On March 25, 2015, Bill 24, the new Societies Act, was introduced in the British Columbia legislature for its first reading. If passed, Bill 24 will repeal and replace the current Society Act, which was enacted in 1977, with modern and updated legislation. The Society Act provides the rules for the creation and governance of societies in British Columbia. The changes in the new Societies Act are intended to allow societies to operate more effectively and efficiently, while at the same time protecting the public interest in societies.
Coming Into Force
If the British Columbia legislature passes Bill 24 in the current session which ends in May 2015, the new Societies Act is projected to come into force approximately 18 months after receiving royal assent.
Transition of Pre-Existing Societies
If the new Societies Act comes into force, pre-existing societies will be required to transition under the new Societies Act within two years by filing a transition application containing a constitution and bylaws meeting the requirements of the transition application. Once the legislation comes into force, pre-existing societies must not alter their bylaws or amalgamate with other corporations prior to transitioning.
Changes in the new Societies Act
In our Newsletter, we previously reported on the significant changes to the Society Act proposed in the White Paper and draft legislation released by the British Columbia Ministry of Finance in August 2014 for comment. Bill 24 has largely maintained the overall scheme of the draft legislation.
New Corporate and Governance Procedures
The new Societies Act will introduce corporate and governance procedures adopted from the Business Corporations Act (British Columbia) and other corporate legislation, such as:
- proxy voting may be used at members' meetings if permitted by the bylaws;
- introducing the concept of members bringing forward proposals if they hold five percent or more of the voting membership;
- clarifying that multiple classes of membership can be created, as long as there is one voting class of members. The existing prohibition on the number of non-voting members outnumbering the voting members will be removed; and
- reducing the threshold to pass a special resolution from 75 percent to two thirds, unless the bylaws provide for a higher threshold.
Reduced Regulatory Burden for Member Funded Societies
The new Societies Act will treat member-funded societies differently from charities and publicly funded societies. Member funded societies, such as sports clubs and professional organizations, will be subject to fewer accountability measures, such as:
- being allowed to distribute assets on liquidation and distribution to members;
- not being required to give members of the public access to their financial statements;
- not being required to report on remuneration of directors, employees or contractors; and
- being allowed to have only one director and not being subject to any requirement to have directors ordinarily resident in British Columbia.
Greater Regulatory Burden for Charities & Publicly Funded Societies
Societies that have charitable status or that receive significant public funding will continue to be subject to the requirements set out in the current Society Act along with additional requirements, for instance:
- a majority of their directors must not be entitled to receive remuneration from the society under contracts of employment or services (this does not apply to pre-existing societies until two years after the new Societies Act comes into force);
- disclosing in the financial statements the amount of remuneration paid to directors and the ten highest paid employees or contractors;
- permitting members of the public to inspect the financial statements of the society;
- continuing to have at least three directors, one of whom must be ordinarily resident in British Columbia; and
- on dissolution or liquidation, distributing assets to other "qualified recipients" and not to members. A society can now designate a qualified recipient by directors' resolution if a members' resolution is not feasible.
Proposed Public Complaint Remedy Removed and Replaced with Oppression Remedy for Members Only
The draft legislation prior to Bill 24 contained a right for members of the public to apply to court to seek a remedy for oppressive conduct or unfair treatment, or if a society is acting in a fraudulent or unlawful manner or is otherwise not acting in the public interest. Bill 24 has significantly changed those provisions and now restricts the ability to apply to court to see a remedy for oppressive conduct or unfair treatment to members of the society only. The new Societies Act will also no longer introduce an ability to seek a court remedy if a society is acting in a fraudulent or unlawful manner, or is otherwise not acting in the public interest. However, the authority of the minister to investigate a society has been retained in section 213 of the new Societies Act.
Other Significant Changes
Additional significant changes proposed in the new Societies Act are:
- clarifying societies' record keeping obligations by specifically describing what records must be maintained and who has access to those records;
- implementing a mandatory online filing system for incorporation, bylaw changes and other filings at the corporate registry. Existing societies will be required to input their constitution and bylaws into an electronic, searchable data base when they transition;
- specifying the requirements an individual must meet in order to be qualified to be a director, for instance a director cannot be an undischarged bankrupt (this does not apply to pre-existing societies until two years after the new Societies Act comes into force);
- requiring directors to consent in writing to their election or to be present at the meeting at which the election took place in order for the election to be valid (this does not apply to pre-existing societies until two years after the new Societies Act comes into force);
- removing the existing requirement to obtain court approval for director indemnity payments;
- clarifying directors' liability for improper payments and providing limitations on the liability where the directors relied on the society's financial statements or an expert report;
- clarifying that bylaw authorization is needed if directors are to be compensated for being directors (this does not apply to pre-existing societies until two years after the new Societies Act comes into force);
- giving societies greater flexibility to meet changing needs by enabling unalterable provisions in a society's bylaws (or currently in the society's constitution) to be altered by special resolution;
- removing the ability of societies to create branch societies; and
- introducing the concept of a subsidiary, which is a corporation (including a society) controlled by a society. If a society has a subsidiary, the society must provide copies of the financial statements of the subsidiary to a security holder of the society on request.
A copy of Bill 24 can be found on the Legislative Assembly of British Columbia's website here: https://www.leg.bc.ca/40th4th/votes/progress-of-bills.htm
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.