We all know that Ontario is revamping its regulation of the condominium industry. As part of the sweeping changes being introduced, the province is imposing mandatory licensing on condo managers but it is also imposing new training and new disclosure obligations on condo directors. In this post, we explore the new mandatory disclosure obligations.
Condo Directors Qualifications
The basic qualifications to be a condo directors have not changed. You still need to:
- be an individual (as opposed to a corporation);
- be over the age of 18;
- not be an undischarged bankrupt ;and,
- be capable of managing property within the meaning of the Substitute Decisions Act.
The “old” Condo Act also provides that a director in office will immediately cease to be a director if he or she becomes either incapable of managing property or an undischarged bankrupt or if a certificate of lien registered on his/her unit is not discharged within 90 days.
The “new” Condo Act imposes additional restrictions. A person will immediately cease to be a director if:
- The person has not completed the prescribed training;
- The person has not complied with the prescribed disclosure obligations within the prescribed time.
Now that draft regulations are out for review, we know more about these new disclosure obligations. This is what this post will focus on.
A condo director will have to confirm:
- Whether the person or his/her spouse, child or parent are a party to any legal action to which the corporation is a party. In such cases, the director will have to provide a brief general description of the action. I note in passing that this disclosure obligation does not seem to apply to legal actions involving a corporation controlled by a director. I am of the view that this is an oversight by the drafters of the regulations and should be corrected.
- Whether the person has been convicted of an offence under the Condominium Act within the preceding 10 years. If so, the person will have to provide a brief description of the offence. It is interesting to note that condo managers will be required to provide a recent police record check, but not directors (unless a corporation adopts a by-law requiring it);
- Whether the person has a “material” interest, directly or indirectly, in a contract or transaction to which the corporation is a party. In such cases, the person will have to advise of the nature and extent of the interest. There are additional disclosure obligations when the transaction in question involves the purchase or sale of real or personal property by the corporation or if the transaction involves the declarant; and,
- Whether he or she is in arrears for 60 days or more.
Corporations will be able to adopt by-laws to impose additional disclosure obligations.
When and How Must a Director Provide This Information?
If a person has notified the corporation in advance of his/her intention to be a candidate in the election of directors, the candidate must disclose this information in advance and in writing.
If the person advises of his/her intention to run at the meeting of owners (a “nomination from the floor” given at the actual meeting), then the candidate must provide this information at the meeting. In such case, this information can be provided either orally or in writing. Presumably there is an expectation that the minute taker will record these statements from the candidate if they are provided orally.
What About Directors Who Are Appointed by the Board?
As for directors who are appointed by the board to fill a vacancy, they also have to disclose the same information. Unless the corporation has adopted a by-law dealing with this required disclosure, the director being appointed must disclose the information either before or at the meeting where he/she is being appointed. If the information is disclosed before the meeting appointing them, it must be in writing. If the information is disclosed at the meeting, then it can be either orally or in writing.
Whenever the information is provided in writing, then the candidate must also sign the statement containing the information.
In light of the importance of the information being disclosed and of the risks associated with relying solely on minute takers, I am of the view that the information should always be provided in writing and should always bear the signature of the candidate. But this is not, presently, a requirement under the proposed regulation.
When Will This Disclosure Requirement Come Into Force?
It is anticipated that the new disclosure regulations for candidates to a director’s positions will come into force on July 1st, 2017. However, this new regulations would only apply to candidates in elections that are held 40 days or more after this date and for which a notice of meeting has not been sent by that date.
What About Directors Already on Boards?
Directors who have been appointed or elected before these disclosure obligations come into force are exempt from these disclosure obligations… until their next election or next appointment.
More importantly: These disclosure obligations are ongoing and continue to exist throughout the director’s term. Any time there is a change in the information required to be disclosed, the director has to disclose the information, either within 30 days of becoming aware of it or at the first meeting of the board, whichever occurs first. The information must be provided in writing and must bear the signature of the director. For instance, if a director (or his spouse, children or parent) become a party to a litigation involving the corporation, or should the director fall into arrears for more than 60 days, the director would have to advise the corporation. A director who fails to do this, immediately ceases to be a director. This appears to be an automatic disqualification, which would create a vacancy on the board.
The Province is Inviting Your Comments
It is to be noted that the information provided in this post is based on a draft version of the regulations proposed to be adopted pursuant to the Condominium Act. These regulations are still in draft form and subject to change.
The Ministry of Government and Consumer Services is inviting comments by March 30, 2017. Comments can be sent to :
56 Wellesley Street West, 6th Floor Toronto, ON M7A 1C1
Comments can also be sent by email. You should quote proposal number 17-MGCS001.