The Ontario government recently announced that the in force date for the Not-for-Profit Corporations Act, 2010 (the “ONCA”) will be no sooner than January 1, 2014.Previously the government had target dates of January 1, 2013 and July 1, 2013.The ONCA has been passed by the Ontario Legislature, but is not yet in force and the draft regulations have not been released. The ONCA will come into force on the day named by proclamation. On that day, the ONCA will apply to non-share capital corporations established under the Corporations Act (Ontario).
The Government also announced that it may make certain amendments to the transition provisions that apply when the ONCA comes into force. As currently drafted there is some uncertainty as to when and how the provisions of the ONCA apply to corporations that have not yet taken steps to conform to its provisions.This is particularly important to the question of whether or when non-voting members have voting rights.
In a response to a question about the transition period the Government stated:
The transition provision provides existing not-for-profit corporations with a three-year period to make any necessary amendments to their incorporation and other documents to conform with ONCA. These documents include letters patent and any supplementary letters patent (corporations will receive articles under ONCA instead of letters patent and supplementary letters patent), by-laws and special resolutions.
The government takes the position that provisions of these documents that are valid under the current Corporations Act will continue to be valid until the end of the three-year transition period or sooner if the corporation amends them to conform with the Act. Corporations are encouraged to review their documents before the end of this period.
It is important to note that, under ONCA, non-voting members will have some limited voting rights. However, it is the government’s intent that if an existing corporation provides for non-voting members in its letters patent, any supplementary letters patent, by-laws and special resolutions, the non-voting members remain non-voting for the three-year transition period. This will occur unless the corporation amends its by-laws, letters patent, supplementary letters patent or special resolutions to conform with ONCA during this period.
While this was clearly the intent of the drafters of the ONCA the words used in the ONCA are not clearly consistent with this statement.And while we think it likely that a Court would give effect in the circumstances to the drafters' intent, the government could give the sector further certainty by amending the ONCA to confirm that a corporation’s existing letters patent or by-laws will prevail over the ONCA until the expiration of the three-year period.
The Government also indicated it is exploring the possibility of holding back from proclamation the provisions in the ONCA giving voting rights to non-voting members in certain limited circumstances.It is our understanding that the Minister of Consumer Services will be recommending that these provisions not come into force for at least three years following the proclamation of the ONCA and the Minister intends to undertake a sector consultation on this issue.Given the uncertainty around the transition provisions we would applaud any steps taken by the government to clarify the issue.
This additional delay gives Ontario non-share corporations who are concerned about making changes more time to make the changes to their current structure before the ONCA comes into force.Please see our article Ontario Not-For-Profit Corporation Act, 2010 – An Overview of the Transition on the factors that corporations should take into consideration when determining whether changes are desired before the ONCA is in force.