Impact of Ontario Not-for-profit Corporations Act on District School Boards

January 28, 2013

A funny thing happened on the way to the
reform of the law regarding non-share capital corporations in Ontario. Unless
revised before proclamation (currently expected 1 July 2013), the new Ontario Not-for-profit Corporations Act, 2010,
(“ONCA”) will change the law respecting district school boards. For the most
part, the legislative changes will be of little consequence to district school
boards or their Trustees and staff, but in some areas, the effect could be
quite significant.

The possible ONCA “game-changers” are:

  • section 15 which provides that
    a corporation has the capacity and rights, powers and privileges of a natural
    person;
  • section 35 which makes written
    resolutions signed by all Trustee entitled to vote on an issue, as valid as if
    passed at a meeting of the board or a committee of the board; and
  • sections 43 through 46 which
    establish a standard of care and a due diligence defence for directors, a
    presumption of consent to a decision unless there is a dissent, and authority
    for indemnification of directors.

Education statutes have been restrictive in
the powers and authorities given to school boards. Jurisprudence over that past
nearly 200 years has held that a school board, as a creature of statute,
possesses only those powers and authorities that have been expressly (or by
necessary implication) granted to it by the statute that created the school
board.

With the addition of section 15 of ONCA, a
district school board has plenary power and authority, subject only to the
restrictions that have been expressly placed upon it. So unless the Education Act prohibits or imposes
conditions or restrictions upon what it can do, a district school board will be
authorized to do anything that is not otherwise unlawful.

The addition of section
35, if used, presents an alternative to calling and holding board or committee
meetings, which could simplify the process for dealing with some kinds of board
action, including responding to urgent matters.

Of particular interest to Trustees are new
sections which provide (to quote from the Explanatory Note to the Bill that
became the statute) that:

[They set
out] directors’ liabilities and standard of care. The standard of care is to
act honestly and in good faith with a view to the best interests of the
corporation and to exercise the care, diligence and skill that a reasonably
prudent person would exercise in comparable circumstances. Directors are given
a reasonable diligence defence, including reliance on officers and employees of
the corporation and on professional advice. Directors and officers are entitled
to indemnification from the corporation so long as they acted honestly, in good
faith and with a view to the best interests of the corporation and believed
reasonably that their conduct was lawful.

The Government is
delaying proclamation while the Ministry of Consumer Services considers what
additional statutory corporations still need to be excepted from the
application of ONCA, and it is not known at this time whether District School
Boards will be added to that list.

So, it remains to be
seen what longer range impact this new statute will have on District School
Boards.

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