Canada: Changes To The Ontario Not-For-Profit Corporations Act, 2010

On November 14^th, Bill 154 received Royal Assent. As noted in our previous newsletters, this omnibus bill made changes to the Corporations Act (Ontario), to social investment provisions in the Charities Accounting Act (Ontario), and other statutes. This newsletter will report on some of the more significant changes to the Not-For-Profit Corporations Act, 2010 ("ONCA"), none of which are in force today but will be when ONCA comes into force. As you may recall, ONCA was passed in 2010, but it will only come into force on a day to be named. The government has committed to giving at least two years' notice before ONCA will come into force. Assuming we do not hear anything from the government by the end of the 2017, then it is likely ONCA will come into force no earlier than June 2020.

Delay of Non-Voting Member Voting Rights

As previously reported, ONCA grants voting rights to members who would not have the right to vote on corporate decisions under the Corporations Act. Under ONCA, non-voting members will have the right to vote, including the right to a separate class vote, on some fundamental changes. These fundamental changes include: amendments to membership rights of a class or group; amalgamation; continuance to another jurisdiction; and the sale, lease or exchange of all or substantially all the property of the corporation.

Bill 154 delays the in force date for these rights to no earlier than the third anniversary of the day ONCA comes into force. Therefore, corporations that do not want their non-voting members to vote will now have the opportunity to change their membership structure within the first three years after ONCA comes into force.

Transition Rules

When ONCA is proclaimed, it will apply immediately to non-share capital corporations currently under the Corporations Act. However, the new transition provisions in Bill 154 provide that any provision in the corporation's governing documents that was valid immediately before ONCA comes into force that is not in conformity with this ONCA will continue to be valid for three years. These provisions will give corporations more time to amend their documents to comply with ONCA.

Where a corporation has not made the necessary changes after three years to move certain items from the by-laws into the articles, ONCA now provides that certain provisions will remain valid until the corporation comes into compliance. These provisions aim at giving the corporation certainty as to its members and directors and voting rights in order to allow the corporation to come into compliance.

Electronic Communication

ONCA is amended to allow for the filing, keeping and searching of documents in electronic format. The definition for "telephonic or electronic means" is expanded to allow for communication by new technologies without requiring changes to ONCA or its regulations.

The Director appointed under ONCA may also send a corporation notices by telephonic or electronic means.

Proxies

ONCA had provided that every member had the right to a proxy, unless the corporation provided an alternate means to vote by mail, telephone or electronically. ONCA is now amended to provide that a member can only vote by a proxyholder if permitted by a corporation's articles or by-laws. Further, a proxyholder need not be a member of the corporation, unless this is required by the articles or by-laws of the corporation. Bill 154 removes the requirement to provide a proxy form with the notice of a members meeting. These changes provide welcome flexibility to corporate structures.

Conflicting laws

ONCA previously provided that where a provision of ONCA conflicts with a law or regulation of another law relating to charitable corporations, that other law or regulation prevails. Bill 154 clarified that this rule also extends to rules and principles of common law or equity that conflict with ONCA provisions.

Bill 154 also added a provision that states ONCA does not apply to a corporation to the extent that it is inconsistent with the intent or purpose of another Act or a regulation that applies to the corporation.

Assets of Wind-up/Dissolution

On wind-up or dissolution where the corporation is a public benefit corporation, it had to give its assets to an Ontario corporation with similar purposes or to a government or government agency. This requirement has been amended by Bill 154 to allow a charitable corporation to give the assets to: a Canadian body corporate that is a registered charity under the Income Tax Act (Canada) with similar purposes to its own; the Crown in right of Ontario; the Crown in right of Canada; an agent of either of those Crowns; or a municipality in Canada. A non-charitable corporation that is a public benefit corporation can also give its assets to another public benefit corporation with similar purposes. This is an important change that recognizes Ontario corporations may give assets on wind-up to Canadian charities outside Ontario.

Documents May be Publicly Available

There is a new provision allowing the Director appointed under ONCA to publish or otherwise make available to the public: any notices or other documents sent by the Director; and any documents required by ONCA, its regulations or the Director to be sent to the Director.

Corporations Sole

Bill 154 amended ONCA so that it does not apply to corporations sole, except as prescribed under the regulations. A corporation sole is a special act corporation in which a person with a particular office, such as a Bishop, is named as a corporation.

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.