Directors of Education, Superintendents of Business, Trustees and Boards of Directors of Foundations are advised to start thinking now about the impact that the soon-to-be enacted Ontario Not-for-Profit Corporations Act (“ONCA”) will have on their not-for-profit foundation.
The new legislation is widely regarded as a major reform of not-for-profit governance in Ontario. It is aimed at creating greater transparency, accountability, flexibility and efficiency. Boards of Directors will note that there are particularly significant revisions to Members’ rights and Director liability, which we will explore in greater detail in Parts II and III of this series of newsletter articles. Our focus in this issue will be to discuss why school board Foundations should be turning their attention to the implications of the changes soon to be required.
Under the ONCA, any provisions of an organization’s Articles and By-laws, which have not been amended to comply with ONCA requirements within three years of its enactment, will be "deemed" into compliance thereafter.
There are a number of reasons why Foundations should be wary of allowing their governance structure to be dictated by the deeming and default provisions of the ONCA, and why they might instead treat the transition period as an opportunity to incorporate the new features of ONCA while updating their practices in a manner which compliments and serves their strategic plan and organizational vision.
- The Opportunity for Clarity
One of the primary purposes of any By-law is to codify the process by which an organization makes decisions and determines its policy direction. A By-law should also offer a means of resolving differences of opinion. The more clearly a By-law is drafted, the more expeditiously a Board of Directors will be able to navigate their way through any disagreement, whether about process or substance.
However, the benefits of a well drafted by-law are undermined when the rules by which matters are decided can be found in multiple additional sources, including the Articles and Supplementary Articles, Roberts Rules of Order, the Corporations Act, the ONCA, and their regulations. Where these documents are not aligned, the potential for misunderstanding can be compounded rather than diminished. The new ONCA provides a solution to this potential problem by providing the framework for developing one comprehensive and ‘user-friendly’ document for Foundation Directors.
- The Opportunity for Accuracy and Compliance
Many Foundations adopt by-laws at the time of incorporation. Unless the content thereafter proves to be blatantly unsuitable or impractical to follow, Boards of Directors typically direct their efforts towards fundraising and supporting students. Over time, By-laws may no longer reflect the practices which evolve with the governance of the Foundation.
This kind of migration from adherence to the By-law rules, which were drafted to comply with statutory requirements and approved by the Board and the Membership, can be problematic. The Foundation could be vulnerable to any Member who might wish to challenge the validity of a decision or the competence of the Directors.
The enactment of the ONCA provides an opportunity for Foundations to review their corporate Objects and By-laws, to ensure that these documents accurately reflect organizational culture and practice within the context of the new statutory regime.
- The Opportunity to Customize
A number of sections of the ONCA incorporate standard provisions, qualified by the phrase "unless the articles or by-laws provide otherwise". In other words, if a Board of Directors takes no steps to amend and customize their documents, the default provisions of the ONCA will apply. Relying on these statutory provisions alone, without considering alternatives, is a missed opportunity to include what may be working well, or could work better, for your Foundation.
- The Opportunity for Governance Training
Directors often comment that one of the rewards of serving on a volunteer Board of Directors is personal skill development. The introduction of the ONCA is a reminder to Foundations to ensure that they continually build capacity within their organization and meet their professional development mandate. This not only benefits the individual Board members, but also helps retain their services and sustain their commitment.
With so many not-for-profit organizations facing similar challenges, it is an excellent time for groups with similar objects, such as school board Foundations, to pool resources and share training opportunities.