On Wednesday, October 6, village council convened a special meeting to discuss proposed Policy 81, which will bar anyone who does any work for the Community Forest from sitting on the Board of Directors for the community forest. The meeting went on for at least two hours, and in conclusion resulted in Council recommending to themselves that they pass the policy as written. This process could have been done in five minutes and saved a lot of time. Perhaps a harbinger of things to come when the Village finally assumes complete control of the Board.
My thoughts on the matter centre on three points. The first involves the seeds of this dispute, which were planted in 2016 when legal advice from a couple of different law firms recommended that we create a new company (VIP) to manage all assets but the Community Forest, to preserve the Community Forest’s tax-exempt status.
Not only were we advised to create a new company, but we were also advised to create two new legal entities (LLP’s) to shield the Village from any financial catastrophes that might befall the ComFor or VIP. Indeed, Mr. Parcells, who provides legal advice to the Village, elaborated on those opinions in a memo to Craig Pryor, the CF General Manager, dated February 17, 2018. Some excerpts follow:
“The limited partners invest in the partnership and do not play an active role in the management of the partnership. As long as they retain their passive role, the liability of limited partners is limited to their investment in the partnership.”
“This section confirms that Valemount as the limited partner in VCF LP must not take an active role in the affairs of VFC LP in order to maintain its limited liability protection; however, it may do indirectly in its role as sole shareholder of the general partner, VCF.”
In the conclusion on P. 6 of the memo:
“Valemount will be able to appoint and remove directors as it deems necessary and take whatever steps it considers reasonable to ensure the respective general partners remain accountable; however, Valemount will not take an active role in the management of the limited partnerships as that would potentially cause it to lose its limited liability protection under the Partnership Act.”
Mr. Parcells appears to now hold a diametrically opposed view; that the liability protection is no longer required. Other legal opinions recently offered state that none of the relevant corporate legislation and regulations have changed between 2016 and now. Why has Mr. Parcells’ opinion changed?
Regarding Council’s contention that “Best Practices” preclude any director of a village-owned corporation having any conflicts of interest. This seems to be an opinion dressed up as a fact, based on legal advice provided by Mr. Parcells. Certainly, the BC Business Corporations Act makes no such requirement.
Sections 124 and 147 of the Corporations Act outline the legal status of potential directors and how to deal with any conflicts of interest that might arise.
The upside of the present Board configuration is that most of the directors are involved in the industry, and specifically with the Community Forest. We all recognize that our selfish interests are best served by a profitable, growing enterprise, which by no coincidence also serves the broader interest of the residents of Valemount.
My last point is regarding Council’s decision to add a Councillor and the CAO to the Board as voting members. This point is, in my opinion, the most damaging outcome of the entire process.
For example, imagine a CF Board meeting next year, when the CF Manager asks the Board for a resolution to set aside $750,000 to buy a couple bridges and upgrade or build 10km of road because we need to get into the Yellowjacket to deal with a massive Spruce Beetle infestation. If we don’t get to the wood within 2 years, it degrades from sawlog to pulp quality and may no longer be profitable to harvest. (This may happen.)
Coincidentally, the CAO is planning to hire another couple people for the Works crew and another administrator. He/she sees that the CF has $750,000 in the bank, earmarked for road and block development. What will prevent him/her from lobbying other board members to deny the manager’s request and bonus out the funds to the Village? After all, it is ultimately Village money. The fact that it could cost the CF several million in lost profits over the few years might be irrelevant to the CAO, especially if he’s already eyeing the next rung on the corporate ladder.
In another scenario, the Councillor on the Board plans on running for Mayor in the next election. He or she might want to use that $750,000 to lower municipal taxes. “Vote for me, I’ll keep your taxes down.” Again, the consequences for the Community Forest would be dire, but that individual may have realized their political ambitions and very few people will connect the two events.
The evolution of the Board from a working business board to a sub-committee of Council could be a rapid process, depending on the whims of the present or future Council. In my opinion, the devolution of the companies from businesses to non-profits would be equally rapid.
Recent provincial governments’ practice of siphoning off ICBC’s working capital had consequences all of us can understand, and having people on the board who understand forestry can prevent some of the problems that arise when business and politics meet.
The end game of this scenario would be where the Councillors’ most fervent wish was that the Village was protected from any liability beyond its investment. Unfortunately, the path we are set on now means that their wish would not be granted.
John McGuire, RFT
President, GreenStar Forest Solutions Inc.