By Sport Law & Strategy Group
It’s been nearly a year since we dedicated a blogpost to the Ontario Not-For-Profit Corporations Act (ONCA). During that time the implementation date of the ONCA has been delayed twice and new details have been revealed about what type of changes Ontario corporations will need to make in order to comply with the legislation.
The broad intention of the ONCA is to ensure greater transparency within organizations and require organizations to have more accountability to their members. All non-for-profit Ontario corporations will be subject to the new legislation and must transition to compliance within three years of the law coming into force. Amendments to the ONCA are currently being debated in the Ontario legislature and, if those amendments are passed, the ONCA should come into effect in early 2014.
Given that there is a three-year transition period after the law comes into effect, it may seem like sport organizations have a long time to become compliant. It is true that some organizations will be able to transition and get adjusted quickly to the new rules. However other organizations will have more work to do – and more members to inform – and should begin the transition process early. We are aware of some proactive sport organizations that have even started preparing themselves already!
The ONCA is still yet to be fully formed and the legislation should be finalized in the fall of 2013. But here are some of the expected features:
Proxies. The ONCA requires corporations to permit proxy voting or another voting system in place of proxy voting (such as absentee voting) with the goal of encouraging more members to vote.
Commercial Activities. Organizations will be permitted to engage in commercial activities, which may still be subject to the Income Tax Act, if those activities are in support of the corporation’s not-for-profit objectives.
Directors. Directors may only serve terms of four years without re-election. They will also be required to identify and report conflicts of interest and will be required to act honestly, with a duty of care, and in the best interests of the corporation. Directors will also be empowered to exclude member proposals if the proposal does not significantly deal with the activities of the corporation or if the proposal is a personal claim or complaint.
Members. Will be empowered to act to remove Directors in certain circumstances and will have greater access to financial records – at least 21 days before the annual meeting.
Audit. Some corporations will be permitted to have a simpler process for reviewing the corporation’s financial records instead of requiring a full audit, while others will be required to complete more onerous requirements, such as a review engagement or full audit.
Voting Rights. If there is more than one class of membership the classes of members must be described in the articles of the corporation – not just the bylaws. It is possible for corporations to have both voting and non-voting members, but non-voting members will be given voting rights when the membership votes on a ‘fundamental change’ (as defined in the ONCA) to the organization.
The ONCA will also make an important distinction between not-for-profit corporations that are ‘public benefit corporations’. These are organizations that receive more than $10,000 a year in donations or gifts, or in grants or financial assistance from a government agency. Public benefit corporations will have different audit and board composition requirements.
Brand new not-for-profit corporations will be required to incorporate under the ONCA as soon as it comes into force – there will be no transition period. Further, special ‘share capital social clubs’ (some tennis, golf, or country clubs) will have a transition period of five years and will be required to incorporate under a different legislation other than the ONCA.
This post is only a general overview of the ONCA as it currently exists. There are other provisions in the ONCA that are not listed and there may be more to come once the ONCA is in force. We will continue to post regular updates on the status of the ONCA and please feel free to email us if you have any questions.
Steve Indig – SJI@sportlaw.ca
LeeAnn Cupidio – LLC@sportlaw.ca