Ontario Not-for-Profit Corporations Act delayed until 2014

April 8, 2013 | Kate Lazier


The Ontario
government recently announced that the in force date for the Not-for-Profit
Corporations Act, 2010
(the “ONCA”) will be no sooner than January 1,
2014. Previously the government had
target dates of January 1, 2013 and July 1, 2013. The ONCA has been passed by the Ontario
Legislature, but is not yet in force and the draft regulations have not been
released. The ONCA will come into force on the day named by proclamation. On
that day, the ONCA will apply to non-share capital corporations established
under the Corporations Act (Ontario).


The Government
also announced that it may make certain amendments to the transition provisions
that apply when the ONCA comes into force. As currently drafted there is some
uncertainty as to when and how the provisions of the ONCA apply to corporations
that have not yet taken steps to conform to its provisions. This is particularly important to the
question of whether or when non-voting members have voting rights.


In a
response to a question about the transition period the Government stated:


The transition provision provides existing
not-for-profit corporations with a three-year period to make any necessary
amendments to their incorporation and other documents to conform with ONCA.
These documents include letters patent and any supplementary letters patent
(corporations will receive articles under ONCA instead of letters patent and
supplementary letters patent), by-laws and special resolutions.


The government takes the position that
provisions of these documents that are valid under the current Corporations Act
will continue to be valid until the end of the three-year transition period or
sooner if the corporation amends them to conform with the Act. Corporations are
encouraged to review their documents before the end of this period.


It is important to note that, under ONCA,
non-voting members will have some limited voting rights. However, it is the
government’s intent that if an existing corporation provides for non-voting
members in its letters patent, any supplementary letters patent, by-laws and
special resolutions, the non-voting members remain non-voting for the
three-year transition period. This will occur unless the corporation amends its
by-laws, letters patent, supplementary letters patent or special resolutions to
conform with ONCA during this period.

See the Not-for-Profit Corporations Act: Transition Period: Frequently-Asked Questions for further information.


While this was clearly the intent of the drafters of the ONCA the words
used in the ONCA are not clearly consistent with this statement. And
while we think it likely that a Court would give effect in
the circumstances to the drafters’ intent, the government could
give the sector
further certainty by amending the ONCA to confirm that a corporation’s existing
letters patent or by-laws will prevail over the ONCA until the expiration of
the three-year period.


The Government also indicated it is exploring the possibility of holding
back from proclamation the provisions in the ONCA giving voting rights to
non-voting members in certain limited circumstances. It is our understanding that the Minister of
Consumer Services will be recommending that these provisions not come into
force for at least three years following the proclamation of the ONCA and the
Minister intends to undertake a sector consultation on this issue. Given the uncertainty around the transition
provisions we would applaud any steps taken by the government to clarify the
issue.


This
additional delay gives Ontario non-share corporations who are concerned about
making changes more time to make the changes to their current structure before
the ONCA comes into force. Please see
our article Ontario Not-For-Profit Corporation Act, 2010 – An Overview of the Transition on the factors that corporations should take into consideration
when determining whether changes are desired before the ONCA is in force.


Miller
Thomson LLP’s charity and not-for-profit group will continue to keep our
readers updated as this legislation progresses
and would be happy to provide
specific advice on transition issues.


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