On November 14, Bill 154 received Royal Assent in the Legislative Assembly of Ontario.

Among other things, Bill 154 affects legislation governing Ontario non‑profits and charities, namely, the Corporations Act (OCA), Not‑for‑Profit Corporations Act, 2010 (ONCA) and the Charities Accounting Act (CAA).

Changes to ONCA

ONCA was amended in various ways, including:

• a new definition, “electronic signature,” is added, which will enable the Ministry to specify method for signing documents other than by a physical signature;
• the definition of “telephonic and electronic means” is amended to allow for communication (i.e., sending notices, holding meetings) by new technologies;
• the definition of a “public benefit corporation” is changed so that a non‑charitable corporation will be a public benefit corporation if it receives more than $10,000 of specified funding in a financial year or another amount prescribed by regulation (“public benefit corporations” have stiffer requirements than non‑public benefit corporations);
• it is specified that ONCA does not apply to a corporation sole, unless if prescribed in the regulations (a “corporation sole” consists of only one member at a time, the corporate character being kept up by a succession of solitary members; examples include sovereign and ecclesiastical persons, such as bishops);
• corporations are specifically prohibited from carrying on activities or exercising powers that their articles of incorporation restrict them from carrying on or exercising;
• mandatory proxy voting for members is gone – with the amendment, proxy voting will be permitted only if the articles of incorporation or by‑laws allow it;
• because mandatory proxy voting is gone, so is the requirement that corporations send a proxy form to members along with notice of a members meeting;
• under ONCA, members of a corporation may vote on certain matters, whether or not their memberships carry the right to vote, and in some cases ONCA provides that members are to vote separately as a class or group; the amendments delay when these provisions come into force to day to be named by proclamation, and that day is to not to be earlier than three years after the date that ONCA comes into force;
• the provisions dealing with a public benefit corporation’s distribution of its property upon dissolution is changed to restrict the recipients of the property, in the case of a dissolving charitable corporation, to registered charities (with similar purposes) under the Income Tax Act (Canada), as well as all levels of government (and government agencies), and in the case of a public benefit corporation that is not charitable, to other public benefit corporations (with similar purposes), registered charities (with similar purposes), as well as all levels of government (and government agencies); and
• there is an expansion of the powers of the Minister responsible for ONCA to make regulations, and it will be mandatory to appoint a Director who will have a number of powers to administer the Act.

 

These amendments to ONCA, along with ONCA, will come into force on a day to be proclaimed by the government.

Changes to OCA

The OCA will cease to apply to not‑for‑profit corporations once ONCA comes into force.  But until then, several amendments to the OCA will be effective as of January 13, 2018, including two changes impacting OCA corporations.  First, the by‑laws of a corporation may permit that a non‑member can be a director of the corporation.  Currently, there is no way for non‑members to be directors of an OCA corporation.  The amendment permits greater flexibility in terms of who may be elected to the board of directors of an OCA corporation.

Second, it will be easier for smaller non‑profits to elect not to have an audit in respect of a financial year.  The current regime requires the consent in writing of all members to decide not to appoint an auditor, and the corporation must have annual income in that financial year of less than $100,000.  The amendment allows the members to decide not to appoint an auditor and not to have an audit in respect of a financial year by an extraordinary resolution of the members, which means a resolution adopted by at least 80% of the votes cast at a members meeting.  It also gives the Minister discretion to change the annual revenue threshold to more or less than $100,000 by passing regulations, though if there are no regulations specifying otherwise, the annual revenue of the corporation in that financial year must still be less than $100,000 for it to be able not to have an audit.

Several other amendments to the OCA have been made that came into effect on November 14^th, when Royal Assent was given to Bill 154.  These changes will make it easier for OCA corporations to direct their affairs.  We focus on four. First, members will be able to hold meetings by telephone, unless the corporation’s by‑laws provide otherwise.

Second, subject to the existing provisions in a corporation’s by laws, the amended OCA gives members the power to remove a director from office by majority vote rather than two-thirds vote, as is currently the case (except that ex officio directors cannot be removed).  If a corporation’s by‑laws state that a director can be removed from office by a two‑thirds majority vote, then that will continue to apply until the by‑law provision is changed to allow for removal by a simple majority vote.

Third, notices for members meetings will now be allowed to be given by electronic methods.

Finally, if a corporation has no directors or members, then a court will be able to appoint the required number of directors.

Changes to the CAA

Our charity clients will be interested in amendments to the Charities Accounting Act, which will enable a charitable corporation to  make social investments, subject to restrictions and qualifications set out in the amending provisions.  A social investment refers to the use of the charity’s property to directly further the purposes of the charity and achieve a financial return.  However, this permissive power is subject to a few limitations. The first is if the charity is holding property that is subject to a requirement that the capital be used for specified purposes, unless the charity’s board of directors expects that making the social investment will not affect the requirement. Second, the power to make social investments can also be restricted or excluded by the terms of the trust that are imposed on the capital. The charity’s board of directors will now have certain duties in making social investments, which must be complied with, including determining whether to get advice on the proposed social investment before making it, and being satisfied that it is in the interests of the charity to make the social investment. If the directors rely on such advice, they will be protected from a breach of trust.  If your charity is considering expanding the use of its capital into social investments, we would be glad to respond to questions you may have.

Land Registration Matters

Finally, for individuals who are known only by a single name (I’m thinking of you, Rihanna!), changes to the Land Titles Act and Registry Act will now allow them to have real property registered in their single name.  This change is now in effect.

We encourage you to check out the Bill for yourself to see what other legislative changes will be effected.  You can find it online here.

Filed in: Charities, Not for Profit Law

Tags: Charities Accounting Act, Land Registration, Ontario Corporations Act, Ontario Not for Profit Corporations Act