Co-authored by 2024 summer law students Amber LeBlanc and Andrea Leung.
If you're a member or director for one of Ontario's share capital social clubs, you're a part of a unique group. These clubs take the form of golf, tennis, and various other types of social clubs and have a rich history, sometimes dating back many decades. Share capital social clubs, like many other organizations, are subject to the changes brought about by the transition to Ontario's Not-for-Profit Corporations Act, 2010 ("ONCA"). Unlike non-share capital organizations though, share capital social clubs must take action for their organization to continue. This insight briefly reviews developments that require your attention.
A new era under ONCA
ONCA was proclaimed into law on Oct. 19, 2021, ushering in significant changes for social clubs in Ontario. Non-share capital social clubs will transition and continue automatically under ONCA like most other Ontario-based charities and not-for-profits. While this process is automatic, it may still be prudent for these non-share capital organizations to review their constating documents to ensure ONCA compliance before Oct. 18, 2024. For information about this, see our recent article.
Share capital social clubs must actively seek continuance
Share capital social clubs that currently exist under the Ontario Corporations Act ("OCA") will not automatically transition under ONCA like their non-share capital counterparts. Instead, they must actively seek continuance under one of three possible Ontario statutes:
- as a corporation without share capital under the ONCA;
- as a co-operative corporation under the Ontario Co-operative Corporations Act; or
- as a for-profit corporation under the Ontario Business Corporations Act.
As part of the transition from the OCA to ONCA, there is a five-year period granted to share capital organizations to seek continuance. This five-year transition period expires on Oct. 19, 2026, and failure to act before then means your club could be automatically dissolved. While dissolved clubs will be given a chance to revive and continue under one of the applicable acts for 25 years after the initial dissolution, acting now will ensure your club can continue to operate without interruption.
Preparing for change
To ensure a smooth transition for your club, you will need to review your corporate structure and share arrangements. You will likely need to make adjustments to your governing documents, which will require shareholder meetings and special resolutions. Making the decision that is best for your club will depend on your club's goals and various tax considerations. This decision impacts how your club will be governed in the future, and so should be carefully considered.
Don't delay! October 2026 may seem far away now, but this transition may take longer than you think. The structural changes you will have to make may be significant, and shareholder approval will be required.
Read the original article on GowlingWLG.com
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.
