Ontario Not for Profit
Corporations Act
Presentation by Steven Indig
Sport Law & Strategy Group
Providing strategic insight to the Canadian sport
community through professional services in these
areas:
– Legal Solutions
– Planning & Governance
– Strategic Communications
SOME OF OUR CLIENTS
NFP Acts
• Canada NFP Act received Royal Assent in June
2009, Regulations published February 2011 and
came into force October 17, 2011 – 3 years to
transition
• Ontario NFP Act received Royal Assent on
October 25, 2010 and is expected to come into
force no earlier than early 2015.
Rationale
• Original version enacted in 1907
• Simplify the incorporation
process (electronic)
• Improve corporate governance
and accountability by strict rules
• Provide more rights for members
– Required Audit Requirements
– Non-voting members may have voting rights
Benefits under New Act
• Can waive appointment of auditor and audit under
certain circumstances
• Default by-laws available*
• Allows directors to pass resolutions in lieu of holding inperson meetings (i.e.: by written confirmation or
conference call)
• No immediate action needed – 3 year grace period*
Transition
• Existing not-for-profit corporations:
– Will have three years after the new Act comes into
force to update articles and amend by-laws to
conform
– At the end of the three years, these documents will
be deemed to be amended to conform with the
requirements of the new Act
– New Corporations subject to Default Bylaws
•
If Corporation does not pass an organizational by-law within 60 days after the date of
incorporation.
Types of Ontario NFP Corporations
• Charitable Public Benefit Corporation, incl. religious
(Charitable PBC)
• Non-Charitable Public Benefit Corporations (“NonCharitable PBC”) – receive >10k/year from public
resources
– Government grants (federal or provincial), and
– Donations from non-members, directors, officers or
employees)
• Non-Public Benefit Corporations (“Non-PBC”) –
everyone else
Audit Requirements
Type of Corporation
Amount of Revenue
Type of Financial Review
Public Benefit Corporation
$ 100,000 or less
Waive*
More than $100,000 but Review engagement*
less than $500,000
$500,000 or more
Non-Public Benefit Corporation $500,000 or less
More than $500,000
Audit
Waive*
Review engagement*
*Approval to waive an audit or to waive both an audit and
review engagement requires an extraordinary resolution.
Membership Issues
•
•
One vote per member unless the bylaws state otherwise
Power to discipline or terminate a member requires the
directors, members or any committee of directors or member
to discipline or terminate
–
–
•
•
•
Minimum 15 days notice which must contain reasons and explain that the
member has the right to be heard.
A right to a hearing (orally or in writing)
Notice of AGM 10 – 50 Days
Quorum is a majority of members unless stated otherwise in
the Bylaws (Meeting may continue if quorum is not
maintained)
Members may requisition a meeting (10%)
Members’ Rights Expanded
•
Vote by proxy (mandatory rule) unless mail in voting or alternate
voting accepted (Proxy holders need not be members)
• Presentation of Financial Statements
– Director must present before the members at every AGM
• The Financial Statements approved by the Directors
• The Report of the Auditor
• Copies must be provided no less than 21 days before the
AGM.
• Non-voting Members may vote on ‘fundamental changes’ that
affect their rights.
FUNDAMENTAL CHANGES
A special resolution of the members and each class for the
following:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
change the corporation’s name;
add, change or remove any restriction on the activities that the corporation may carry;
create a new class or group of members;
change a condition required for being a member;
change the designation of any class or group of members or add, change or remove any rights
or conditions of any such class or group;
divide any class or group of members into two or more classes or groups;
add, change or remove a provision respecting the transfer of a membership;
increase or decrease the number of, or the minimum or maximum number of, directors;
change the purposes of the corporation;
change the manner of giving notice to members;
change the method of voting by members not in attendance at a meeting
Membership Complexities
• Consider whether the group in question really
need to be members (or have the power to
veto proposed changes!)
• Consider making changes before the new Act
comes into effect
A corporation that wishes to maximize its future
flexibility will best avoid creating more than one class
of members
Corporate Records
Corporate records to be kept:
–
–
–
–
–
–
–
–
–
the articles and by-laws
the minutes of meetings of the members and of any committee of members;
the resolutions of the members and of any committee of members;
the minutes of meetings of the directors and of any committee of directors;
the resolutions of the directors and of any committee of directors;
a register of directors;
a register of officers;
a register of members; and
accounting records adequate to enable the directors to ascertain the financial
position of the corporation with reasonable accuracy on a quarterly basis.
– Red means members access
Directors
• The following will preclude a person from being a Director:
– A person who is not an individual.
– A person who is under 18 years old.
– A person who has been found under the Substitute Decisions Act, 1992 or under the
Mental Health Act to be incapable of managing property.
– A person who has been found to be incapable by any court in Canada or elsewhere.
– A person who has the status of bankrupt.
• Non-member directors
– A director of a corporation is not required to be a member of the corporation unless
the by-laws provide otherwise.
Directors
•
•
•
•
•
•
•
All corporations must have minimum of 3
Maximum term is 4 years (if not stated term 1 – year)
Corporation may set a range of Directors determined by
Special Resolution
PBC: no more than 1/3 may be employees
Sets out a statutory duty of care (higher standard) and
responsibilities of directors
Better protected from personal liability - due diligence
defence and statutory indemnification/insurance
provisions
Includes procedures for Conflict of Interest
Directors
• Removal of directors
–
–
–
–
Ordinary Resolution of Members
If elected by a Class or Group – removal by that Class/Group
If ex-officio, removal from the position.
Maximum term of 4 years and then subject to re-election.
• Liability to Wages
– Six Months Wages
– Vacation pay of not more than 12 months.
• Standard of Care
– Act honestly and in good faith with a view of the best interests of the
corporation.
– Exercise the care, diligence and skill or a prudent person in similar
circumstance
Draft Bylaws
• Bylaws – If the Corporation does not pass bylaws within 60 days
after the date of incorporation, the default bylaws apply.
• Ex Officio - means by virtue of the office and not necessarily nonvoting;
• Execution of Contracts – Requires either the president or vicepresident and the secretary; or two (2) directors at large or any
other person by resolution. Upon signature, agreements are
binding. (Signing authority not dictated by the Act).
• Board Composition – Defined the minimum number required as
three (3).
• Term – Default period is one (1) year.
Draft Bylaws - Directors
• Vacancy of Director – Upon a resolution passed by a majority of
Members.
• Filling a Vacancy – If because of member removal, the members
will fill the vacancy by majority vote. If any other reason, the
Board my fill the vacancy.
• Remuneration of Directors – Directors will serve without
remuneration.
• Notice – 7 days prior to meeting unless all Directors consent. Act
allows for flexibility on Notice requirements.
• Quorum – Majority of Directors
Draft Bylaws - Directors
• Vacancy of Director – Upon a resolution passed by a majority of
Members.
• Voting – Each Director has one vote and Chair will have a 2nd in
the case of a tie (Contradicts Roberts Rules).
• Telephone Participation – Legal if all Directors consent.
• Written Resolutions – Upon 100% voting.
• Auditor – Appointed by Members to conduct a review
engagement. The Auditor may not be a Director, Officer or
Employee and must be licensed.
• Indemnity – Must comply with the Act and exercise the
reasonable care required by the Act.
Draft Bylaws - Members
• Members – Members are those approved by Board Resolution or
named in the Articles.
• Discipline – Required 30 days notice; Conduct to be determined
by the Board; Notice to contain reasons for discipline; Member
entitled to provide written submission (Act allows discretion as to
discipline process but must be at least 15 days notice).
• Annual Meeting – Requires not less than 10 and not more that 50
days written notice with a copy of the financial statements and
auditors report. Notice of each meeting must remind the Member
of the right to vote by proxy.
• New Business – Requires to be provided to
Secretary prior to the notice.
Draft Bylaws - Members
• Special Meetings – Upon request of the Board
or upon one-tenth of the Members.
• Quorum – Majority of voting members whether present or by
proxy. (Act allows flexibility with respect Quorum but should be a
fixed number or percentage.) If a quorum is present at the
opening, the members may proceed even if quorum is no longer
present, unless the bylaws state otherwise.
• Voting – Each member entitled to one (1) vote.
• Notice - By telephone, delivered personally, or sent by prepaid
mail, facsimile, email or other electronic means.
Recommendations
• Compliance will require a careful plan of changes to
membership and board structures, all of which
require member engagement and approval.
• 3 years seems like a long time but we think its
important to start now.
• Some orgs. may take advantage and also change
their legal name (NUANS search)
• Ensure by-laws do not conflict with the way your
organization operates or the Act.
Preliminary Steps
•
•
•
•
Gather and review current governance structure
and practices;
Review key features of ONCA, determine what type
of corporation you are and what rules apply;
Compare ONCA Rules with current governance
structure to determine whether changes should be
made prior to continuance;
Consider changes affecting membership rights,
timing needed for approval, and potential conflict
with default by-laws
BYLAW OVERVIEW
•
•
•
Registered Office
Membership
– Membership Categories
– Qualifications of Membership
– Admission of Members
– Membership Fees
– Withdrawal and Termination of
Membership
– Members in Good Standing
Governance
– Directors
– Powers of the Board
– Discipline of Members
– Election and Appointment of Directors
• Eligibility and Nomination
• Decision
• Terms
– Resignation and Removal of Directors
– Filling a Vacancy on the Board
– Meetings of the Board
• Notice
• Quorum
•
•
•
•
•
•
•
• Voting
• Electronic Meetings
– Officers
– Committees
– Remuneration
– Conflict of Interest
Meetings of Members
– Location and Date
– Notice
– New Business
– Quorum
– Voting and Proxies
Finance and Management
– Fiscal Year
– Auditor
– Books and Records
– Signing Authority
Amendment of Bylaws
Notice
Dissolution
Indemnification
Adoption
Current Board Composition
GENERAL STRUCTURE.
• The affairs of the Corporation shall be managed by a
Board of twelve (12) Directors each of whom at the
time of his election or appointment or within ten
(10) days thereafter and throughout his term of
office shall be registered as a Member of the
Corporation
Proposed Board Composition
The Board will consist of the following:
a) Six (6) Regional Directors
b) Five (5) Directors-at-Large
c) One (1) Athlete Director
Current Member Composition
GENERAL STRUCTURE.
1.17.2 There shall be nine (9) classes of Membership in the
Corporation, namely:
Charter Members (6);
Registered Member (75)s;
Associate Registered Members (12000);
Registered Affiliate Members;
Ontario Ringette Associate Registered Affiliate Members;
Affiliate Members;
Associate Members;
Honorary Members; and
Life Members.
Proposed Member Composition
Registered Member – A ringette club
association that is registered as a member of
the Corporation and has agreed to abide by the
Corporation’s By-laws, policies, procedures,
rules and regulations.
For more information, visit:
http://www.sse.gov.on.ca/mcs/en/Pages/Not_For_
Profit.aspx
http://www.sportlaw.ca/nfp-act/ontario-act/
Steven Indig
647-348-3080
sji@sportlaw.ca
www.sportlaw.ca