Members can bring claims against an association if they feel like their rights are being oppressed by the association.
The oppression remedy is an equitable remedy under the Canada Not-for-profit Corporations Act ("CNCA") that also gives a court broad powers to intervene in the internal affairs of an association. Whereas a derivative action addresses harm done to an association, an oppression remedy is meant to address harm done to the complainant by an association.
Upon application by a "complainant," which has the same definition as in the context of derivative actions discussed above, a court may make an order if it is satisfied that (1) any act or omission, (2) the conduct of the activities or affairs, or (3) the exercise of the powers of the directors or officers of the association is oppressive or unfairly prejudicial to or unfairly disregards the interests of any shareholder, creditor, director, officer or member.
Whether association conduct will attract the oppression remedy depends on the specific surrounding facts. Circumstances that may attract the oppression remedy include: mismanagement; self-dealing and self-interested transactions; appropriation of corporate opportunities; changes to membership structure; violation of procedural rules and laws; discrimination between members of the same class; or breach of the articles or by-laws of the association. In other words, there are a large number of association actions that could attract review!
The CNCA sets out the oppression remedies that a court may order, which include: requiring the amendment of the articles or by-laws or the creation or amendment of a unanimous member agreement; appointing additional or replacement directors; directing an association to pay a member all or part of the amount that the member paid for their membership; varying, setting aside or annulling a transaction or contract to which an association is a party and compensating the association or any other party to the transaction or contract; or liquidating and dissolving an association.
Note that in assessing an oppression remedy claim, a court will apply the "business judgment rule". Courts recognize that it is impossible satisfy all stakeholders and, therefore, will defer to the responsible business decisions of directors, without deeper analysis.
In our next corporate governance post we will discuss how to respond to member claims and reduce the likelihood of receiving such claims.
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.
