Download - Canada Not-for-Profit Corporations Act
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Canada Not‐for‐Profit Corporations Act Canadian Chamber of Commerce
Industry Association Business Roundtable
November 21, 2012
Presented by: Thomas A. Houston and Margot Patterson, Fraser Milner Casgrain LLP
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Overview
The Canada Not-for-Profit Corporations Act and what it means for Associations
Process: a suggested transition guide
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1. The CNCA – what it is, what it does
• A new framework for the incorporation and governance of Associations and other federal not-for-profits
• A comprehensive rule book, modeled on the Canada Business Corporations Act, which includes much of the detail previously required in the by-laws
• Replaces Part II of the Canada Corporations Act (1917)
• Entered into force October 17, 2011
• Gives Associations incorporated under Part II of the CCA until October 17, 2014 to transition to the CNCA to avoid dissolution
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The CNCA – what it means for Associations
1. Enhanced Members’ Rights
2. Fundamental Changes
3. Financial Accounting and Disclosure: Soliciting and Non-Soliciting Corporations
4. Directors’ Duties
5. Elimination of Ex Officio Directors
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Enhanced Members’ Rights
• Right of members with 5% of votes to requisition a meeting
• Right of voting members to submit notice of a proposal of a matter to be raised at a members’ meeting
• Class voting, including: – right of members of a class to special resolution vote
– right of non‐voting members to vote separately from voting members on matters that impact their rights
• Consider “eliminating” non-voting members
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Enhanced Members’ Rights
• Unanimous member agreement (UMA):
– Non-soliciting corporations only
– UMA restricts, in whole or in part, the powers of the directors to manage, or supervise the activities and affairs of the corporation
– Those given powers under UMA have all the rights, powers, duties and liabilities of a director of the corporation
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Enhanced Members’ Rights
• Remedies to enforce members’ rights:
– court‐ordered investigations (to review alleged wrongdoing)
– compliance orders (e.g. to share information with members)
– “business‐style” derivative action and oppression remedies
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Fundamental Changes
• Fundamental changes require approval by special resolution (2/3rd member vote)
• Fundamental changes to Articles or by-laws include: – name of the corporation – corporation’s activities – Corporation’s statement of purpose – conditions of membership or rights of any class/group of members – means of giving notice of a members’ meeting to voting members
• Certain fundamental changes affecting a class of members also require a
special resolution of that class – e.g. reclassifying or canceling class, changing membership conditions
• A director or voting member may propose a fundamental change
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Financial Accounting & Disclosure
Soliciting or Non‐Soliciting Corporation?
• “Soliciting corporation” – receives more than $10,000 in a financial year, in the form of:
– third party donations, government grants, financial assistance, or donations from another soliciting corporation
• “Soliciting corporation” status lasts for three years
• “Non‐soliciting corporation” ≠ soliciting corporation
• Level of corporate gross revenues relevant to review and reporting
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Financial Accounting & Disclosure
Corporation Type / Revenues
Soliciting corporation < $50,000
Non‐soliciting corporation < $1M
Soliciting corporation between $50,000 and $250,000
Soliciting corporation > $250,000
Non‐soliciting corporation > $1M
Defaults, Options for Financial Review
Members may unanimously vote not to appoint a public accountant; can have its financial statements reviewed or audited.
Must have a financial review by a public accountant; can have its financial statements reviewed or audited.
Must have a financial review by a public accountant; must have its financial statements audited.
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Directors’ Duties
• Directors are subject to the same duty and standard of care as directors of business corporations:
an explicit duty to act honestly and in good faith,
in the best interests of the corporation,
and to exercise the care, diligence and skill of
a reasonably prudent person in similar circumstances
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Elimination of Ex Officio Directors
• CNCA does not permit ex officio directors
• Does your Association Board include ex officio directors representing: regions? industry sectors? other?
• Work-around: – create a class of member with the right to appoint a single
director for that constituency (e.g. “Ontario” or “manufacturing”)
– however - consider class rights
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2. Process: A suggested transition guide
1. Designate a Committee to work with Management and Legal Counsel
• Governance, Executive, Ad Hoc
2. Review current Letters Patent and By-laws
• Review objects in Letters Patent to determine if they remain current
• Identify by-law provisions which may have been problematic in the past
• Consider adding a provision to require nominations for directors to be submitted prior to AGM
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Process: A suggested transition guide
3. In determining the best approach to revising your by-laws, consider the following questions:
• Has the Association recently undergone a governance review? If not, good opportunity to do so
• Does the Association refer to its by-laws as a “rule book”?
• How complex are the Association’s corporate governance structure and processes?
4. Choose your option:
• Make only the minimum necessary changes to adapt existing by-law to CNCA
• Adopt a short by-law, addressing only the few provisions that must be included
• Adopt a comprehensive by-law, modeled on CNCA, to act as “rule book”
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Process: A brief transition guide
1. Prepare Articles of Continuance (transition)
2. Prepare revised by‐laws
3. Obtain Board and Member approval
4. File with Industry Canada • the Articles of Continuance (transition)
• Registered Office Address
• “First” Board of Directors
• amended by‐laws (approval of Industry Canada not required)
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Ongoing Corporate Obligations
1. Elections
• Minimum of 1 Director (non-soliciting corporation)
• Minimum of 3 Directors (soliciting corporation), 2 of whom must not be officers or employees of the corporation
• Directors can elect up to 1/3 of Board after AGM (if articles provide)
2. Meetings
• Meetings of Directors or Members can now be conducted by unanimous written resolution
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Ongoing Corporate Obligations
3. Reporting to Industry Canada
• New, simpler reporting: simply file copies of by‐laws, no review/approval process
• Key ongoing filing requirements: – annual return
– changes in directors and registered office (15 days)
– articles (and amendments)
– by‐laws (and amendments)
– financial statements and accountant’s report (soliciting corporations)
Thank You. Questions? Fraser Milner Casgrain LLP Thomas A. Houston (613) 783-9611 [email protected] Margot Patterson (613) 783-9693 [email protected]
