The Ontario Not-for-Profit Corporations Act 2010 (the
"Act") was passed in October of 2010. The proposed
date for it coming into force was changed from the fall of 2012 to
July 1, 2013 in September 2012.
The Province announced at the end of March that it will be
"at least" January 1, 2014 before the Ontario
Not-for-Profit Corporations Act, 2010 comes into
This week, the Province published a default by-law for Ontario
not-for-profit corporations in draft form on the Ontario Ministry
of Consumer Services website. The draft by-law is relatively
bare-bones; as it must be, to apply to the wide variety of
organizations that are currently incorporated under the Ontario
Corporations Act. It is probably not suitable for use by
more sophisticated organizations, particularly those with multiple
classes of members, delegate or representational voting
arrangements, or any organizations which have carefully or
significantly crafted their governance structures.
There is a transition section in the Act: section 207. That
transition provision deems any by-law or letters patent not amended
to explicitly bring them into conformity with Bill 65's
provisions to be amended on the 3rd anniversary of the Act coming
into force. This period has been referred to as a three year
transition period. Some have assumed that during the three
year transition period the existing by-laws "override"
all of the provisions of Bill 65.
The Province has said that "the government
takes the position that provisions of [Letters Patent
and by-laws] that are valid under the current Corporations Act will
continue to be valid until the end of the three-year transition
period or sooner if the corporation amends them to conform with the
Act." (emphasis added)
Non-profit corporations, particularly those looking to ensure
their existing non-voting membership classes do not acquire the
class veto rights which the new Act creates (see our
earlier comprehensive analysis for an explanation) have been
confused about whether steps to remedy those situations need to be
carried out before the Act comes into force.
Adding some credence to the view that those types of changes do
not need to be made before the Act comes into force is the Ministry
of Consumer Service's statement:
For example, under ONCA, non-voting
members will have some limited voting rights. However,
it is the government's intent that if
an existing corporation provides for non-voting members in its
letters patent, any supplementary letters patent, by-laws and
special resolutions, the non-voting members remain non-voting for
the three-year transition period. (emphasis
Unfortunately, the government's intent or position may not
be what a court, faced with an application by disgruntled
non-voting members, may decide the actual wording of the Act
We do not believe it is safe to rely upon these statements to
put off amending Letters Patent, By-laws or Supplementary Letters
Patent until the end of the three year transition period.
A provision of an existing by-law "remaining valid" is
not the same as that provision overriding or eliminating a new
right which the Act provides to non-voting members when that Act
comes into force. The transition provision, section 207 of the
Act, simply says that a non-conforming by-law is deemed to comply
on the third anniversary of the Act coming into force. Section 207
does not say that the by-law should be interpreted as if Bill 65
did not exist until the third anniversary unless it is amended
earlier. The Act does not explicitly postpone the effect of any
provisions of the Act which are contrary to the intent of the
existing constating documents.
Unless the Act is further amended before it comes into force, it
is safest to make the organizational changes which avoid
application of undesirable provisions of the new Act in advance of
it coming into force. It is particularly important that any
non-voting membership classes a not-for-profit corporation does not
wish to maintain be eliminated before Bill 65 comes into
Fortunately for those corporations which have not had the time
or energy to devote to this task, we now have almost seven
additional months to amend their by-laws and seek supplementary
letters patent in order to rearrange their affairs.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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