If necessity is the mother of invention, regulation must surely be its unwanted sibling.
It was mid-September in a small boardroom on Bay Street when the thought occurred. Oscar Jofre (pictured, above),the 43-year-old chief executive of BoardSuite, had just run down a laundry list of requirements that new legislation introduced last spring had imposed on business.
In June, Bill C-25, a federally-mandated expansion of The Proceeds of Crime, Money Laundering and Terrorist Act, came into force, requiring banks to collect information on virtually every stakeholder, financial interest and transaction for every incorporated account holder.
"That touches six and a half million commercial accounts currently open with all major banks in Canada," Mr. Jofre said. "It doesn't matter if it's private or not-for-profit; every single one of these entities will have to adhere to the new banking laws."
The expansion was built on rules erected in the wake of the Sept. 11, terrorist attacks in the United States, as well as the accounting scandals of Enron in the United States and Nortel Networks Corp., to keep tabs on illicit bookkeeping.
It has become the latest regulatory cross all businesses big and small must bear.
That was in mid-September, when the towers a few blocks south were just beginning to feel the bite from the biggest failure in regulation in living memory. What will the fallout be from the current financial crisis? Even more rules, said Mr. Jofre, whose firm, BoardSuite (www.boardsuite.ca) aims to make corporate record-keeping more transparent and cheaper than ever before.
Through an easily navigable Web site, the firm has streamlined that process from the smallest tasks like tracking events on a calendar and maintaining the minute book, to mandatory obligations such as insurance reapplications and annual return filings.
Some company data must still be manually inputted into the system; however, once it's there, it stays on the record.
Concerned about complying with Bill C-25 at the risk of having an account frozen? "[BoardSuite] has all the data organized and sent to the bank rep without encumbering your business operations," said Dean Peloso, a former Toronto Stock Exchange regulator. "It's the institutional repository for all this information.
"All the elements you normally rely on your professionals to tell you to do, it's now telling you," said the 50-year-old career regulator who helped design Sedar, the electronic filing system for Canadian public companies.
Mr. Peloso's involvement with BoardSuite, where he's a director, is a testament to the rigorous planning that went into the product early on, Mr. Jofre said.
It was in 2003 when Mr. Jofre, an entrepreneur from Edmonton, learned his lesson in the regulatory pitfalls small businesses can stumble into.
A routine offering memorandum transferring assets from his company to another filed with the Alberta Securities Commission failed to disclose a bankruptcy of one of its officers.
The commission returned the filing and fined each director and Mr. Jofre $3,500, he said.
"It was in the minute book, the shareholders knew ... that wasn't the issue. Guess what the issue was -- one little line in the first page ... indicated no director or officer had filed for bankruptcy in the last 10 years. "The lawyer's backing away saying, 'It's not my responsibility,' but yet he's got the book. At the end of the day, I have to know exactly what I'm signing," he said. "The only way you can do that is by having access to information. That's the reason Board-Suite got started."
Of course, having the information on an encrypted Web site is another caveat of the service.
It's accessible around the clock anywhere there's an Internet connection. But perhaps best of all, BoardSuite is absolutely free. At least, it is to the company using it.
Through partnering with major service providers such as Aon Corp., the largest insurance broker in the world, BoardSuite can offer itself for free to clients. It generates income through service fees from Aon and other partners every time a company uses a partner's service.
Not that clients are compelled to use BoardSuite's sponsors, Mr. Peloso said, but "we think they will. It's easier, it's going to save them [time] and money and it's going to be that much more convenient."
"By helping your organization, we help the partners and everybody wins," Mr. Jofre said. Since mid-September, the financial crisis has deepened with the possibility of a recession looming. The talk of increased regulation has begun in earnest.
While it may be good news for BoardSuite, it likely means more red tape for businesses of all sizes.
"This will only impose more regulations," Mr. Peloso said. "Just like last time, the really big mistakes are made by the really big corporations, but the rules are made for all. The small guys end up having to live with the new rules. So you have to organize yourself better."
jasturgeon@nationalpost.com
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