section 14 of the Act.)

The Board's licensing powers are expanded to permit the suspension or revocation of a licence if an inquiry determines that the licensee is not competent to practise as a public accountant. The Board's existing powers to revoke a person's licence are expanded to also permit the suspension of the licence. (See the amendments to section 18 of the Act.)

The maximum fines that may be imposed by the courts for offences under the Act are increased to $1 million. (See the amendments to sections 22 and 23, subsection 24 (3) and section 25 of the Act.)

The Board is given the power to impose administrative penalties of up to $250,000 if an inquiry determines that a public accountancy firm or a person licensed under the Act has contravened the Act or the regulations. (See the new section 20.2 of the Act.)

The amendments require public accountancy firms and persons licensed under the Act to comply with the quality control and accounting standards established by the Board. (See the new section 25.1 of the Act.) The amendments also prohibit firms and persons licensed under the Act that provide public accountant services to a client from providing other services to the client. (See the new section 25.2 of the Act.)