The Ontario Not-For-Profit Corporations Act, 2010, establishes the corporate structure that determines how nonprofit organizations are governed, and their accountability to key stakeholders. It is the framework that influences how we are able to meet our missions, and go about the day-to-day decision-making in organizations across the sector. It’s not something we can afford to ignore.
For the past fifty years our sector has remained under the Ontario Corporations Act as others moved to new legislation (e.g. the Ontario Business Corporations Act). Our legislation, being 50 years old, had basic and in many instances antiquated legislation to govern Boards of Directors, member rights, powers of the corporation, etc. While sometimes old fashioned, the legislation was flexible enough to allow the sector to adapt and change within it. Over time we have evolved a unique corporate structure that suited the sector and had the flexibility the sector needed.
The new legislation for the sector has borrowed heavily from legislation for business corporations and while many of the provisions in the new Act are suitable for the sector, there are some specific instances where the sector has evolved sector-specific practices that are not accommodated.
ONN has worked to get sector voices heard on this issue, and has proposed amendments to the Ontario Not-for-Profit Corporations Act to meet the needs of the sector and public interest.
Unfortunately, in its current form, the Act does not provide adequately for the sector’s accountability to communities and undermines the governance capacity of volunteer Boards of Directors. In sum, it fails to support longstanding and effective governance practices that have evolved in the sector. Key changes we need to see include:
• Members should not be allowed to pass binding resolutions on Boards of Directors. In all other corporate legislation, member resolutions are advisory and non-binding on Boards of Directors. Binding resolutions from members will place many Boards in difficult positions as member resolutions may be at odds with an organization’s contracts and agreements with funders and community partners. Legislation allowing binding resolutions from members will be a huge disincentive to people considering serving on voluntary Boards.
• A clear and permanent definition of public benefit corporation based on organizational purpose (not revenue source). This will ensure organizations working for public benefit have an ongoing accountability relationship with their communities and to differentiate them from member-focused nonprofits existing to serve their membership. These two classes of organizations have different obligations and needs.
• A permanent asset lock (non-distribution constraint on dissolution) for nonprofit organizations providing public benefit, to ensure assets remain in the public domain for the long-term.
• Make non-voting members non-voting. The Act currently gives non-voting members a vote on key corporate issues. Our sector’s longstanding practices should be respected and the sector should not have to face costly and complex restructuring to accommodate a provision imported from the business sector, where non-voting members have a financial interest in the corporation. Non-voting members in the non-profit sector have no financial interest, indeed in the sports sector all the participating children (over 3 million) are non-voting members, and in other sectors non-voting members are corporations, other community organizations or for example magazine subscribers that wish to support and affiliate with the nonprofit.