At long last, the day that nonprofits have been waiting for. The Ontario Not-for-Profit Corporations Act (ONCA) will be proclaimed on October 19, 2021.
The ONCA legislation was passed by the Ontario Legislature in 2017 but the date in which the act would come into force has been delayed for several years.
Now is a good time for Ontario Nonprofits to look at their by-laws to make sure that they are in compliance. If you are a nonprofit registered in Ontario, you will have three years after the proclamation to transition to the new rules.
Why do you need to look at your bylaws?
Your by-laws provide the backbone, the fundamental principles of your governance. Think of them as the operating manual, that guides the board and your community.
Sadly, this document is often neglected in the wake of the everyday running of your organization. However, if not attended to, this area of your governance could create a lot of angst and conflict within your organization if they are not kept up to date.
For some organizations, this could create significant problems as they must modify their articles and by-laws to conform with the Act or move to Federal corporate law under the Canada Not-for-profit Corporations Act (CNCA). Nonetheless, these new legislative changes are to provide nonprofit organizations with the opportunity to reassess their governance practices and policies and transition to modern acts.
What is ONCA?
All corporations in Ontario, including not-for-profits and charities, are currently governed by the Ontario Corporations Act (OCA). In 2017, however, the Ontario government amended the OCA and passed legislation so that not-for-profits and charities would be governed by a new act – the Ontario Not-for-Profit Corporations Act (ONCA).
With the implementation of this new legislation, the Ontario government expects it to do the following:
- simplify the incorporation process;
- clarify rules of governance;
- clarify whether not-for-profits can earn a profit through commercial activities;
- allow some corporations to use a review engagement, instead of an audit; and
- enhance members’ rights.
How Does ONCA Affect Your Organization?
If you’re incorporated as a nonprofit under Ontario’s Corporations Act, then Ontario’s Not-for-Profit Corporations Act (ONCA) applies to you. However, if you’re incorporated under the Canada Not-for-Profit Corporations Act or another law outside of Ontario, then the ONCA does not apply to you. This means you don’t need to make any changes to your articles and bylaws.
Changes that are already active under the ONCA include:
- Duty of directors to act honestly, in good faith and with a view to the best interests of the corporation
- Members’ meetings can take place by telephone or electronic means
- Members can remove a director by majority vote
- Non-members may serve as directors
- Documents may be filed electronically
Changes that will be coming into effect after the proclamation:
- Membership structures must be outlined in the corporation’s articles
- Non-voting members will have a right to vote as a class for certain decisions
- Members can put forward proposals at annual general meetings and special meetings
- Proxy and electronic voting are allowed
- New eligibility criteria for directors
- Minimum number of directors and maximum terms for directors
- Distinction between public benefit corporations and other not-for-profit corporations
- Greater flexibility for financial reporting
- Offences for contravening ONCA, misleading statements, misuse of membership
How Can Your Organization Prepare?
Work with a lawyer who specializes in the Ontario legislation, or with a team, to assess whether your nonprofit is aligned with the ONCA and what changes you’ll need to make in order for your organization to comply. Reviewing as a team can provide many advantages. Your bylaws will benefit from multiple perspectives, and more people will familiarize themselves with the new regulations. Distributing responsibilities among numerous people will make the task more manageable, and if one member leaves, the work can continue.
If the ONCA applies to your nonprofit, there are multiple things you can do to prepare ahead of time, or you can wait until after ONCA is proclaimed, on October 19, 2021, when it has taken effect. You’ll have 3 years after the ONCA is proclaimed to review, update, and file your governing documents with the Ontario government. This period is expected to end in early 2024.
Your nonprofit organization must adhere to the ONCA, that is why we recommend performing a review of your by-laws, articles of incorporation, letters patent, special resolutions, and policies to ensure that they are all current, compliant with ONCA, and embody your exact practices. You should also review these documents in consideration of your strategic plan and organizational mandate.
As ONCA makes significant changes to not-for-profit membership, it is also vital to reassess your membership structure.
To learn more, visit the ONCA legislation.
If you would like to talk to Christina more about how your by-laws can be updated to meeting modern best practices in governance, book a free 30-minute call now.
