ONCA fo finally enter into force!
At last, the Government of Ontario has announced that the Ontario Not-for-Profit Corporations Act, 2010 ("ONCA") will enter into force on October 19, 2021 - the same day the new Ontario Business Registry is set to launch. When ONCA enters into force, it will largely replace the antiquated Ontario Corporations Act ("OCA"), a statute that has governed non-share capital (i.e., not-for-profit) corporations in Ontario for decades. This is welcome news for Ontario not-for-profit corporations as many of them have deferred by-law amendments until ONCA enters into force - a date that always seemed to be around the corner, until now.
How does this impact you?
The differences between ONCA and the OCA are significant and will impact all Ontario non-share capital corporations with limited exceptions. All corporations transitioning to ONCA will need to understand how these differences will affect their corporations. We will outline some of these differences in future articles and content.
Generally speaking, corporations will not have to approve the transition to ONCA itself. Instead, they will become subject to it automatically. The transition provisions in ONCA provide that any provisions in a corporation's letters patent, supplementary letters patent, by-laws, or special resolutions that are in effect before ONCA enters into force on October 19, 2021 will remain in force, despite any non-conformity with ONCA, for a period of three (3) years.
What should you do?
Within the three (3) year period, corporations are advised to amend their constating documents to align them with ONCA. With some exceptions, if a corporation fails to align its constating documents with ONCA within that period, the provisions that do not align with ONCA will be deemed to be amended "to the extent necessary to bring [the provisions] into conformity with the [ONCA]".
Such deemed amendments have the potential to create a confusing patchwork of obligations. Unless an analysis is performed, it may not be clear which by-law provisions are still in force and which have been superseded by ONCA. The adoption of new, fully-compliant by-laws or by-law amendments is therefore advisable.
It is worth noting three exceptions to the foregoing transition requirements.
- First, certain by-law or special resolution provisions (e.g. a provision on member voting rights) will remain in force until those provisions are added to a corporation's articles in conformity with ONCA, which could be after the three-year period.
- Second, in an amendment to the OCA, corporations "with a social purpose" (e.g., clubs) will have five (5) years to transition to ONCA, the Co-Operative Corporations Act, or the Business Corporations Act or they will be dissolved. This special treatment is undoubtedly to account for the fact that many social corporations have share capital. Therefore, the transition to other legislation requires special considerations and actions.
- Third, certain electronic meeting provisions of ONCA are temporarily suspended and replaced until at least January 1, 2022 to facilitate electronic meetings during the pandemic.
Not yet incorporated?
While these changes are significant for existing Ontario not-for-profit corporations, they are also significant for entities that have yet to be incorporated. For years, prospective incorporators of not-for-profit corporations in Ontario only had one real option: to incorporate under the Canada Not-for-profit Corporations Act ("CNCA"). This was because the OCA was so outdated and because the CNCA is relatively modern. With ONCA coming into force, prospective incorporators will have two corporate statutes from which to choose: ONCA or the CNCA. This is a good thing.