The ONCA and OBR

Ontario’s Not-for-Profit Corporations Act, 2010 (“ONCA”) came into force on October 19, 2021. It modernizes the legal framework for Ontario’s not-for-profit corporations (also known as “non-share capital corporations”). Most non-share capital corporations that were previously governed by Ontario’s Corporations Act (“OCA”) are now governed by the ONCA. Existing non-share capital corporations will need to transition to this new statute by the end of the three-year statutory transition period (October 19, 2024).  As previously explained in this article, new entities that want to incorporate as non-share capital corporations in Ontario and existing non-share capital corporations that want to update their documents must now do so under the ONCA and through the Ontario Business Registry system (“OBR”).

Many previous OCA non-share capital corporations have started the transition process. For many corporations, this has been a complex exercise of rethinking their governance structure and processes.  In some instances, the logistics of implementing these changes using the OBR has proven to be equally as complex.

The OBR was launched in tandem with the proclamation of the ONCA. The OBR is an online government services interface that enables Ontario non-share capital corporations to complete over 90 transactions online, including incorporating and updating their information. By being online, the OBR is intended to make interacting with government services more accessible and provide a streamlined way for new provincial corporations to incorporate (whether non-share capital or for-profit) and for existing Ontario corporations to comply with their statutory filing and corporate compliance obligations.

The proclamation of the ONCA and the OBR’s launch were highly anticipated events, but upon reflection, it is clear that this first year has been a year filled with growing pains. Unfortunately, the OBR has not been as streamlined and accessible as originally anticipated. There have been a number of technical issues which have arisen consistently over its first year. We will outline some of the most common issues below. These technical issues have impacted new incorporations under the ONCA, as well as the transition and filing processes for existing Ontario corporations.

Tricks and traps when using the OBR

1. Forms

At this time, some of the OBR forms do not permit Ontario non-share capital corporations to include provisions that are either mandatory or permitted under the ONCA.  For instance:

  • The ONCA requires that a corporation’s Articles include the conditions for membership and the respective voting rights when there are two or more classes of members (s. 48), however, there is no space provided to include membership provisions in the Articles of Incorporation and Articles of Amendment forms. Presently, corporations are required to comply with the relevant provision of the ONCA by including a statement regarding the classes of members in the ‘special provisions’ section of the form.
  • In the Restated Articles of Incorporation form, if a corporation indicates that it is a charity or intends to act as one, then there are five special provisions that will populate automatically in the restated articles. This is an issue, because it is possible that the ‘special provisions’ in a corporation’s historical letters patent or supplementary letters patent will conflict with any one of these five special provisions. Presently, filing restated articles for these Ontario corporations overrides these very specific clauses, which may be unintended.  For example, one of the five automatic special provisions is a dissolution clause that requires a corporation, after satisfying its debts, to distribute its property upon dissolution to “a registered charity under the Income Tax Act (Canada) with similar purposes to its own…”. Many Ontario non-share capital corporations that are charities have tailored dissolution clauses that name specific charities as the recipients of their property on dissolution, but these listed charities may not have purposes that necessarily align with the purposes of the charity in question, especially where the purposes of the charity in question or the listed charities have evolved over time. As another example, some letters patent permit a registered charity to circumvent those provisions of the Trustee Act (Ontario) dealing with how investments can be made as long as the assets of the corporation are invested prudently. This special provision would be overridden by the special provision contained in the restated articles that subjects the directors to the Trustee Act when making investments. Notably, while the form does permit a charity to restate any existing special provisions, it is not clear how this works when the existing provisions do not align with the automatically populated provisions.

Importantly, it is now a requirement that all ONCA filings are done through the OBR. In order to access the OBR a corporate key must be obtained and used. It is no longer possible for a corporation’s solicitor to e-mail the relevant filings to representatives of ServiceOntario. If you do not have your corporation’s corporate key, you can request it on ServiceOntario’s website.

In addition to the more substantive limitations listed above, the forms are also coded with some technical limitations. For instance:

  • The new OBR-version of the Notice of Change does not permit the corporation to change/amend a director’s name. For example, if a director of an Ontario non-share capital corporation legally changes his/her/their name yet remains a director of that corporation, at present there is no ability to amend the name for the corporate record. While the new name could be added and the existing name removed, it will appear that the director resigned and a new director was elected. This, of course, would not reflect the board history of the relevant director.
  • There is also no mechanism to save draft Notices of Change as PDFs. This is sometimes desired, by legal counsel in particular, in order to confirm details with the instructing representative of the non-profit before filing the form.
  • Articles of Incorporation and Articles of Amendment do not permit the filer to include e-mail addresses that end with “.ca”. This is problematic as these forms require the filer to include the email address of the representative that is to be contacted once the filing has been processed.
  • There is no ability to upload or attach a schedule to the Articles of Incorporation or Articles of Amendment. Because of the further inability to format the text in the forms, where a corporation has a number of special provisions or a particular set of voting rights, for example, the text appears as a single large paragraph, making the document difficult to read and understand.

These issues may seem small, but cumulatively they have the effect of complicating corporate filing tasks, which were intended to be more straightforward with the rollout of the OBR.

2. Corporate name approval

As always a corporate name must be selected and included in any application to incorporate a new corporation, amend an existing corporate name, or continue a corporation under the ONCA. There are legal requirements with which the proposed name must comply. For instance: (i) no other existing Ontario corporation can have the same or similar name to the proposed name; and (ii) the proposed name must comply with the relevant ONCA regulations on names and filings. These regulations contain a number of provisions that limit the ability of an ONCA corporation to use certain words or combinations of numbers in its name. Despite the fact that these regulations are similar to other provisions in comparable Canadian non-share capital corporate statutes, a large number of proposed corporate names that arguably meet these legal requirements are being rejected or challenged by the Ministry on the basis that they are not descriptive or distinctive enough. More clarity is needed to limit such responses to proposed corporate names and limit the time needed to address these responses from the regulator.

Role of the Office of the Public Guardian and Trustee of Ontario

Generally, the Office of the Public Guardian and Trustee (“PGT”) plays an important role in protecting the public interest in the charitable property of charities operating in Ontario. The PGT has historically been involved in the incorporation process for new charities in Ontario, but with the proclamation of the ONCA the PGT’s role has changed regarding this part of its mandate.

Pursuant to the ONCA, the PGT is no longer required to approve the Articles of Incorporation for most applicants. Instead, the PGT fulfills its statutory mandate by requiring Ontario-based charities to meet certain reporting requirements following incorporation. Now, charities are required to submit their governing documents (i.e., the Articles of Incorporation) to the PGT’s office post-incorporation, as well as provide information about their street and mailing address(es) and the names and addresses of their directors and officers.

That said, PGT pre-approval is still required for some entities trying to incorporate under the ONCA. For instance, the PGT’s written consent is required when the entity’s proposed corporate name contains the word “charity”, “charitable”, or “foundation”.

Notwithstanding some of these changes, all Ontario-based charities continue to be required to  report to the PGT’s office when they receive or manage charitable property. This applies both to charities incorporated under the ONCA and charities incorporated in other jurisdictions that are operating in Ontario (e.g., federally-incorporated corporations based in Ontario). Importantly, these reporting requirements to the PGT’s office are in addition to the Income Tax Act reporting obligations for new charities who successfully register with CRA.

Conclusion

It has been nearly one year since the ONCA was proclaimed and the OBR was launched. In many ways this is an improvement (e.g., the OBR limits the need for paper filing of corporate documents, wet-ink signatures and filing in duplicate). However, as set out above, there is room for improvement on this government services interface.

With this in mind, if you are looking to incorporate a new Ontario non-profit or update the corporate documents of an existing Ontario non-profit, you should familiarize yourself with the requirements and limitations of the OBR. You should also confirm whether you need to engage with the PGT’s office. Miller Thomson’s Social Impact Group is available to assist if you need assistance drafting the appropriate forms, using the OBR, or implementing workarounds to both ensure compliance with the ONCA and avoid unintended consequences of the new system.