On October 19, 2021, after an over ten-year delay, Ontario not-for-profit business owners will finally see the Ontario Not-for-Profit Corporations Act (ONCA) proclaimed into force.
What is ONCA intended to do?
ONCA is intended to replace the existing Ontario Corporations Act (OCA) (which currently governs over 50,000 Ontario not-for-profit corporations) to modernize how Ontario not-for-profit corporations are created, operated, governed, and dissolved by:
- Simplifying the incorporation process;
- Making a new distinction between public benefit corporations and other not-for-profit corporations;
- Permitting by-laws to provide for other means of voting such as by mail, telephone, and electronic means, in addition to or in place of voting by proxies;
- Permitting members to appoint proxy holders, but only if the letters patent/articles of incorporation or by-laws permit it;
- Clarifying that not-for-profit corporations are permitted to engage in commercial activities that support their not-for-profit purposes but may be subject to restrictions imposed by other legislation (i.e. the Income Tax Act);
- Implementing a simpler process for reviewing financial records, called a “review engagement”, which, in some circumstances, can take the place of an audit. In other circumstances, neither an audit nor a review engagement may be required;
- Requiring corporations with two or more classes or groups of members to set out each class/group in their letters patent or articles of incorporation and to set out the conditions of membership in their by-laws;
- Providing clearer rules for governing a corporation and increasing accountability, such as providing for a statutory duty of care for directors 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;
- Setting out a due diligence and good faith resilience defence for directors, meaning that directors will not be liable in certain circumstances if they can prove that they acted with the care, diligence and skill a reasonably careful person would have used in similar circumstances;
- Listing specific requirements for directors and officers to report conflicts of interests;
- Stating that corporations are relieved, in some circumstances, from including a member’s proposal in meeting notices;
- Providing members with actions they can take if they believe that directors are not acting in the best interests of the corporation;
- Providing members with greater access to financial records; and, among other things,
- Streamlining incorporation as a “charitable corporation”, which no longer requires approval from the Office of the Public Guardian and Trustee. All applications for articles of incorporation will be submitted directly to ServiceOntario.
Will ONCA apply to my corporation?
ONCA will apply to all not-for-profits currently incorporated under the OCA and to all not-for-profit corporations looking to incorporate provincially in Ontario after the date ONCA comes into force. ONCA will not apply to corporations incorporated federally under the Canada Not-for-Profit Corporations Act (CNCA).
What changes do I need to make when ONCA comes into force?
Before or once ONCA comes into force, not-for-profits incorporated under the OCA or not-for-profit organizations looking to incorporate in the future, should consider whether they would like to incorporate under (or move to, if already incorporated) ONCA or the CNCA. Not-for-profits incorporated under the OCA will have three years form the date ONCA comes into force to ensure that their governing documents (letters patent/articles of incorporation and by-laws) and their membership structures comply with the new rules and reflect the corporation’s current practices.
For more information on ONCA and the upcoming changes and requirements that may impact your not-for-profit corporation or organization, visit Ontario’s “Guide to the Not-for-Profit Corporations Act” and the Community Legal Education Ontario website.
This blog post was written by Jade Renaud, a member of the Business Law team. Jade can be reached at 613-369-0373 or at email@example.com.