The Ontario Not-for-Profit Corporations Act, 2010, SO 2010, c 15 (“ONCA”)[1] is expected to come into force after 2015[2], at a yet to be determined date.
Every not-for-profit (“NFP”) incorporated under an act of the Ontario legislature, including the current Ontario Corporations Act (“CA”) should ensure compliance with the new legislation.
NFPs are corporations without share capital, and can also be charities. With few exceptions, all existing Ontario incorporated NFPs will have three years to transition to the ONCA once the Act is in force.
The ONCA is designed to make it simpler to incorporate and seeks to promote transparency and accountability in NFP administration by setting out clear rules for corporate governance. It also seeks to provide members with enhanced rights by providing for different types of members, including voting and non-voting members, and granting members greater access to financial records.
Ontario NFPs will have to make necessary changes to corporate documents to comply with the ONCA. Specifically, it is recommended that NFPs review their letters patent and supplementary letters patent and make any necessary changes to by-laws. Specifically, this includes:
1. Letters patent and supplementary letters patent
(a) Review letters patent and supplementary letters patent, including special provisions, to ensure the purposes reflect the corporation’s activities and that they are consistent with the ONCA, its regulations and other laws and court decisions.
(b) Determine if your corporation falls under the definition of a “public benefit corporation” or a “non-public benefit corporation”. This will effect available auditing procedures.
(c) Consider amending articles to provide for a minimum or maximum number of directors rather than a fixed number, keeping in mind that a corporation must have at least three directors.
(d) Review existing powers of the corporation to determine whether it is necessary to include all powers, given that a corporation has the rights, powers and privileges of a “natural person” under the ONCA.
(e) Ensure that the membership structure of the corporation meets the needs of the corporation.
2. By-laws
(a) Review all provisions to ensure they are up-to-date and meet the requirements of the ONCA and its regulations.
(b) Review by-law directors provisions to consider whether directors must be members of the corporation (see ONCA s 23); whether to change term of office of directors (see ONCA s 24); any changes to provisions for directors’ meetings and any relating to ex officio directors; revising provisions concerning indemnification and insurance for directors and officers (see ONCA s 46); revising conflict of interest provisions for directors (see ONCA s 41); and reviewing officer positions.
(c) Review by-law member provisions to consider more than one class or group of members; any changes to membership qualifications; amending disciplinary provisions concerning members in light of new rights given to members (see ONCA s 51); amending provisions relating to minimum notice periods for calling member meetings; providing specific procedures for members to request financial statements (see ONCA s 84); and any changes to the method of voting in light of new mandatory proxies or alternative means of voting at members’ meetings (see ONCA ss 65 and 67).
(d) Consider deleting or amending existing borrowing powers given that the ONCA gives directors power to borrow money without authorization from members.
For help transitioning your Ontario not-for-profit feel free to contact me directly at: [email protected]
Notes:
[1] Find the Ontario Not-for-Profit Corporations Act, 2010 online: <http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_10n15_e.htm>.
[2] See Ontario Ministry of Government and Consumer Services website for the source of the following information: online <http://www.sse.gov.on.ca/mcs/en/Pages/Not_For_Profit.aspx>.
This blog and the contents herein are for informational purposes only and do not constitute legal advice. Readers are advised to seek legal counsel prior to acting on any matter discussed herein. I take no responsibility for any third-party sites linked, nor is the presence or absence of a link an indication of my endorsement of views expressed.