In 2010, Ontario attempted to modernize the governance of
not-for-profit corporations (NFPs) incorporated in Ontario when it
passed the Not-for-profit Corporations Act (Ontario) (the
"ONCA"). This followed similar legislation at the federal
level in the Canada Not-for-Profit Act (CNCA). Both the
ONCA and CNCA share the objective of giving NFPs governance tools
similar to for-profit corporations, including increased duties for
directors, more rights to members and streamlined rules for
meetings, notice and general governance. However, unlike the
federal statute, which federally-incorporated NFPs are required to
continue under by October 17th this year, Ontario has yet to
proclaim the ONCA into force and so NFPs in Ontario are still
governed by the old Ontario Corporations Act.
The Ontario government introduced Bill 85 last year to amend
other legislation consequential to the enactment of the ONCA and
provide additional regulatory detail. Bill 85 contemplates
proclamation for the ONCA within six months of its passage and then
a three-year transition period to the new framework. Yet despite
tacit support for the bill at first reading in June, the minority
governing Liberals have not yet re-introduced the Bill for second
or third reading and this may be unlikely to happen before the 2014
provincial budget and election that could soon follow it (Ontario
has a minority government so an election would be triggered if the
budget is not passed with the support of one of the opposition
parties). Therefore, nearly four years after the ONCA was passed
into law it still remains unclear when it will actually be
proclaimed and operational for NFPs in Ontario.
For a more detail background on the specific provisions in the
ONCA, please see
This holding pattern for the ONCA has created a frustrating
situation for NFPs in Ontario as many are prepared to transition to
the new regime but are unable to at this time. Given this
situation, provincially-incorporated NFPs are still encouraged to
seek legal advice to ensure any revisions they make now to their
articles or bylaws are ONCA compliant in order to save time and
cost in the future when the ONCA is finally proclaimed.
Ontario-incorporated NFPs may also wish to consider making any
changes to their membership (i.e. voting rights) before the ONCA is
proclaimed, as doing so after will require a more fulsome
membership vote rather than the current right to simply file
amended articles or bylaws.
In addition, federally-incorporated NFPs may wish to consider
continuing under the old Ontario Corporations Act (the precursor to
the ONCA) with ONCA-compliant articles if there is a particular
CNCA provision that they may have difficultly complying with. While
the CNCA and ONCA are very similar, there are some key differences
that all NFPs should consider:
1. Deadline to comply: NFPs have until Oct 14, 2014 to continue
under the CNCA but no deadline has been set under the ONCA other
than 3 years from the date it is eventually proclaimed into
2. Notice for Annual Meeting: The CNCA lists more stringent
rules for the form of notice to be provided while the ONCA defers
to the NFP's bylaws for form (both include the same minimum
3. Ex-officio Directors: The CNCA does not permit ex-officio
directors; all directors must be elected, unlike the ONCA.
4. Removing members: The ONCA has a slightly higher procedural
threshold to remove a member, which accords the members a right to
notice and to be heard before they can be removed by directors.
5. Directors' Duty and Liability: Directors have slightly
better protection under the ONCA, as its reasonable diligence
defence specifically includes good faith reliance on professional
advisors, financial statements, and reasonable reliance on employee
reports or advice; and
6. Oppression Remedy: The CNCA allows members to bring an action
against the NFP for action that is oppressive or unfairly
prejudicial to or unfairly disregards the interests of any member;
there is no oppression remedy under the ONCA.
For a more fulsome analysis on the differences and similarities
between both legislation please see
this chart. Regardless of federal or Ontario incorporation,
2014 will be a big transition year for the governance of NFPs, who
are encouraged to work with their counsel at Davis to ensure this
transition is as smooth as possible.
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.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
While most are well aware that the sale of a business is generally a complex process, even sophisticated business owners are surprised by just how much cost and effort is required to complete the sale.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).