Movement on the Ontario Not-for-Profit Corporations Act!
Note: this announcement was published on September 19, 2017. For updates, visit our ONCA page.
New legislation introduced
On September 14, the Ontario government introduced Bill 154, Cutting Unnecessary Red Tape Act, 2017. The Bill proposes amendments to three important statutes affecting the nonprofit sector: The Ontario Corporations Act, the Ontario Not-for-Profit Corporations Act, 2010, and the Charities Accounting Act.
Bill 154 contains all the enabling legislation needed so the Ontario Not-for-Profit Corporations Act (ONCA) can be proclaimed. It also contains some important improvements to ONCA that ONN, charity law lawyers, and nonprofit organizations have been asking for. Collaboration in action!
Please note: This update is intended to give you an overview of the new legislation and how it may likely impact nonprofit organizations. Please consult your legal advisor and the Act in more detail to determine how your organization will be impacted by these provisions.
The sections of the ONCA regarding membership classes will not be proclaimed.
This supports the sector’s current voting practices. Non-voting members do not vote and if an organization has different categories of members, they vote together as members, not as different classes unless your by-laws state otherwise .
Proxies are optional and whom you can give a proxy to can be specified in by-laws.
The means each organization can decide if it wants proxies. If it has proxies but does not want non-member outsiders at meetings, an organization can restrict voting of proxies to members only.
Organizations can specify fewer than 21 days for distribution of financial statements before the annual meting.
This is important because it gives organizations more flexibility to schedule their annual general meetings depending on when statements are ready.
Other changes proposed include the ability of government to adjust the $10,000 revenue minimum required to qualify as a public benefit organization. Bill 154 clarifies the status of religious organizations under the Act, and enables the issuing of corporation numbers. ONN is also pleased that some grandfathering of important board resolutions, such as number of directors and classes of members, have been enabled to make continuance under the ONCA more streamlined.
What happens next?
Once Bill 154 is passed, it will be two more years before the ONCA is proclaimed into law and organizations have a further three-year implementation period to become complaint with the new requirements. After that, they are deemed to comply (meaning ONCA provisions will override noncompliant by-laws).
Ontario Corporations Act (OCA): the current corporate legislation that applies to nonprofits incorporated in Ontario
Bill 154 also contains some helpful changes to the sector’s current and antiquated legislation to make life easier for nonprofit organizations, as it adds some important modern components while we are waiting for ONCA to be proclaimed. Highlights include:
- A meeting of members may be held by telephonic or electronic means, plus electronic communications and records have been enabled for organizations under the OCA
- Corporations are given the capacity, rights, powers, and privileges of a natural person. This means that a corporation’s actions are valid even if the corporation acted contrary to its instrument of incorporation, its by-laws or the Act.
- A corporation may sell, lease, or exchange all or substantially all of its undertaking if authorized to do so by a special resolution.
- The duties and standard of care of the directors and officers are clearly outlined. The section also provides that no provision in a contract, instrument of incorporation, by-law, or resolution can relieve a director or officer from these duties or from liability for breach of the Act or regulations.
- Members may remove a director from office by majority vote, rather than two-thirds vote.
- The members may, by an extraordinary resolution (80%), decide not to appoint an auditor and not to have an audit if the corporation had annual revenue not exceeding $100,000.
- The by-laws of a corporation may provide that a person may be a director even though he or she is not a shareholder or member (requires consent in writing of the person to be a director).
Changes to Ontario Business Corporations Act
Changes have been made to allow business corporations to convert to cooperatives or nonprofit corporations. These provisions have been enabled in the ONCA and the OCA.
Change to Charities Accounting Act
Changes have been proposed to permit charities to make social investments to forward their purposes and receive a financial return.
At this stage, ONN is still reviewing these changes to better understand why they have been proposed, and how they fit with other legislation and regulation regarding charity investments.