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”). ONCA is expected to come into force in 2021.
What is ONCA?
The Ontario Not-for-Profit Corporations Act (“ONCA”) updates the rules for not-for-profit corporations in Ontario. The Ontario government expects that ONCA will 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.
Does ONCA apply to my organization?
If you are a not-for-profit or charity incorporated in Ontario under the OCA, ONCA will apply to your corporation when it comes into force. If you are incorporated federally under the Canada Not-for-Profit Corporations Act (“CNCA”), ONCA will not apply to your corporation.
What changes were made to the OCA?
Changes made to the OCA 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
Note that these changes are active now.
What changes were introduced under ONCA?
Changes introduced under ONCA include:
- 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
Note that these changes have not yet come into force.
Does my organization have to transition over to ONCA now?
Once ONCA comes into force, your corporation will have a three-year transition period to make necessary changes to your governing documents.
PooranLaw, however, does recommend changing your governing documents now (including incorporation documents and by-laws), to ensure that your corporation is well-prepared when ONCA comes into effect. In terms of membership structure, it would be much easier to make changes under the OCA now, rather than pursue a more complicated process under ONCA.
Alternatively, you may want to shift your corporation to federal legislation (CNCA), in order to avoid the transition to ONCA altogether. We recommend that you seek legal advice to determine the best course of action for your organization. Our lawyers are well-equipped to assist you with this process.
What should our corporation do before ONCA comes into force?
PooranLaw recommends undergoing a review of your by-laws, articles of incorporation, letters patent and policies to ensure that they are current, ONCA-compliant and reflective of your actual practices. You should also review these documents in light of your strategic plan and organizational mandate.
It is critical that you review your membership structure, as ONCA makes significant changes to not-for-profit membership.
For more information, please visit the Ontario government’s Guide to the Not-For-Profit Corporations Act.
If your not-for-profit or charity is provincially incorporated, we recommend that you contact PooranLaw to determine your best course of action.