In September 2020, the Ontario Legislative Assembly passed a resolution extending the proclamation period for the Not-for-Profit Corporations Act, 2010 (the "ONCA") until December 31, 2021, with some notable exceptions. The same resolution provided that certain provisions of the ONCA would not be subject to such extension and would be repealed if they were not brought into force by December 31, 2020. As such provisions were not enforced by December 31, 2020, they were repealed pursuant to Section 10.1 of the Legislation Act, 2006. A list of the significant sections of the ONCA that were repealed are set out in the table at the end of this bulletin. These repealed provisions related to the voting rights of members, specifically the rights of non-voting members and class voting rights in organizations with multiple classes of membership.
Under the original provisions of the ONCA, non-voting members were entitled to vote on certain fundamental issues, including, for example, an amalgamation, continuance to another jurisdiction, extraordinary sale, lease or exchange of assets of the corporation, and a change to membership composition/rights. Also, in a multi-class membership structure, members were, subject to limited exceptions, entitled to vote separately as a class on the same fundamental issues.
The changes that came into effect on December 31, 2020 repeal all such rights; non-voting members remain non-voting regardless of the topic of the resolution or the proposed change. Members of a class may not exercise a separate class vote on fundamental issues.
The granting of voting rights to non-voting members was previously raised as a concern by some of the stakeholders in the not-for-profit sector, some of whom believed it to be a non-democratic exercise to allow non-voting members to vote, regardless of the objective of a resolution. With this recent change, we are optimistic that we are getting closer to seeing the ONCA being proclaimed into force.
Until the ONCA comes into force, the Corporations Act continues to govern not-for-profit corporations incorporated under the laws of Ontario. Once the ONCA is in force, such corporations will have a three-year transition period to make the necessary changes to conform their governing documents to the ONCA.
Our team at Fasken will provide you with updates as they become available. In the meantime, please feel free to contact a member of our team to discuss suitable governance changes before the proclamation of the ONCA.
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Repealed Section of ONCA |
Subject of Repealed Provision1 |
|
105 |
Class vote on fundamental changes set out in section 103(1) |
|
111(3) |
Non-voting members' right to vote on an amalgamation agreement |
|
111(4) |
Class vote on an amalgamation agreement |
|
116 (3) |
Non-voting members' right to vote on continuance to other jurisdictions |
|
118 (4) |
Non-voting members' right to vote on an extraordinary sale, lease or exchange of all or substantially all of the assets of the corporation |
|
118 (5) |
Class vote on extraordinary sale, lease or exchange of all or substantially all of the assets of the corporation |
Footnote
1 Table of Public Statute Provisions Repealed Under Section 10.1 of theLegislation Act, 2006 - 31/12/2020
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.