Although members of non-share capital corporations have a right to submit and discuss a "proposal" at a meeting of members under the federal Canada Not-for-Profit Corporations Act ("CNCA") and will soon have such a right under Ontario's not-yet-in-force Not-for-Profit Corporations Act, 2010 ("ONCA"), the recent decision of the Ontario Superior Court of Justice (the "Court") in Koh v. Ellipsiz Communications Ltd. is a useful reminder to boards of directors that this right is not unlimited.

On Friday, January 13, 2017, Borden Ladner Gervais LLP published a bulletin on the Koh decision, which discussed the Court's denial of an application for a declaration brought by the largest shareholder of Ellipsiz Communications Ltd. ("Ellipsiz") claiming that he validly requisitioned a shareholders meeting under the Business Corporations Act (Ontario) ("OBCA"). The Court denied the application on the basis that the primary purpose of the requisition was to redress a "personal grievance" against Ellipsiz and a group of its directors, in which case the Ellipsiz board was not, pursuant to section 99(5)(b) of the OBCA, obligated to comply with the requisition.

The Court's analysis is relevant to organizations incorporated under the CNCA or ONCA because section 163(6)(b) of the CNCA and section 56(6)(b) of the ONCA provide nearly identical language to section 99(5)(b) of the OBCA.

Canadian courts have previously applied interpretations of business corporations legislation to analogously worded not-for-profit corporations legislation (see Lash v. Lash Point Association Corp., a recent case in which Borden Ladner Gervais LLP was involved) and interpretations of not-for-profit corporations legislation to the business corporations context. In fact, the Court in Koh relied heavily on Saskatchewan WTF Taekwondo Assn Inc. v. Taekwondo Canada, a decision that directly considered the scope and application of section 163(6)(b) of the CNCA, in defining "personal grievance" as "a dispute that does not entail an issue of corporate policy or operations but rather involves an issue primarily pertaining to the personal interest of the complainant."

The Koh decision serves as useful guidance on the scope and application of the personal grievance exception to member proposals, particularly:

  • The onus of proof rests with the corporation: The corporation must demonstrate that that primary purpose of the member proposal is to redress a personal grievance, rather than the member having to demonstrate that such a proposal is not. 
  • The burden of proof is a high one: Section 163(6)(b) of the CNCA and section 56(6)(b) of the ONCA imposes a high threshold on the corporation, requiring that it must be clearly apparent that the primary purpose of the member proposal is to redress a personal grievance.
  • The determination must be made on 'objective' evidence: An analysis of whether a member's proposal can be said to be motivated by personal grievance must focus on objective evidence (in the form of the member's actions, including prior conduct, behavior and written communications).

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