The Ontario Not-for-Profit Corporations Act (ONCA), over ten years in development, was proclaimed on October 19, 2021. It is the enabling corporate legal framework for most not-for-profits incorporated under Ontario provincial law. It may affect not-for-profits in many important ways, such as:
- The requirement to get an audit;
- Members’ rights to make proposals and call members’ meetings;
- The number of your directors.
Not-for-profit organizations have three years after the October 19, 2021 proclamation to transition to the new rules. In the interim, the rules in your current Articles and Bylaws will continue to be valid provided they were valid under the previous legislation (Ontario’s Corporations Act).
Existing corporations previously governed under the Corporations Act are encouraged to review their documents before the end of the transition period. Unless otherwise noted, the information in this guide corresponds to sections of ONCA.
The Province of Ontario provides a Guide to the Not-for-Profit Corporations Act, 2010 outlines in detail the features of the new Act. Below are highlights from the Guide:
- Makes a new distinction between public benefit corporations and other not-for-profit corporations
- Allows a not-for-profit corporation to provide in its by-laws other means of voting (by mail, telephone or electronic means) in addition to, or in place of, voting by proxies
- Allows a member of a corporation to appoint a proxy holder, but only if the articles or the by-laws of the corporation permit it
- Clarifies that not-for-profit corporations can engage in commercial activities if the activities support the corporation’s not-for-profit purposes
- a not-for-profit corporation may be subject to restrictions on its activities imposed by other legislation such as the Income Tax Act
- Allows for a simpler process for reviewing the corporation’s financial records
- called a “review engagement,” the process can take the place of an audit in some circumstances and, in some situations, neither an audit nor review engagement will be required
- Requires a corporation that has two or more classes or groups of members to set this out in the articles (instead of in the by-laws)
- the by-law must set out the conditions of membership
- Provides clearer rules for governing the corporation and increasing accountability
- ONCA provides a statutory duty of care for directors, which requires them to act honestly and in good faith with a view to the best interests of the corporation, and to exercise reasonable care, diligence and skill
- Sets out due diligence and good faith reliance defence for directors
- a director will not be legally liable in certain circumstances if they acted with the care, diligence and skill a reasonably careful person would have acted in similar circumstances
- Lists specific requirements for directors and officers to report a conflict of interest in certain circumstances
- States that corporations do not always have to include a member’s proposal in meeting notices in certain circumstances
- Provides members with actions they can take if they believe directors are not acting in the best interests of the corporation
- Provides members with greater access to financial records
- Streamlines incorporation as a charitable corporation, which no longer requires Office of the Public Guardian and Trustee (OPGT) approval
- all applications for articles of incorporation will be submitted directly to ServiceOntario
- Joins other jurisdictions in Canada that have modernized their not-for-profit corporations’ laws
- the Canada Not-for-profit Corporations Act, for instance, came into effect on October 17, 2011 at the federal level
A special note – the Ontario government has extended virtual meeting provisions until September 2022. With the extension, organizations currently governed under the Ontario Not-for-Profit Corporations Act (ONCA) and other corporate Acts, are allowed to continue to hold meetings, including AGMs, virtually until September 30, 2022.
If you would like assistance in reviewing your current articles and bylaws, you can contact The Osborne Group.