If your association has ever encountered an unhappy member or
member group, you should be aware of the enhanced member rights
under the Canada Not-for-profit Corporations Act
("CNCA"). Unhappy association members now have some
new tools at their disposal. In many ways, they now have
rights similar to those of shareholders of for-profit corporations.
(Many of these rights are also present in the Ontario
Not-for-Profit Corporations Act, 2010 which is not yet in
Members can now bring claims, called derivative actions, on
behalf of the association, if they feel that the association has
not responded to certain matters appropriately.
The CNCA allows "complainants" to apply to a court for
leave to bring an action in the name of and on behalf of the
association. This means that someone other than the
association itself could bring an action on behalf of the
association. Note that derivative actions are meant to deal
with harm done to the association, not to the
For example, a claim that directors have breached their
fiduciary duties to the association might be a basis for a
derivative action because fiduciary duties are owed to the
association and not to the complainant. This could mean that
a member who feels that the association wasn't taking
appropriate action around an alleged breach of fiduciary duty could
apply to a court to allow the member to bring an action against
The term "complainants" is defined broadly and
includes former or present members, debt obligation holders,
directors, officers or any person who, in the discretion of the
court, is a "proper person" to make an application.
Note that the court will not grant leave to commence a
derivative action unless it is satisfied that (1) the complainant
has given sufficient notice, (2) the complainant is acting in good
faith and (3) the action appears to be in the interests of the
association, not simply the complainant as an individual. As
noted above, a derivative action can only be brought by a
complainant to enforce the rights of the association when the
association is itself unwilling to act. The prejudice must be
suffered by the association directly; the complainant cannot use a
derivative action to enforce their own personal rights. In
other words, there are a lot of things a complainant would need to
establish before the court will grant leave.
In connection with a derivative action brought by a member, a
court has broad discretion and may issue any order that it thinks
Of course, there is law around the use of derivative actions in
the for-profit context and it will be interesting to see how a
court will react to requests made by complainants in the
In our next corporate governance post we will discuss oppression
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.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan 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.
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