School Board Foundations and the new Ontario Nor-for-Profit Corporations Act – Part I

November 2012 | Gillian Tuck Kutarna

( Disponible en anglais seulement )

Directors
of Education, Superintendents of Business, Trustees and Boards of Directors of
Foundations are advised to start thinking now about the impact that the soon-to-be
enacted Ontario Not-for-Profit
Corporations Act
(“ONCA”) will have on their not-for-profit foundation.

The new legislation is
widely regarded as a major reform of not-for-profit governance in Ontario.
It is aimed at creating greater transparency, accountability, flexibility and
efficiency.  Boards of Directors will note
that there are particularly significant revisions to Members’ rights and Director
liability, which we will explore in greater detail in Parts II and III of this
series of newsletter articles.  Our focus
in this issue will be to discuss why school board Foundations should be turning
their attention to the implications of the changes soon to be required.

Under the
ONCA, any provisions of an organization’s Articles and By-laws, which have not
been amended to comply with ONCA requirements within three years of its
enactment, will be « deemed » into compliance thereafter.

There are
a number of reasons why Foundations should be wary of allowing their governance
structure to be dictated by the deeming and default provisions of the ONCA, and
why they might instead treat the transition period as an opportunity to incorporate
the new features of ONCA while updating their practices in a manner which
compliments and serves their strategic plan and organizational vision.

1.  The
Opportunity for Clarity

One of
the primary purposes of any By-law is to codify the process by which an
organization makes decisions and determines its policy direction.  A By-law should also offer a means of
resolving differences of opinion.  The
more clearly a By-law is drafted, the more expeditiously a Board of Directors will
be able to navigate their way through any disagreement, whether about process
or substance.

However, the
benefits of a well drafted by-law are undermined when the rules by which
matters are decided can be found in multiple additional sources, including the
Articles and Supplementary Articles, Roberts Rules of Order, the Corporations Act, the ONCA, and their
regulations. Where these documents are not aligned, the potential for
misunderstanding can be compounded rather than diminished.  The new ONCA provides a solution to this
potential problem by providing the framework for developing one comprehensive
and ‘user-friendly’ document for Foundation Directors.

2. 
The Opportunity for Accuracy and Compliance 

Many Foundations
adopt by-laws at the time of incorporation. 
Unless the content thereafter proves to be blatantly unsuitable or
impractical to follow, Boards of Directors typically direct their efforts
towards fundraising and supporting students. 
Over time, By-laws may no longer reflect the practices which evolve with
the governance of the Foundation.

This kind
of migration from adherence to the By-law rules, which were drafted to comply with
statutory requirements and approved by the Board and the Membership, can be problematic.  The Foundation could be vulnerable to any
Member who might wish to challenge the validity of a decision or the competence
of the Directors.

The enactment
of the ONCA provides an opportunity for Foundations to review their corporate Objects
and By-laws, to ensure that these documents accurately reflect organizational
culture and practice within the context of the new statutory regime.

3.  The
Opportunity to Customize

A number
of sections of the ONCA incorporate standard provisions, qualified by the
phrase « unless the articles or by-laws provide otherwise ».  In other words, if a Board of Directors takes
no steps to amend and customize their documents, the default provisions of the
ONCA will apply.  Relying on these
statutory provisions alone, without considering alternatives, is a missed
opportunity to include what may be working well, or could work better, for your
Foundation.

4.  The
Opportunity for Governance Training

Directors
often comment that one of the rewards of serving on a volunteer Board of
Directors is personal skill development.  The introduction of the ONCA is a reminder to Foundations
to ensure that they continually build capacity within their organization and meet
their professional development mandate. 
This not only benefits the individual Board members, but also helps
retain their services and sustain their commitment.

With so
many not-for-profit organizations facing similar challenges, it is an excellent
time for groups with similar objects, such as school board Foundations, to pool
resources and share training opportunities.

In the Next Newsletter

The ONCA
contains fundamental changes to not-for-profit governance.  Foundation Boards of Directors which do not
respond to these changes may find themselves working with a governance
structure that is not of their own making and may not reflect their best or
preferred practices.

Conversely,
Foundations which undertake a review of ONCA and its implications for their
organization may benefit from a Board of Directors who share a common and
current understanding of their governance process, and whose time and effort
can be used to greatest effect.

In the
upcoming issues of our newsletter, we will discuss some of the specific
features of the ONCA and we will suggest some drafting considerations for Boards
of Directors preparing for a By-law review.  Please feel free to contact us if you have any
questions, or would like your particular concerns regarding the ONCA addressed
in a future issue

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