On May 14, 2015, Bill 24, the Societies Act (the "Act"), received Royal Assent. The new Act will repeal and replace the Society Act, which is the legislation that currently governs over 27,000 not for profit legal entities in British Columbia. While some sections of the new Act are now in force, the majority of the Act will come into force by regulation, which is expected to be within 18 months after Royal Assent.
The new Act is intended to enhance flexibility by providing societies with more internal governance options while maintaining fundamental accountability provisions.
Transition
Once the majority of the new Act is in force, societies will have two years to transition under the Act. To transition under the Act, a society must file with the registrar a transition application, consisting of the constitution, bylaws, statement of directors and registered office of the society. The transition can be an opportunity for existing societies to review and update their constitution and bylaws.
Significant Changes
Five significant changes of the new Act are as follows:
Member Funded vs. Publicly Funded. The new Act differentiates between "publicly funded" societies and "member funded" societies. A member funded society is funded primarily by its own members to carry on activities for the benefit of its members. Member funded societies are not charities and do not receive any significant public or government funding. Golf courses, sports clubs and professional organizations are examples of societies which are expected to be member funded. Student societies and hospital societies cannot be member funded societies
A publicly funded society is a charity or society that obtains funding from the public or government in excess of the threshold prescribed by regulation.
Member funded societies are subject to fewer accountability measures than publicly funded societies under the new Act. For example:
- A publicly funded society must have a minimum of 3 directors, one of whom is a BC resident. A member funded society is only required to have a minimum of 1 director, without any residency requirement;
- Upon dissolution, a publicly funded society may only distribute assets to a "qualified recipient" such as a registered charity or other asset locked entity. A member funded society may distribute assets to any person on dissolution;
- A publicly funded society must set out in its financial statements the remuneration of its directors and 10 most highly remunerated employees and contractors above the amount prescribed by regulation. Member funded societies are exempt from this requirement; and
- A majority of directors of a publicly funded society must not receive or be entitled to receive remuneration under contracts of employment or services other than remuneration for acting as a director. A member funded society is exempt from this requirement.
Electronic Filing System. The Act introduces an electronic filing system. The corporate registry would maintain a single database of societies and society bylaws. Pre-existing societies will need to consolidate existing bylaws and enter them into the electronic database as part of their transition to the new Act.
Unalterable Provisions. Under the current Society Act, the constitution of a society may include "unalterable" provisions. Unalterable provisions often deal with fundamental principles of membership and distribution of assets upon wind-up of the society. However, the use of unalterable provisions has been problematic as there is no procedure or remedy for reversing an unalterable provision. Under the new Act unalterable provisions are no longer permitted. When a pre-existing society transitions under the new Act, unalterable provisions must be moved from the constitution to the bylaws. These unalterable provisions will be flagged as unalterable, but under the new Act will be alterable.
Special Resolution. The new Act lowers the special resolution threshold from3/4 of votes cast by voting members to 2/3. This aligns with the definition of special resolution in the BC Business Corporations Act and is intended to give societies greater flexibility. The bylaws of a society can set a threshold greater than 2/3 for any action requiring a special resolution, except the threshold for removing a director from office.
Directors. Significant amendments pertaining to directors include the following:
- Ex-officio directors, being directors who become directors because of a particular attribute or position they have or hold, are specifically permitted;
- Directors must be 18 years of age, subject to certain exceptions in the regulations which allow for directors that are 16 or 17 years of age;
- Directors must expressly consent to act as a director;
- Directors may provide their residential address or another address that the director can ordinarily be physically served during business hours;
- Directors who vote or consent to a distribution contrary to the Act or bylaws will be jointly and severally liable; and
- Directors may not receive remuneration for acting as a director unless permitted in the bylaws.
We have only highlighted some of the changes brought on by the new Act and the list above is not exhaustive.
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.
