In early August of 2014, the British Columbia Ministry of Finance released a White Paper containing policy recommendations for a new Society Act to regulate the governance, organization and operation of non-share capital entities incorporated in British Columbia.  The White Paper includes the full text of the proposed newSociety Act, and includes annotations setting out background information on the proposed legislation, including the policy intention behind the new provisions.

The proposed legislation maintains and builds upon the basic framework of the current Society Act.  Societies will continue to have constitutions and bylaws that are filed at the corporate registry, and restrictions on share capital and the distribution of assets.  However, the proposed legislation provides a degree of modernization and adopts a more user-friendly drafting style.

Significant proposals in the White Paper include the following:

New Corporate and Governance Procedures

The proposed legislation adopts specific corporate and governance procedures from the Business Corporations Act (British Columbia) and other corporate legislation. While these new provisions include default governance procedures, they also provide societies with a greater ability to use their own bylaws to structure their governance for their specific needs.  For instance, societies will have more options around matters such as proxy voting, the holding of general meetings and the creation of multiple classes of membership (including the ability to create classes of non-voting membership). 

Reduced Regulatory Burden for Member Funded Societies

The most significant change under the proposed legislation is the distinction between member funded societies and those that are charities or otherwise rely on government funding.  Because they are not funded by public donations or government grants, member funded societies will be subject to fewer accountability measures.  For example, they will only be required to have one director (as opposed to three that are required for other societies), they will not need to provide the public access to their financial statements, and they will not be subject to the same asset lock on dissolution as are ordinary societies. 

Increased Regulatory Burden for Charities & Publicly Funded Societies

British Columbia societies that have charitable status or that receive significant public funding will continue to be subject to the current Society Act’s requirements respecting the number of directors, financial statements and distributions on dissolution.  Additionally, a majority of their directors must not be entitled to receive remuneration under contracts of employment or service.  These societies will also be required to publicly disclose the amount of remuneration paid to their directors and their ten highest paid employees and contractors.

Other key proposals set out in the White Paper include:

  • Implementing a mandatory online filing system for incorporation, bylaw changes and other filings at the corporate registry.  Existing societies will also be required to input their constitution and bylaws into an electronic, searchable data base;
  • Streamlining the process for incorporation by allowing a single subscriber to form a society (as opposed to five subscribers required under the current legislation).  This will make British Columbia legislation consistent with the new federal not-for-profit statute;
  • Removing the existing requirement for court approval of director indemnity payments;
  • Clarifying record-keeping and access to records;
  • Clarifying directors’ liability for improper payments;
  • Providing greater protection for directors, who are often volunteers, including court-ordered relief in legal proceedings and a defense for reasonable reliance on expert reports;
  • Clarifying that bylaw authorization is needed if directors are to be paid; and
  • Giving societies greater flexibility to meet changing needs by enabling unalterable provisions in a society’s bylaws to be altered by special resolution.

Submissions for Comments:

The proposed legislation is still in draft form and is subject to revision as a result of further consultation and comments from stakeholders.  Comments on the White Paper may be submitted to the Ministry of Finance up until October 15, 2014.

Jordan Regehr