How Should Ontario Nonprofit Corporations Adapt to the ONCA?

The Ontario Not-for-Profit Corporations Act (ONCA) introduces substantial changes and opportunities for not-for-profit organizations in Ontario. This new legislation offers a chance to revisit and potentially revise membership structures, ensuring they align with the evolving needs of the corporation. Let's explore how nonprofit corporations can effectively navigate these changes.

Reviewing Membership Structures

Key Considerations:

• Class or Group of Members: Assess whether having multiple classes or groups of members would benefit the organization. Different classes can cater to varied interests and participation levels within the corporation.
• Transferable Memberships: Evaluate the potential benefits and drawbacks of allowing membership transfers. This flexibility might attract more members but requires careful implementation in the articles or bylaws.

Enhanced Voting Rights and Remedies

The ONCA significantly enhances the rights and remedies available to members, aligning them more closely with those afforded to shareholders under the Ontario Business Corporations Act (OBCA). Here's what members are now entitled to:

1. Submitting Proposals:
   • Members can submit proposals on any matter to be raised at an annual meeting, provided they meet certain requirements and thresholds. This empowers members to have a direct influence on the corporation's agenda.
2. Requisitioning Meetings:
   • Members holding at least 10% of the vote, or a lower percentage specified in the bylaws, can requisition the calling of a meeting of members or directors. This provision ensures that significant issues can be addressed promptly.
3. Proxy Voting:
   • If allowed by the articles or bylaws, members can vote by proxy. This allows members who cannot attend meetings in person to still have their voices heard.
4. Protective Measures:
   • Members have the right to apply to the court for an investigation into oppressive or prejudicial actions by the corporation. They can also apply to the court to bring a derivative action on behalf of the corporation. These measures provide robust protection for members' interests.

What is "Special Resolution"?

The ONCA modifies the definition of a "special resolution" from what was previously outlined in the Ontario Corporations Act (OCA):

• ONCA Definition: A special resolution is a resolution approved by at least two-thirds of the votes cast by members entitled to vote at a meeting called for that purpose. Alternatively, it can be passed unanimously by all members in writing.
• OCA Definition: Under the OCA, a special resolution required approval by the corporation’s directors and subsequent confirmation by the members, subject to certain thresholds.

Approving Fundamental Changes

Under the ONCA, members must approve key structural changes within the corporation, ensuring greater member involvement and oversight. These fundamental changes include:

• Amalgamations: The merging of two or more corporations into a single entity.
• Sale, Lease, or Exchange of Property: The transfer of all or substantially all of the corporation's property, other than in the ordinary course of its activities.

The ONCA presents not-for-profit corporations with an opportunity to modernize and strengthen their governance structures. By reviewing and possibly revising membership structures, understanding the enhanced voting rights and remedies, and adapting to the new definition of special resolutions, corporations can better align with the ONCA's provisions. This will not only ensure compliance but also empower members and enhance the overall effectiveness of the corporation.

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