Ontario government consulting on compensation of charity directors with court order

July 12, 2017 | By: .(JavaScript must be enabled to view this email address) Mark Blumberg
Topics: News, Canadian Charity Law, Ethics and Canadian Charities

The Ontario Government is looking at adding a regulation to the Charities Accounting Act that would allow in certain circumstances compensation for directors without specific legislation or court order.  "The regulation would authorize incorporated charities to pay their directors and persons related to them, for goods, services, or facilities, without obtaining a court order, provided specific conditions are met."   I have some concerns with the proposal and will blog in the future about that.  The proposal was posted on July 10, 2017 and comments are due by August 29, 2017.

Here is the announcement by the Ontario Government:

Regulation Number(s): 4/01
Bill or Act: Charities Accounting Act
Summary of Proposal:  
The regulation would authorize incorporated charities to pay their directors and persons related to them, for goods, services, or facilities, without obtaining a court order, provided specific conditions are met. It would also address the need to ensure that the payments are made in the best interests of the charitable corporation.

The regulation balances the need for charities to enter into advantageous transactions with the need to protect the public's interest in ensuring that charitable property is not misused. 

Not every kind of payment would be authorized by the regulation. The regulation would not authorize direct or indirect payments for: 
• Services provided by a director as a director or employee of the charity;
• Fundraising services or selling goods or services for fundraising purposes; or 
• The purchase or sale of real estate. 

The regulation would require charities to meet the following conditions before payments could be made to a director or persons related to a director:
i. The payment must be made with a view to the charity's best interests; 
ii. The payment must be in an amount that is reasonable for the goods, services or facilities provided; 
iii. The payment must not result in the amount of the debts and liabilities of the charity exceeding the value of the charity or render the corporation insolvent; 
iv. Before the board may authorize the payment:
a. Every director must agree in writing to the maximum amount that can be paid for the goods, services or facilities; 
b. Every director, other than the director receiving the payment, must agree in writing that that they are satisfied that the conditions set out in the regulation have been met, and 
c. The board must consider any guidance issued by the Public Guardian and Trustee; 
v. There must be at least five directors on the board; 
vi. Neither the director who will receive the payment, nor any person related to them, can take part in the deliberations, attend any part of a board meeting during which the decision to authorize the payment is discussed or participate in any vote of the board on the issue;
vii. The number of directors receiving remuneration, or who are connected to persons receiving remuneration, cannot be greater than 20% of the total number of directors in any fiscal year; and
viii. The payment to the director must be reported at the annual general meeting and must be noted on the charity's financial statements.

Payments made to a not-for-profit corporation or a corporation wholly owned by the charity, would be exempt from the regulation if no director of the charity or a person connected to a director, received a benefit from the payment. For instance, a charity could make payments to a wholly owned subsidiary if no benefit was received by the charity's directors or persons connected to them. 
Further Information:
[Click to open]  Charities Accounting Act 
[Click to open]  O. Reg. 4/01: APPROVED ACTS OF EXECUTORS AND TRUSTEES 
[Click to open]   Consultation Draft    (Download Adobe Reader) 
Proposal Number:
17-MAG008
Posting Date:
July 10, 2017
Comments Due Date:
August 29, 2017
Contact Address:
Nicholas Hedley
Deputy Director and Deputy Public Guardian and Trustee
Office of the Public Guardian and Trustee
595 Bay St., Suite 800
Toronto, ON M5G 2M6
Comment on this proposal via email

You can provide your feedback to the Ontario government here:

http://www.ontariocanada.com/registry/view.do?postingId=24430&languagei=en 

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Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.

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