The new British Columbia Societies Act, which will come into force on November 28, 2016, introduces a number of measures aimed at promoting transparency and accountability. While these measures are intended to promote both members’ and donors’ confidence and trust, societies may find some of these measures, like the requirement to report on remuneration, onerous and invasive.
Under the current British Columbia Society Act, the directors of every society must present the financial statements to the society’s members at the annual general meeting. While this obligation is continued under the new Act, the new Act includes a new requirement for the financial statements to include a note stating the remuneration paid by the society to its directors and top ten highest paid employees and contractors who are paid at least $75,000. In addition, under the new Act any person will be able to request a copy of the financial statements of a society and the society will have to provide a copy of the financial statements to that person, on receipt of any required fee, regardless of whether or not that person is a member or a director of the society.
These disclosure obligations do not apply to “member-funded societies”. A member funded society is a society that receives funding from its members, is not a charity and for two of its most recent financial years did not receive public or government funding greater than $20,000 or 10% of the society’s gross annual income. In addition, during the two year transition period immediately after the new Act comes into force, these disclosure requirements will not apply to existing societies in British Columbia.
While the note in the financial statements does not have to include the name of the directors, employees and contractors whose remuneration is being disclosed, existing societies in British Columbia have expressed concern that it will be relatively easy to determine who in the society is receiving the compensation disclosed in the financial statements. This is particularly the case for smaller societies with only a handful of employees or a very small board of directors. In addition, the regulations which were recently published will require that the disclosure on the directors must include the position or title of each director.
Although this disclosure requirement is similar to that for Community Contribution Companies in British Columbia, it is rather unique compared to the other provincial and federal not-for-profit legislation. The only other Canadian jurisdiction that requires similar remuneration disclosure for not-for-profits is the Yukon.
The requirement to disclose information on remuneration may be sufficiently onerous that societies may be tempted to avoid the application of the new Societies Act by leaving British Columbia before the remuneration disclosure requirements come into effect. Unfortunately, however, both the current British Columbia Society Act and the new Societies Act do not permit societies to continue into another jurisdiction. In contrast, theCanada Not-for-profit Corporations Act and the non-profit legislation in most other provincial jurisdictions permit not-for-profits to continue into another jurisdiction.
Even without the ability to export out of the British Columbia jurisdiction, many British Columbia societies may still be able to effectively transfer their organization to another jurisdiction by taking the following steps:
- incorporate a new not-for-profit entity in another jurisdiction;
- if the society is a registered charity, apply for charitable registration of the new entity;
- transfer the society’s assets to the new entity; and
- obtain extraprovincial registration in British Columbia if the entity is continuing to carry out activities in British Columbia.
In addition to considering the provisions of the applicable legislation, a society wishing to move to another jurisdiction will need to consider whether there are any restrictions in its constitution and bylaws on the distribution of assets that will prohibit the society’s transfer of its assets.