The legislation governing British Columbia not-for-profits,
known as societies, is changing. On November 28, 2016, a new
Societies Act (the “New Act”)
is scheduled to come into force, replacing the current Society
Act (the “Current Act”). The
legislation is a welcome modernization of the outdated Current Act,
and includes a number of provisions and procedures that will be
familiar to those who deal with business corporations incorporated
under the British Columbia Business Corporations Act.
Within two years of the New Act coming into force, all existing
B.C. societies must transition their constitution and bylaws into a
form that complies with the requirements of the New Act. Whether or
not they transition, all B.C. societies will be governed by the New
Act as of the in force date. The transition is done by filing a
transition application online. Any society that has not filed a
transition application within the two-year period may be dissolved
by the Registrar. Lenders should therefore ensure those borrowers
that are societies transition within the prescribed time period,
and require them to provide a copy of the filed transition
application or other evidence that they have completed the
A key change in the New Act of importance to lenders to the
not-for-profit sector in British Columbia relates to the borrowing
powers of a B.C. society. The change applies to all societies as of
November 28, 2016, whether or not they have transitioned under the
new legislation. The Current Act contains a somewhat inscrutable
section that has generally been interpreted to mean that a society
cannot borrow money unless it has been authorized to do so by a
special resolution, which requires approval by at least 75% of the
society’s voting members. Even more restrictive is that any
power to borrow given to directors under that special resolution is
limited to a maximum period of one year after the special
resolution is passed. The borrowing provision of the New Act is
much more flexible, giving the directors the general power to
authorize a society to borrow money, subject only to any
restrictions or prohibitions on borrowing in the society’s
This section of the New Act is similar to the usual borrowing
powers of a business corporation, and will make it easier for
directors, without the need for approval by a society’s
members, to authorize borrowing by a B.C. society. However, the
provision of the New Act that permits the bylaws to restrict or
prohibit the ability of a society to borrow money is a good
reminder to lenders in all provinces to be vigilant in confirming
the proper authorization of borrowing by a not-for-profit. Despite
some similarities between them, societies and other not-for-profits
differ from business corporations, which almost invariably give
directors the clear authority to borrow. The adage “know your
borrower” is even more applicable if the borrower is a
society or other not-for-profit entity.
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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