The provincial Ontario Not-for-Profit Corporations Act (ONCA) has received Royal Assent and is expected to come into force on January 1st, 2014. At that time, PSOs in Ontario (and many incorporated local associations and sport clubs) will have three years to transition from the current Corporations Act to the new ONCA. More information should be forthcoming about this new legislation and some details are already posted on the Ontario Ministry of Consumer Services website.
After consulting with the not-for-profit sector, the Ministry recently decided to extend the deadline (to January 1st 2014) and has started to issue new resources (including a draft default By-law) on its website.
The provincial legislation is different than the federal legislation. Ontario PSOs may be affected by changes in their NSOs’ governance structures, due to NSOs’ compliance with the federal NFP Act – but Ontario PSOs will not need to make exactly the same governance or bylaws changes as their federal counterparts. Some changes will still be required, however, depending on the PSO’s current bylaws and governance structure.
Here is a brief list of some of the important issues that we have identified:
- Type of Corporation determines compliance path. Three types of not-for-profit organizations in Ontario will each need to comply with the legislation differently. The three types are: Charitable Public Benefit, Non-Charitable Public Benefit, and Non-Public Benefit.
- Audit may not be necessary. Under certain circumstances, depending on revenue, organizations may not be required to have a public auditor annually review the organization’s financial statements.
- Members’ rights expanded. As with the Federal NFP Act, non-voting members will have the right to vote on ‘fundamental changes’ that affect their rights. There will also be more remedies available for members if it is believed that directors are not acting in the best interests of the organization.
- Proxies are mandatory. Currently, proxy votes at annual meetings are not necessary. Under the new legislation, proxies will not only be allowed – they will be mandatory.
- Directors are better protected but have more responsibilities. Directors will have a higher duty of care and greater responsibilities, but will also be better protected from personal liability. The legislation also includes procedures for identifying conflict of interest.
- Past-presidents are allowed. Unlike the Federal NFP Act, ex-officio directors (which includes past presidents) are allowed under the Ontario NFP Act.
Many organizations will require a careful plan of changes to membership classes and board structures, and this will require member education, engagement, and approval. Even though the Ontario NFP Act is not yet in force, it would be sensible to begin the conversation for transition as soon as possible given the many local incorporated organizations that may need to prepare as well.
Feel free to contact us at the Sport Law & Strategy Group to help your organization with the transition.
Most of our writings (below) and resources (on the sidebar) are related to the Federal NFP Act which came into force in October 2011. There are still lessons that PSOs can learn from the federal equivalent and we expect to be writing about the specifics of the Ontario Act closer to the date of its enforcement later this year.
- Ontario NFP Act to come into force in July 2013 (September 2012)
- Are there problems with the Ontario Not-For-Profit Act? (September 2012)
- Why the new federal NFP Act is important to PSOs (February 2012)
- Don’t Overlook Some Financial Impacts of the NFP Act (February 2012)
- Wait and Hurry Up! New Corporations Act to Take Effect October 17, 2011 (October 2011)
- Is the New Federal Corporations Legislation on your Radar? (June 2011)
- New Corporations Act Creates Opportunities for NSOs (April 2011)
- Interesting Snapshot of NSO Board Structures (March 2011)
- Some Thoughts on Governance Reform (January 2011)
- Why and When You Are Required to Re-Incorporate Your Organization (December 2010)
- NPCA is on the Way (June 2010)