The Not-for-Profit Corporations Act (Ontario) or “ONCA” was proclaimed on October 19th, 2021 and provided for a three-year transition period for Ontario not-for-profits to transition to its terms from the Corporations Act (Ontario). This means that in less than two months – on October 19th, 2024 – this transition period will be completed. If your corporation is an Ontario corporation, you should already have completed this transition to ONCA or be reviewing the incorporation documents and by-laws and taking steps to ensure those documents are ONCA compliant prior to October 19th. If you have not started to do so, time is running out. If your corporation is a registered charity, you should be aware that failure to transition to ONCA may have negative impacts on charitable status.
The good news is that Ontario not-for-profits that have not completed the work to transition will not be automatically dissolved, as was the case when the Canada Not-for-Profit Corporations Act transition period that came to an end in 2014. Instead, on October 19th all Ontario not-for-profits – whether or not they have done the work to transition – will be governed by ONCA and are required to comply with its terms.
The bad news is that where there are inconsistencies between a corporation’s governing documents and ONCA, ONCA will govern and be deemed to have replaced the terms of a corporation’s existing documents in almost all situations. This can create difficulties in governance, as the rules currently in place for the corporation may not reflect the requirements of ONCA – so it can create ambiguity or force a deemed change in a corporation’s policies or practices, without the board or the members having considered the impact of that change and the best approach moving forward. If the corporation’s existing documents are not updated to be ONCA compliant, it will also create a situation where the corporation will need to rely on ONCA and not its own documents to determine how to proceed on various governance issues – the simpler approach is to ensure that the documents reflect ONCA’s requirements, as opposed to relying solely on ONCA.
There are certain provisions that are not subject to this automatic change and, if these provisions were valid prior to the transition date, will continue to be in effect without amendment. These provisions are set out in Section 207(3) of ONCA: a provision respecting the number of directors of the corporation, a provision providing for two or more classes or groups of members, a provision respecting voting rights of members, a provision respecting delegates made pursuant to section 130 of the Corporations Act and a provision respecting the distribution of the remaining property of a corporation that is not a public benefit corporation on winding up or dissolution.
We strongly recommend that Ontario not-for-profit corporations do not rely on the exceptions of Section 207(3) to prevent governance chaos after October 19th – instead, it is time to roll up your sleeves and take a thoughtful approach to governance, ONCA and moving forward into this new piece of legislation.
This blog post was written by Megan Wallace, Practice Lead, Not-for-Profit and Charity Law, and a member of our Business Law team. She can be reached at 613-369-0368 or at [email protected].
