Canada: Ontario's Not-For-Profit Sector Will Soon See Changes To The Corporations Act And Not-For-Profit Corporations Act

Last Updated: October 12 2017
Article by M. Elena Hoffstein, Lynne Golding, Kathryn L. Beck and Sophie MacRae

On September 14, 2017, the Ontario government introduced Bill 154, the Cutting Unnecessary Red Tape Act ("Bill 154"). Bill 154 includes a number of changes to modernize the governance rules for Ontario-incorporated charities and not-for-profits (referred to in this Bulletin as "not-for-profits").

The Not-for-Profit Corporations Act (the "ONCA") (which is not yet in force) will be amended to address some outstanding technical and other issues in preparation for ONCA's eventual proclamation. Bill 154 will also modernize some of the more outdated requirements of the Ontario Corporations Act (the "OCA")—which currently governs Ontario not-for-profits—in the meantime.

The full text of Bill 154 can be found here.

Modernization of Existing Law

The OCA currently governs most Ontario not-for-profit corporations. The ONCA will, once in force, replace the OCA and modernize the regulatory framework for Ontario not-for-profits. However, although the ONCA received final Royal Assent in October 2010, its proclamation has been delayed several times.

Bill 154 is proposing some modernizations to the OCA in the meantime:

  • Members meetings can be held by tele- or video-conference - A meeting of members would be permitted to be held by telephonic or electronic means, unless the by-laws of a corporation provide otherwise.
  • Directors need not be members - Bill 154 would permit not-for-profits to provide, in their by-laws, that a person may be a director even if he or she is not a shareholder or member.
  • Removal of directors by majority vote - Currently the OCA requires a two-thirds vote for the members to remove a director (other than an ex officio director) from office—this would be amended to a majority vote.
  • Duties and standard of care - The amendments would set out the duties and standard of care of the directors and officers, which is to act honestly and in good faith with a view to the best interests of the corporation and to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. These are existing duties under common law, but the changes would make them explicit in the OCA. A director or officer cannot be relieved of these duties (including the duty to act in accordance with the OCA) by a contract, by-law or other similar document.
  • Relationship with other Acts and charities law - Bill 154 would explicitly clarify that charities laws and other laws that govern a not-for-profit will prevail if there is a conflict between the OCA and that other law.
  • Corporate capacity - The amendments would clearly provide that not-for-profit corporations have the capacity, rights, powers and privileges of a natural person and a corporation's acts are valid even if the corporation has acted contrary to the letters patent (or other incorporating document), by-laws or the OCA.
  • Option to opt out of audit requirements for small corporations - The proposed amendments would permit the members of corporations with annual revenues not exceeding $100,000 (or other prescribed amount) to forego an audit by an extraordinary resolution (approved by at least 80% of votes cast at a meeting of members, or consented to in writing by all members entitled to vote on the resolution).
  • Pre-incorporation contracts - Bill 154 would allow corporations to adopt pre-incorporation contracts entered into on behalf of the corporation.

Proposed Amendments to the ONCA

In the fall of 2015, the Ministry committed to providing the sector with at least 24 months' notice before it proclaims the ONCA in force. The Ministry is upgrading its technology to support better access to online filing, etc. and has indicated it wants to have those upgrades in place before proclamation. This means that even once the amendments are passed, it will be some time before the ONCA is effective.

Bill 154 aims to address concerns raised about the ONCA.[1]

Bill 154's key amendments to the ONCA are set out below:

  • Delayed implementation of voting rights for non-voting members and class vote rights - The ONCA will extend certain voting rights to non-voting members and will also require class votes on certain corporate changes. As it was passed in 2010, the ONCA would have made these rights effective immediately when the ONCA came into force. Bill 154 would provide instead that these rights not be proclaimed in force until at least three years from the proclamation date of rest of the ONCA. The delay would give time to not-for-profits who have not already done so to evaluate and update their governance structures as needed.
  • Corporations are allowed to limit use of proxies - Bill 154 proposes to restrict the right to vote by proxies by providing that: (i) this method of voting will only be available if the articles or by-laws permit proxies and (ii) the articles or by-laws may require that a proxyholder be a member. It would also remove the requirement for a form of proxy to be circulated with notice of members' meetings.
  • Director consents must be in writing - Bill 154 would clarify that directors' consents to serve on the board must be in writing. The ONCA was unclear as to whether consents had to be in writing or could be given in another form. Bill 154 would also give the Government the power to require corporations to file consents with the Ministry in the future.
  • Regulatory flexibility - Under Bill 154, the Minister would have the power to prescribe a different time period for circulating the approved financial statements to the members in regulation—currently this time period is 21 days. Similarly, Bill 154 would provide that the ONCA's current $10,000 threshold relating to the definition of a non-charitable public benefit corporation can be changed by regulation. The Government will have expanded powers to do other things through regulation or to set other requirements (e.g. to set required content of forms, requirements for the execution and methods of filing of documents, etc.).
  • Clarity on transition process - Bill 154 would clarify the process for existing OCA not-for-profits to transition to the ONCA. The proposed updates would provide that existing letters patent, by-laws and special resolutions that were valid before the ONCA came into force, will continue to be valid for three years following proclamation. After that date, conflicting provisions will be deemed to be amended to the extent necessary to conform with all requirements of the ONCA. We had assumed this was the case, and a similar clarification had been previously put forward. Bill 154 would also require that provisions currently set out in by-laws or a special resolution— but which the ONCA requires to be in the articles— be so added before the end of the transition period. If this is not done, those provisions will be invalid—with an exception to this general rule for certain types of provisions (e.g. number of directors, member voting rights).
  • Class vote to approve continuance for share-capital corporations with social objects - Bill 154 would amend the OCA to provide that share-capital corporations incorporated under that Act that have wholly or partly social objects (referred to as a "social company") will have 5 years to continue under the ONCA (as a non-share capital corporation), the Co-operative Corporations Act (as a co-operative) or the Business Corporations Act (the "OBCA") (as a share-capital corporation). If a social company has more than one class of shareholders, Bill 154 would add a requirement that the special resolution to authorize continuance be approved by each class of shareholders by a separate vote.

There are other updates across various corporate statutes, for example, to better account for electronic documentation and filing and to contemplate electronic signatures.

At this time, Bill 154 has passed First Reading so it is possible that further amendments will be made as the Bill progresses. We will keep you apprised as the Bill progresses.

Footnote

[1] The government previously introduced a bill in 2013 that aimed to fix these issues, but the bill (Bill 85) died when the election was called in 2014. The changes introduced under Bill 154 are similar to those previously proposed in Bill 85.

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.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
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).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.