The ONN recently called for a delay in the implementation of the Ontario Not-for-Profit Corporations Act (“ONCA”) which is currently expected to be brought into force on January 1, 2013. I personally think that we should get on with the new ONCA and not delay its implementation any more. The ONCA will bring a modern framework for governance to Ontario non-profits. A lot has happened since the 1950’s and it will be helpful to bring our corporate non-profit legislation into the 21st century.
Here are a few points with respect to the proclamation of the ONCA.
1. Although the ONCA is anticipated to be proclaimed January 1st, 2013, organizations will have 3 years to make the changes that they require. The vast majority of Ontario non-profit corporations will not start really applying their minds to the new ONCA until all of the documents have been released by the Ontario government and after the date of proclamation when a non-profit or charity can actually do something about the new act. The ONCA will automatically apply to every not-for-profit corporation incorporated by or under an act of the Ontario Legislature, including most commonly the current Ontario Corporations Act, with some exceptions. Not-for-profit corporations under the OCA will not be required to file articles of continuance to continue under the ONCA. Existing not-for-profit corporations will have three years from the day ONCA comes into effect to make any necessary changes to their incorporation and other documents to bring them into conformity with the ONCA.
2. We are more than four months away from the proclamation date some are concerned that MCS has not posted on its website detailed information on the new Act. I would point out that the stakeholders have seen copies of many of the documents such as the draft plain language guide to the ONCA for a number of months, and that those documents will be presumably available at least a few weeks before the ONCA is proclaimed. With the federal government’s introduction of the CNCA, Industry Canada provided the material for the first time to the public three days prior to the Act coming into force, and in fact only gave three days’ notice of the Act coming into force, which in my view is less than ideal. Industry Canada’s last minute release of the information had little impact on existing organizations that need to make transition but did create problems for organizations about to be incorporated based on the old Act. We essentially had 3 days to finalize all documents or we had to start from scratch. As non-profits and charities have 3 years to make changes to conform their documents to the ONCA I am not concerned if the guides and educational material are only available in the fall. In terms of the date that the ONCA comes into force, we have the target date of January 1, 2013 and we have had it for a few months - it is nice to know 5 or 6 months ahead of time of the anticipated date for planning purposes.
3. Ontario needs a new non-profit act, and while there can be many legitimate differences as to what people feel is ideal in that act, there is a real cost to dragging on the process with little potential benefit. As we have seen with the implementation of the CNCA, it has gone relatively well and we are already having queries from clients to move from the old OCA directly to the new CNCA because the old OCA is outdated and very limiting. For example, the current OCA provides an exemption for audits to small non-profits with net revenue under $100,000. The ONCA has an audit exemption threshold up to $500,000 for public benefit corporations. This can save small charities considerable money.
4. There is a concern about the time and resources needed to prepare sector oriented training materials. A lot has been written about the ONCA as well as the CNCA and much of it I wouldn’t necessarily categorize as user-friendly or even helpful. With the fullness of time, organizations that are interested in public legal education and who are concerned about the practicality and usability of these resources will develop good resources and probably most of it will be freely available on the Internet. Practically speaking, until the ONCA has been proclaimed, and charities/non-profits and practitioners have used the ONCA for a number of months, it will be difficult to really fine-tune user-friendly guides, checklists, etc.
5. After having done a number of CNCA continuances and discussed with many organizations governance issues relating to the CNCA, and increasingly the ONCA, I can tell you that with most organizations the problem is not the new corporate act, it is the current state of governance of the non-profit under the old acts. How many non-profits don’t know what a member is? (they think it is a board member!) How many non-profits who know what a member is, don’t know who their members are? How many non-profits have not had AGMs in years or perhaps never had an AGM? How many have by-laws that are hopelessly out of step with their own practices? How many non-profits don’t even have access or cannot find their letters patent or by-laws or the correct by-laws? How many non-profits have old objects that do not cover many of the new activities carried on by the non-profit? In fairness to non-profits they are often all volunteer with small budgets and very committed to making meaningful change in their communities. Furthermore, the old Federal and Ontario acts were hopelessly out of date and difficult for anyone to use. However, the issue is not the ONCA - we can fiddle with the ONCA for the next 50 years - there is a huge task ahead to help non-profits understand governance, compliance, standards and charity regulation.
After having delivered many presentations across this country to non-profits and charities I can assure people that the amount of capacity building that is required is immense, the number of people that need to be involved significant and the time it will require will be many years. Such capacity building requires organizations, government, business and others working together to assist the sector.
The ONN recently criticized a couple of provisions in the ONCA and noted “ We are already seeing organizations limit and revamp their membership criteria to narrow and limit members - the opposite of the transparency and accountability that the sector stands for. ” I have a different take on membership. Many Canadian non-profits have large memberships. In some cases people are encouraged to become “members” to feel an affinity for the group, to donate to the group, and to volunteer with the group. In some cases those members really have little or no rights or say in how the organization is run. Many cannot vote and are not provided with basic information on the operation of the non-profit. However, in some cases people only find out years or decades later that they are members but not “real” members and in fact a small group or one person actually controls the organization. Having some basic membership rights will increase transparency and accountability. Currently an organizations may say it has 2000 members of which say 10 are voting members. I would prefer that the organization identify the 10 voting members as members and others that are involved with the organization more clearly understand the extent to which they do or do not control the organization. As an advocate for transparency and accountability amongst non-profits and charities, who has testified twice on the subject in front of the Federal Finance committee in the last few months, I cannot wait for the ONCA to be brought into force. Like the CNCA, the ONCA gets rid of illusory members – “members” who have no meaningful rights. One can argue that this is consistent with accountability as boards are generally not accountable to non-voting members.
Do you require legal advice with respect to Canadian or Ontario non-profits or charities?
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.