On March 25, 2015, British Columbia Minister of Finance Mike de Jong introduced the long-awaited bill for a new Societies Act in the British Columbia Legislature. Bill 24 introduces significant reforms to the legal regime governing over 27,000 societies incorporated or carrying on activities in British Columbia. The current legislation has not seen substantial changes since its introduction in 1977.
With more than 250 sections, the new Societies Act is much longer and more detailed than its predecessor. Once enacted, the new legislation will provide modernized rules for the incorporation and governance of British Columbia societies and extra-provincial not-for-profit corporations active in British Columbia. After the legislation comes into force, existing societies will have a period of two years to transition under the new Societies Act.
The Long Road to a New Societies Act
The Finance Ministry began to review the existing Society Act in 2009. In August of 2014, the Ministry released the “Societies Act White Paper”, which presented detailed draft legislation, policy recommendations and notes, and invited feedback from all stakeholders.
Influenced by the British Columbia Business Corporations Act, the proposed Societies Act focuses on creating greater flexibility, improving accountability, and providing a “user-friendly” legal framework.
During a three-month consultation period, the Ministry received substantive feedback from more than 200 stakeholders. On January 26, 2015, the Ministry held a roundtable discussion with stakeholders to solicit further feedback before the anticipated introduction of the bill this spring. A number of the comments and concerns raised during the consultations and the roundtable discussions have been addressed in Bill 24.
Highlights of the Proposed Societies Activities
Bill 24 contemplates a large number of changes to promote flexibility and accountability. Key features include the following:
- Introduction of an electronic filing and records system for societies (including publicly available consolidated bylaws)
- A new distinction between charitable and publicly funded societies and “member-funded societies” (which can take advantage of a number of regulatory exemptions due to the private nature of their funding)
- Registration of occupational title societies will no longer be available under the new Societies Act (existing occupational title societies will be grandfathered)
- Unalterable provisions in the constitutions of societies are abolished, subject to exemptions for certain designated existing societies or classes of existing societies to be set by regulation
- Societies can be established by a single incorporator (rather than five as currently required)
- More flexibility for creating voting and non-voting member classes
- 2/3 majority approval for special resolutions by members (e.g. to change bylaws) unless the bylaws provide for a higher threshold
- A new right for a minimum of 5% of voting members to make a proposal for consideration at AGM, with procedural safeguards to prevent “hijacking” of member meetings
- New court remedies for members - derivative action and oppression remedy - comparable to shareholder rights in business corporations
- Borrowing and issuing securities no longer require members’ approval and societies have more flexibility for investments (subject to restrictions in their bylaws)
- New “senior manager” concept, similar to officers in business corporations
- Stricter conflict of interest rules for directors and senior managers
- Director indemnification no longer requires court approval
- Public disclosure of remuneration paid to directors and top ten employees or contractors and expanded member access to society records Registration requirements for extra-provincial not-for-profit corporations that carry on activities in British Columbia
Public Complaint Remedy Dropped
The White Paper originally proposed a unique new complaint right by the public. It had contemplated that members of the general public could have sought a court remedy if a society conducted its activities or internal affairs with the intent to defraud a person or carried on activities detrimental to the public interest. This proposal had garnered significant criticism and expression of concern from stakeholders. In light of this feedback, the public complaint remedy was removed from Bill 24.
What Comes Next?
Bill 24 is scheduled to receive second reading at the next sitting of the British Columbia Legislature. It is expected that the new Societies Act will receive royal assent by the end of the spring session in May 2015. However, the new legislation will likely not come into force until the implementing regulations are finalized and societies have had an opportunity to familiarize themselves with the new governance rules. The proposed Societies Act contemplates a two-year transition period to give existing societies time to adopt required changes to their constitution and bylaws.
Read the proposed bill here: Bill 24
Special thanks to articling student Anna Chen for her assistance in drafting this bulletin.