October 19, 2021, marked the long-awaited coming into force of the Ontario Not-for-Profit Corporations Act, 2010 (the "ONCA"), over ten years after it received Royal Assent in 2010. This proclamation initiated a three-year transition period for charities and not-for-profit corporations subject to the ONCA to make any necessary changes to their governing documents to bring them into conformity with the ONCA.
October 19, 2024, marked the end of that three-year period. If your corporation has not yet reviewed its governing documents for compliance, this article is for you. Below, we explain the impact of the ONCA and offer guidance on how to bring your organization into compliance.
What does this mean for your organization?
Now that the three-year transition deadline has passed, any provisions in a corporation's governing documents (e.g., Letters Patent, By-laws, Special Resolutions) that do not conform with the ONCA are automatically deemed to have been amended to bring them into compliance.
There are no penalties for missing this deadline. This differs from when the new Canada Not-for-Profit Corporations Act (the "CNCA") came into force, where corporations could face dissolution if they failed to continue under the CNCA by the deadline. However, continuing to operate under governing documents that are inconsistent with the ONCA may lead to confusion and could result in the corporation unintentionally acting in contravention of the ONCA. Therefore, we recommend that non-profits undergo their ONCA transition as soon as possible.
ONCA Transition Process
To complete the transition, corporations must take the following steps:
- Prepare Articles of Amendment
The corporation should file Articles of Amendment, which will amend the corporation's Letters Patent and/or Articles of Incorporation to conform with the ONCA.
Under the ONCA, certain information must be included in the Articles rather than in the By-laws. Examples of such required information include provisions regarding the number of Directors, the different Membership classes (if applicable), Members' voting rights, and the distribution of the corporation's remaining property upon wind-up or dissolution.
Charities are subject to additional requirements from the Public Guardian and Trustee of Ontario. A charity's Articles must also contain provisions regarding limitations on the charity's commercial purposes, obligations under the Charities Accounting Act and the Trustee Act, a prohibition on remuneration for Directors, and more restrictive obligations for the distribution of the corporation's remaining property upon wind-up or dissolution.
The Articles of Amendment merely amend the corporation's Letters Patent and Articles of Incorporation; they do not replace them. As a result, the Articles of Amendment must be read alongside the corporation's Letters Patent or Articles of Incorporation.
If you prefer your corporation's articles to be contained in a single document, the corporation can request Restated Articles of Incorporation after the Articles of Amendment have been certified by the Ontario Ministry of Public and Business Service Delivery and Procurement. The Restated Articles will consolidate the corporation's Letters Patent and Articles into one document.
- Prepare By-laws
The corporation should ensure that its By-laws conform with the ONCA. While the previous Ontario Corporations Act contained relatively little guidance on what must be included in a corporation's By-laws, the ONCA contains detailed governance provisions that generally apply by default in the absence of By-laws to the contrary.
Below are some key questions and considerations to keep in mind when reviewing your corporation's By-laws.
Director and Officer Provisions
- Should Directors be required to be Members of the corporation?
- Does the term of office for Directors need to be changed? (Note that under the ONCA, the maximum term is four years)
- Do existing provisions for Directors' meetings need to be changed?
- Should you revise any provision concerning indemnification and insurance?
- Should you revise any provisions relating to ex officio Directors (i.e., people who automatically become Directors because they hold a particular office, such as being a Director of another organization)?
- Should you revise the conflict of interest provisions for Directors?
- Should any changes be made to the corporation's current governance structure or officer positions?
Member Provisions
- Does the number of classes or groups of Members match what was set out under your Articles of Amendment?
- Should you change the qualifications for Membership?
- Do disciplinary provisions need to be amended in light of new rights given to Members under the ONCA?
- Does the minimum notice period for calling Members' meetings need to be changed?
- Have you provided a specific procedure for Members to request a copy of the financial statements before the Annual Meeting of Members?
- Should alternative voting methods be added (e.g., absentee voting by mail, telephone or computer)?
Borrowing Powers
- Should any existing borrowing powers be amended or deleted? Unless the Articles or By-laws provide otherwise, the ONCA gives Directors the power to borrow money without member authorization. This is different from the previous Ontario Corporations Act, where the By-laws had to specifically provide for a power to borrow.
- Approve the Articles and By-laws at Board and Members' Meetings (or written Resolutions in lieu thereof)
Both the Articles of Amendment and By-law revisions must first be approved by the Board of Directors and then by the Membership of the corporation. This can be done either at a meeting (such as an Annual Meeting or a Special Meeting called for the purpose of approving the Articles and By-Laws) or through written Resolutions of the Members and Directors.
If you choose to proceed with getting approval of the documents at a meeting, ensure compliance with the applicable notice and quorum requirements. The ONCA provides that notice of a Directors' meeting may be on any notice that the By-laws require; therefore, notice must be in accordance with the corporation's current By-laws. The ONCA requires that notice of a Members' Meeting must be given to each Member entitled to receive it, as well as to each Director and the corporation's auditor, no fewer than 10 days and no more than 50 days prior to the meeting. The Resolution approving the Articles must be passed by at least two-thirds of the Members present at the meeting (with a quorum of at least a majority of Members being present) and entitled to vote.
- File required documents with the Ontario Ministry
Once the Articles of Amendment and By-laws have been approved by the Directors and Members, the documents can be signed, and the Articles must be filed with the Ontario Ministry of Public and Business Service Delivery and Procurement. You will receive a Certificate of Amendment from the Ministry once the Articles have been endorsed.
- File documents with Canada Revenue Agency (Charities Only)
The Canada Revenue Agency requires up-to-date copies of a charity's governance documents, such as the By-law and Articles of the corporation. If your corporation is a registered charity, the certified Articles of Amendment and fully executed By-laws should be sent to the Canada Revenue Agency to update its records.
Conclusion
Missed the transition deadline? We recommend that you complete these steps as soon as possible to ensure your corporation complies with the ONCA.
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.
