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Earlier this year, Gowling WLG had the privilege of representing The College of Family Physicians of Canada (the "College") in a novel application under the Canada Not-for-profit Corporations Act ("CNCA").
The resulting decision in College of Family Physicians of Canada v. Resident Doctors of Canada, 2025 ONSC 1445 will be of interest to all CNCA organizations that have more than one membership class. In addition, the decision could help other organizations to resolve corporate procedural errors.
Background
The College is a national non-share capital corporation claiming status as a not-for-profit governed by the CNCA with more than 43,000 members.
Following an inquiry from a member, it was discovered that, over a period of 10 years, the College had unknowingly amended its By-laws and Articles in a manner that did not comply with the CNCA. More specifically, the College had failed to approve such amendments through separate votes of its membership classes, as required under the CNCA. This raised questions about the validity of those amendments.
For a variety of reasons, it was not practical to "re-do" the votes that did not take place in conformity with the CNCA. In some cases, years had gone by since the votes at issue. Further, amendments had become layered on top of other amendments. As a result, the College applied for a novel court order to validate its Articles and By-laws.
Facts
The CNCA came into force on October 17, 2011. All corporations governed by the Part II of the Canada Corporations Act (the "CCA"), including the College, were required to continue under the CNCA by October 17, 2014 or they would be dissolved. To continue under the CNCA, CCA corporations were required to obtain member approval for (1) Articles of Continuance and amendments to their By-laws to align them with the CNCA, and (2) the continuance itself.
Prior to continuance, the College had 10 membership classes, seven of which had voting rights. In approving the continuance under the CNCA, the College membership approved certain changes to its membership classes, including removing the voting rights of one class.
Unbeknownst to the College, section 212(4) of the CNCA applied to the continuance process, even though the corporation was still governed by the CCA. That section provides that if a corporation wishes to amend its corporate charter as part of the CNCA continuance process, and those amendments are in the nature described in section 199 of the CNCA, then separate class votes under section 199 are required to approve the amendments.
The requirement for separate class votes means that each impacted membership class must approve the proposed corporate changes by a special resolution within that membership class. If one class does not approve the change, then it would fail even if all other classes voted in favour of it. This protection is modelled on similar concepts in business (i.e., "for-profit") corporations statutes.
However, in College's case, no separate class votes were held. Instead, all voting members of the College voted collectively. As a result, the Articles and By-laws approved by College's members in 2013 were not approved in conformity with the CNCA. Nevertheless, Corporations Canada subsequently issued a Certificate and Articles of Continuance in 2014.
Following the continuance under the CNCA, the College made additional changes to its membership classes. Most significantly, in 2022, the College membership approved the replacement of its 10 membership classes with four. These changes also triggered section 199 of the CNCA, as they involved the reclassification of existing members and the elimination of certain membership classes. Once again, separate class votes were required but did not take place.
When this situation came to light, there was no practical way for the College to correct it on its own. It could not "re-do" votes that took place a decade earlier. Corporate changes had become layered on top of other corporate changes. In addition, perhaps more fundamentally, the membership had changed. The College therefore sought a remedy under the CNCA to validate its Articles and By-laws.
However, unlike some corporate statutes (e.g., the British Columbia Societies Act), the CNCA does not contain a provision that expressly allows a corporation to bring an application to validate corporate documents that were irregularly enacted. The College argued that the court had jurisdiction to grant the relief being sought under section 288(4) of the CNCA, which permits an applicant to apply to a court to order the correction to a corporate document. Until this application, section 288 had not been judicially considered.
Decision
The court accepted the College's submission that the CNCA "is remedial legislation warranting a liberal construction and interpretation as best ensures the attainment of its objects." In reaching this conclusion, the court relied on the wording of section 288(4), which allows the court to "make any other order that the court thinks fit," in addition to ordering the correction of the corporate documents.
The court was also mindful that the College was acting in good faith to correct errors resulting from deficient advice it had received regarding the approval process for its Articles and By-laws. Accordingly, the court was satisfied with College's proposed relief: an order validating its corporate documents with retroactive effect.
It is also worth noting that the Resident Doctors of Canada ("RDOC"), which represents the interests of family medicine resident doctors, intervened in the case. RDOC did not oppose the core relief requested by the College but sought to restore membership voting rights for resident members of College.
Prior to 2022, resident members formed a separate membership class with voting rights; however, in 2022, the members of that class were transferred to a new class without voting rights. As noted above, the 2022 amendments were not approved by separate class votes, as required by the CNCA. While the College initially opposed RDOC's position, the parties were able to reach an agreement to add resident members to College's Practicing membership class, which carries voting rights. The court accepted this agreement and validated College's Articles and By-laws nunc pro tunc (i.e., "now-for-then").
Next steps
The court's decision provides an important precedent for non-share capital corporations that find themselves in similar circumstances. It is likely that many other corporations have failed to hold separate class votes as well. Failing to deal with this issue could give rise to serious consequences.
Further, because of the similarities between the CNCA and certain business corporations statutes, and the propensity for more litigation to occur in the business context, it is generally the case that CNCA practitioners have had to "borrow" from the case law relating to business corporations to inform their advice for CNCA corporations. This novel decision may prove to be a rare instance where the reverse occurs.
GowlingWLG was very honoured to have represented the College in this important matter.
Read the original article on GowlingWLG.com
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