Ontario Not-for-Profit Corporations Act Delayed Until 2014

April 29, 2013

As we reported earlier this month, 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.

The ONCA provides that corporations will have three years from the in-force date to amend their governing documents to conform to the new Act. In a response to a question about this transition period, the Government stated that a corporation’s current governing documents 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 ONCA. It also stated that, notwithstanding that the ONCA provides for certain voting rights for non-voting members, any non-voting members will remain non-voting for the three-year transition period (or until the corporation amends its governing documents to conform to the new Act).

While this was clearly the intent of the drafters of the ONCA, the words used in the ONCA are not clearly consistent with the Government’s statement. And while we think it likely that a Court would give effect 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 more time to make 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 consider when determining whether to makes changes 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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