On June 5, 2013 the Ontario government introduced in the legislature Bill 85, the Companies Statute Law Amendment Act, 2013. Bill 85 seeks to amend various corporate statutes, including the still-unproclaimed Not-for-profit Corporations Act, 2010 (the “ONCA”).

The proposed amendments are largely technical in nature: changes to defined terms; updating the mechanics of incorporation, restructurings and filings; and updates in various legislation of references to the existing Corporations Act.

We highlight two substantive changes of significance for Ontario non-share capital corporations:

Clarification of Transition to ONCA

Bill 85, if passed, clarifies that to the extent any valid provision in an existing non-share capital corporation’s letters patent, supplementary letters patent, by-laws or special resolutions (“governance documents”) do not conform with the provisions of ONCA, those provisions continue to be valid and in effect until: (i) the day the corporation amends its governance documents to bring them into conformity with ONCA; or (ii) the third anniversary of the date the transition section of ONCA is proclaimed into force.

To summarize, the transition provisions clarified by Bill 85 are as follows:

  • ONCA applies immediately to all non-share capital corporations incorporated by letters patent under the Corporations Act.
  • If there is a provision in your existing governance documents that is in clear conflict with ONCA, the provision in your governance documents will prevail for up to three years provided that provision is currently in compliance with the Corporations Act.
  • If ONCA prescribes a requirement that is not in clear conflict with your governance documents, the new requirement will apply immediately (for example, unless your organization’s governance documents expressly address the scope and process in which member proposals may be put to meetings, member proposals as permitted by ONCA will immediately apply).
  • Any amendment to the governance documents once ONCA is proclaimed into force must include all changes required for the corporation to be in conformity with ONCA.
  • If within three years after the ONCA is proclaimed in force an organization does not voluntarily amend its governance documents to conform with ONCA, it will be deemed to have done so to the extent necessary to bring the governance documents into conformity with ONCA.
  • ONCA requires certain provisions (for instance, multiple classes of membership with different or no voting rights) to be set out in the articles to be valid. If such a provision exists and is set out in the by-laws, it must be restated in the articles to conform with ONCA by the third anniversary, following which it becomes invalid.

Voting Rights of Non-Voting Members on Fundamental Corporate Changes

One significant change under ONCA is the creation of a statutory right of non-voting members to  vote, sometimes separately as a class, on certain fundamental corporate changes, including decisions to amalgamate, to continue out of ONCA, to approve the sale or lease of all or substantially all of the property of the corporation, and to make amendments to governance documents that would adversely impact the rights of non-voting members.

Bill 85 clarifies that the voting rights of non-voting members will be proclaimed into force no earlier than the third anniversary of the date ONCA is proclaimed into force. Accordingly, non-share capital corporations with non-voting members now have a period of time to deal with this issue before these statutory rights become available to non-voting members.

The text of the government’s announcement and Bill 85 can be found at:

http://news.ontario.ca/mcs/en/2013/06/ontario-government-making-it-easier-for- not-for-profits-to-do-business.html

http://www.ontla.on.ca/bills/bills-files/40_Parliament/Session2/b085.pdf