Welcome to the first of a series of short posts to explain and help you comply with the Ontario Not-for-Profit Corporations Act, 2010 (ONCA).
The ONCA came into force in October 2021. There are some important changes. These posts are intended to make it simple to understand them and, most importantly, explain what to do about them.
Where it Applies
If you are an existing not-for-profit corporation (NFP) that was previously incorporated under Ontario’s Corporations Act, it applies to you. Regardless of whether you are also a charity – the ONCA applies to all NFPs.
If you want to incorporate an NFP in Ontario, the ONCA is the statute that would apply.
If you are an existing NFP incorporated under the Canada Not-for-profit Corporations Act, it does NOT apply to you.
The Key Changes
The key changes include:
- Requiring some things that formerly were in the by-laws to be set out in the Articles (more about that below);
- New requirements regarding director’s terms, consent to act and resignation.
- New requirements regarding membership, including new rules if there’s more than one class of members and new rules regarding discipline or termination of membership.
- Changes to both directors’ and members’ meeting requirements, including how meetings can be held;
- New requirements regarding conflicts of interest, including specific requirements regarding the disclosure of a conflict;
- Specific financial disclosure requirements;
- The creation of “Public Benefit Corporations” with special rules.
In this article we will talk about the Articles. Upcoming posts will address the other key changes.
About Your Articles (formerly called “Letters Patent”)
NFPs in Ontario formally incorporated under the Corporations Act, formerlyhad “Letters Patent” as their foundational document. They are now called “Articles of Incorporation”.
Non-profits should review and amend their Articles to ensure that they meet the requirements of the ONCA and the organization. If you choose not to amend your Articles, your Articles will be deemed to have been amended to the extent necessary to make them comply with the ONCA. That may mean that your Articles no longer operate in the way that you expect, or in a way that is best for the organization.
You will need to think about the specific provisions that must be in your Articles. These include:
- Number of directors (previously could be in by-laws).
- Membership classes (previously could be in by-laws).
- Members’ voting rights (previously could be in by-laws).
- Location of members’ meetings
- Distribution of remaining property on winding up or dissolution (previously could be in by-laws).
Number of Directors
Your Articles must state how many directors you will have (a minimum of 3 is required). You can specify a fixed number (e.g., 3 directors) or provide for a range (e.g., 3-10 directors), but either way, it must be set out in the Articles.
One of the most common reasons to have multiple classes (types) of members is to provide for different voting rights (or to say some classes do not vote).
Formerly, that was all in the by-laws. But now, if you want to have more than one class of members, you need to provide for that in your Articles.
And either your Articles or by-laws must set out the conditions for joining, leaving and moving between classes.
Members’ Voting Rights
If you have more than one class (type) of members, you now have to set out their voting rights in your Articles.
Big point: if your Articles do not say anything about voting rights, everyone gets to vote. The default tin the ONCA is one vote for each and every member. It takes your Articles to change that.
Location of Members’ Meetings
If you want to be able to have members’ meetings outside Ontario, you need to say so in your Articles.
Distribution on Dissolution or Wind Up
If you want to specify what happens to the NFP’s property when it is dissolved or wound up (e.g., any net assets are to be given to an NFP with similar objects), you need to set that out in the Articles.
NFPs that are charities already have to meet similar requirements in order to get registered as a charity.
You should amend your Articles by October 18, 2024. After that date, the ONCA deems your Articles to be amended to the extent necessary to make them conform with the ONCA. What exactly that means is not always clear but at the least means that your Articles might not work the way you have done things in the past.
It really does make sense to amend your Articles by the deadline.
The one exception to the October 18, 2024 date is that any of the provisions listed above that were previously allowed to be in your by-laws continue to be valid until you amend your Articles, even if that is after October 18, 2024. That means that you need to address these provisions whenever you do amend your Articles – if you amend your Articles to deal with a particular issue but do not consider all of these provisions, any provisions that were previously in your by-laws may no longer be valid.
We’re here to help. If you have questions about how the ONCA affects your non-profit or need help reviewing and amending your Articles, please contact me at email@example.com
About the Authors and Even More Help
Gayle Wadden, a lawyer and co-founder of Compliance Works Inc., created this post with us.
Compliance Works is an online legal information platform, which makes employment/HR legal compliance fast, easy, and accessible – no matter the size or complexity of your organization.
It does this by giving you plain language summaries of employment law requirements in its unique online platform, and its automated systems provide subscribers with customized alerts of any changes in the law, again in brief, plain language updates, real-time.
For more information, or to start a Free Trial, go to www.complianceworks.ca