Understanding Membership Structures under Ontario’s ONCA

The Ontario's Not-for-Profit Corporations Act (ONCA) provides provisions for various types of membership structures, and we outline some of the frequently encountered ones as follows.

If your incorporation predates the proclamation of ONCA on October 19, 2021, there is a possibility that your bylaws or articles may not align with the regulations explained below. However, you have until October 18, 2024, to assess, revise, and submit your governing documents to the Ontario government. During this transitional period, the regulations outlined in your articles and bylaws remain in effect, provided they were valid prior to the implementation of ONCA.

Open membership

Any individual who aligns with the vision, mission, and values of your nonprofit organization has the opportunity to become a voting member.

This type of membership entails both advantages and disadvantages. Here are a few of them:

Advantages:

• Enhanced accountability due to the representation of diverse viewpoints among members
• Increased volunteer base, potentially attracting additional funding opportunities
• Augmented revenue streams from donations and membership fees

Disadvantages:

• Heightened privacy concerns arising from members' access to the membership list
• Increased potential for conflict as members are empowered to challenge the board
• Risk of a majority of members altering the nonprofit's direction and purpose without a fiduciary duty
• Additional workload to manage member records and effectively communicate meetings and financial matters

Semi-open membership

Membership eligibility is not universal as it may be subject to specific conditions outlined in your bylaws. For instance, the bylaws may stipulate:

• The qualifications and process for individuals to become members
• The requirements for individuals to obtain and retain membership
• The prescribed code of conduct that members must follow
• Any limitations on the maximum number of members that the nonprofit can accommodate.

Nevertheless, it is important to note that the rights granted to members under the ONCA, such as the right to vote, cannot be revoked or eliminated.

In terms of the membership structure, a semi-open membership approach may entail similar advantages and disadvantages as an open membership structure, depending on the specific conditions set in place.

Self-perpetuating membership

Under the Ontario Not-for-Profit Corporations Act (ONCA), it is not mandatory for directors to be members. Nevertheless, your organization's bylaws can specify that directors will be the sole members. This arrangement is referred to as a "self-perpetuating" structure, wherein the directors, while functioning as members, are responsible for electing new directors.

Advantages and disadvantages of having directors as the exclusive members of your nonprofit organization include the following:

Advantages:

• Reduced likelihood of conflicts arising, as stakeholders are unable to challenge board decisions.
• Directors are not legally bound to prioritize the interests of members, ensuring they can focus solely on the nonprofit's best interests.
• Decreased administrative burden in terms of informing and managing members.

Disadvantages:

• In the absence of legal mechanisms, stakeholders lack the means to hold directors accountable if they fail to prioritize the nonprofit's best interests.
• This could lead to reduced stakeholder participation and input, posing challenges in effectively serving the community.
• Additionally, the perception of limited transparency may result in diminished trust towards the nonprofit, potentially leading to a decreased level of trust from the public.

Single member

If your nonprofit organization is established or initiated by an individual or entity, this particular structure may suit your needs. In this case, the founding individual or organization serves as the sole member.

This type of membership is accompanied by numerous advantages and disadvantages.

Advantages:

• Enhanced accountability: With a single member overseeing the nonprofit, there is increased assurance that directors and stakeholders will act in the best interests of the organization.
• Reduced administrative burden: Having only one member alleviates the need for extensive communication and tracking of multiple members, streamlining the organizational processes.

Disadvantages:

• Limited transparency: The lack of information rights for the majority of stakeholders can result in reduced transparency regarding the organization's financial matters and decision-making processes.
• Decreased stakeholder participation: The limited involvement and input from stakeholders may pose challenges in effectively serving the community, as valuable perspectives and insights might be missed.
• Perception of closedness: There is a possibility that your organization could be perceived as closed and less transparent, potentially leading to a decrease in trust from external parties.

Hybrid membership

The exclusive voting rights within your organization are reserved for your directors, while a non-voting category is available to individuals who endorse your nonprofit's mission.

This type of membership entails a handful of advantages and disadvantages.

Advantages:

• The inclusion of more stakeholders in comparison to self-perpetuating and single-member structures encourages increased participation. This inclusive approach can attract funders and contribute to the advancement of your mission.

Disadvantages:

• There is reduced board accountability as non-director members lack voting rights and can only exert indirect influence by resorting to legal action.
• The increased number of individuals requires additional effort to manage and keep them informed about meetings and financial matters.

Representative membership:

The voting members of your organization consist of a class comprised of directors. Additionally, there are one or more other voting classes composed of members who are elected by and represent various stakeholders, such as regional or youth stakeholders.

This particular membership encompasses a variety of advantages and disadvantages.

Advantages:

• Increased flexibility due to the ability to allocate voting powers in various ways.
• Enhanced transparency and accountability by effectively balancing voting powers.
• Reduced likelihood of conflicts between members and the board by limiting the overall number of members.
• Minimized risk of members altering the purpose or direction of your nonprofit, as stakeholders are fairly represented, preventing any one group from gaining undue influence.

Disadvantages:

• Increased workload as it requires coordination of multiple elections and, in certain instances, separate voting processes.