Though Ontario's Not-for Profit Corporations Act, 2010 ("ONCA") received Royal Assent over a decade ago, it was not until October 19, 2021, that the legislation finally came into force.
From that date, Ontario not-for-profit corporations ("NFPs") had three years to review, update and file their governing documents in accordance with ONCA. The end of this transition period is now fast approaching. All NFPs must comply with ONCA by October 18, 2024.
ONCA changed the not-for-profit landscape in Ontario significantly. See our previous article for more information. In short, NFPs should be taking these last few months to ensure they have reviewed their governance documents and implement any needed changes.
Risks of Non-Compliance
There are risks for an NFP if they fail to comply with ONCA by the October 18th deadline. For example, ONCA requires that any NFP with more than one membership class include the classes, their names, the conditions for joining, leaving and transferring between classes, and any voting rights (if they differ between the classes) in the articles. This is a change from the previous legislation which only required membership information to be included in an NFP's by-laws. As such, any NFP with multiple classes of members will need to file articles of amendment to comply ONCA.
Additionally, ONCA has created an entirely new category of NFP, a public benefit corporation ("PBC"). Under ONCA, all registered charities are a PBC, but an NFP can also be a PBC if it receives more than $10,000 in its previous financial year from public sources. ONCA imposes greater obligations on PBCs, especially with regard to their finances and what they can do with their assets upon dissolution. Some PBCs, regardless of their charitable status, may be required to have audited financial statements.
ONCA is largely structured as a default governance regime. As such, anything in an NFP's governance documents which are not compliant will be deemed to comply with ONCA and will default automatically to its provisions.
This has the potential to create a confusing situation for an NFP, where it is difficult to tell what the requirements are for each NFP. An NFP may have some provisions within its Articles and by-laws that are complaint with ONCA, which would continue to apply. However, they may also have several provisions which are not compliant, in which case ONCA's default provisions would now govern. This leaves the NFP in the difficult and uncomfortable position of having a jumbled mishmash of obligations. Directors and members may have trouble complying with their own corporate obligations, as it may be difficult to tell what those are.
Steps to Take
Unlike federal NFPs when the Canada Not-for-Profit Corporations Act came into effect, Ontario NFPs do not have to file Articles of Continuance. However, to avoid the above fate, it is recommended all NFPs review their governing legislation and take steps now to change them as needed. A detailed review of letters patent, any supplementary letters patent, by-laws, finances and other documents such as committee descriptions should be done.
Once the changes needed are determined and drafted, updates to an NFP's letters patent should be done through Articles of Amendment, filed with the Ontario Ministry. Changes to an NFPs by-laws must be made in accordance with the by-laws as they currently are, not as they are being changed.
Pallett Valo is happy to help you ensure your NFP is compliant with ONCA before the October 18 deadline.
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.