Ontario Not-For-Profit Corporation Act Introduced

by Arthur Drache
May 2010

               About the same time as the federal legislation (C-4) moves closer to implementation[1], Ontario introduced its version of a new not-for-profit corporation regime after several years of study and consultation.

                The massive (242 clauses) legislation has been designated Bill C-65 and is formally called the Not-for-Profit Corporations Act 2010.[2] Like the federal counterpart, the procedure to set up a corporation will be streamlined and simplified.

·         Simplifying the incorporation process. The current incorporation process is complex and lengthy, normally taking six to eight weeks to incorporate. Under the new Act, incorporation could take only a few days.

·         Enhancing corporate governance and accountability by providing a statutory duty of care for directors; and, at the same time, providing specific protection from liability for directors.

·         Allowing not-for-profit corporations to engage in commercial activities where the revenues are reinvested in the corporation's not-for-profit purposes.

·         Providing for a less expensive review engagement or audit exemption in appropriate circumstances.

·         Harmonizing with other Canadian jurisdictions that have modern legislation, such as the Canada Not-for-Profit Corporations Act which received Royal Assent on June 23, 2009 and the Saskatchewan Non-profit Corporations Act, 1995.

·         Enhancing member democracy by expanding member remedies to ensure directors are acting in the corporation's best interests.

·         Increasing transparency for financial information, access to records and when disciplinary action is contemplated against a member.

·         Providing directors and officers better protection from personal liability.

Amongst charity lawyers the general view is that this legislation is a much more rational effort at corporate reform than is the federal version. But it is also clear that the process of implementation will be lengthy and that there will be opportunities to critique the legislation in committee before passage. Whether the new Act will be effective in its objectives remains to be seen.

But for those in Ontario at least, there will be some "voting by action" as many Ontario charities will have the option of choosing federal or Ontario incorporation and it remains to be seen which regime is seen as more attractive.

Where an organization has already been incorporated as a non-share in Ontario, there is a three year transition period.

"Amendment of letters patent, etc., to conform to Act

206. (1) A corporation may, by articles of amendment, amend any provision in its letters patent, supplementary letters patent, by-laws or special resolution to bring the provision into conformity with this Act.

Deemed amendment

(2) Any provision in letters patent, supplementary letters patent, by-laws or any special resolution of a corporation that was valid immediately before the day this section comes into force and that has not been amended to bring it into conformity with this Act is deemed, on the third anniversary of the day this section comes into force, to be amended to the extent necessary to bring the provision into conformity with this Act.

Restated articles

(3) A corporation shall not restate its articles under section 108 unless the articles of the corporation are in conformity with this Act and, if the articles have been deemed to be amended under subsection (2), the corporation has amended the provisions in its articles in accordance with subsection (1). "

                As with the federal legislation, we anticipate that there might well be a year or so before the legislation is proclaimed as law but now is the time for Ontario non-profit corporations to start contemplating what their next moves will be.