The new Societies Act (S.B.C. 2015 c.18) received Royal Assent on May 14, 2015. It provides rules for the incorporation and governance of approximately 27,000 societies in British Columbia. Once in force, the new legislation will be the first substantial change to the current legal regime which has been in place since 1977.
What Happens Next?
Although the new Societies Act has received Royal Assent, it is not yet in force. There are some indications that the new legislation could come into force as early as January 1, 2016. This will depend on whether the government is able to finalize the implementing regulations, model bylaws and forms and can establish the necessary infrastructure for the new electronic filing system by the end of the year. As part of its societies reform, the government will implement a new public electronic database for societies and move to an electronic filing system for society records. In the future, new societies can be incorporated online, and will be able to submit constitutions and bylaw amendments, annual reports as well as other filings electronically. The new database will also provide access to the most recent consolidated bylaws of all societies as compared to the present cumbersome paper filings.
After the new legislation comes into force, there will be a two-year transition period for existing societies and extraprovincial non-share corporations. During the transition period, certain new rules, such as the requirement to have a majority of independent directors on the board, the new minimum qualifications for directors and senior managers (officers), and the restrictions on remuneration and reimbursement of directors, will not apply to existing societies.
Additionally, until they undertake the required transition process (described below) to the new Societies Act, existing societies will not be able to change their constitutions and bylaws or amalgamate. At the end of the two years all existing societies must have transitioned, and all extraprovincial non-share corporations that carry on activities in British Columbia must become extraprovincially registered.
Transition of Existing Societies
An existing society will be able to transition by electronically filing with the British Columbia Registrar of Companies (Registrar) a transition application that includes:
- a new constitution with only the name and purposes of the society;
- the consolidated bylaws of the society; and
- a statement listing the current directors and the registered office of the society.
All other provisions currently found in the constitution must be moved into the bylaws. Further, the new Societies Act abolishes the concept of unalterable provisions. While these cannot be amended or deleted as part of the transition application and need to be identified in the bylaws as “having previously been unalterable”, societies will be able to alter such provisions in the future.
Alternatively, societies that place special value on their unalterable provisions can adopt in their bylaws higher voting thresholds - up to unanimity - to protect these clauses against future change.
Existing societies that are “reporting societies” under the current legislation will also need to add the so-called “reporting society provisions” to their bylaws. These provisions also cannot be changed on transition. The exact language of the reporting society provisions is not yet known as these will be enacted by the implementing regulations for the new Societies Act.
Existing societies should use the transition period to carefully review their existing bylaws for compliance with the new legislation. They may also combine the transition application with other changes to their bylaws, provided these changes have been approved by special resolution (which will require a 2/3 majority, rather than the current 75%).
Special Rules for Special Societies
The new Societies Act recognizes two kinds of special societies, occupational title societies and member-funded societies. Each of them is subject to specific transition rules.
Occupational Title Societies
Occupational title societies (OTS) can be established under the current legislation. OTS have as one of their purposes the representation of the interests of an occupation or profession. OTS members have the exclusive right to use registered occupational titles or initials. Existing OTS are permitted to continue under the Societies Act, but it will no longer be possible to register a new OTS. Anyone interested in establishing an OTS must file a registration application by December 31, 2015.
On transition, OTS cannot amend their bylaws relating to:
- the qualifications for admission to membership or a class of membership;
- courses of study and examinations for members or applicants for membership;
- the conduct of members, ethics and standards of practice; and
- the suspension, expulsion or other penalties for misconduct, incapacity or incompetence of members.
Any alterations to these bylaws in the future will continue to require the Registrar’s written consent.
Member Funded Societies
In contrast, member-funded societies (MFS) are a creation of the new Societies Act. This category is intended for societies that exist solely for the benefit of their members and do not receive significant public funding. Several of the transparency and governance rules introduced by the new Act will not apply to MFS. We will review the rules for MFS in more detail in a future bulletin. For the purposes of transitions, qualifying societies (which excludes charities, student and hospital societies, and societies that received public donations or government funding, among others) may become member-funded societies if authorized by special resolution of its members. In addition to the other transition steps, the society must include in its constitution a prescribed statement which identifies itself as a member-funded society.