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The long-awaited Ontario Not-for-Profit Corporations Act, 2010 (the "ONCA") will be proclaimed on October 19, 2021, replacing the Ontario Corporations Act (the "OCA").
Canada Corporate/Commercial Law
The long-awaited Ontario Not-for-Profit Corporations Act, 2010 (the "ONCA") will be proclaimed on October 19, 2021, replacing the Ontario Corporations Act (the "OCA"). Passed by Ontario Legislature back in 2010, the ONCA will come into force after numerous delays due to technical amendments and technological upgrades to government systems.
With many similarities to both the federal statute governing not-for-profits and the provincial legislation governing for-profit corporations, the ONCA will modernize the legal framework for Ontario not-for-profits.
The new legislation will apply to non-share capital corporations formed under Part III of the OCA, including non-share capital social clubs, such as golf clubs and tennis clubs. However, the ONCA will not apply to social clubs that have incorporated under Part II of the OCA as share capital corporations.
Below we have highlighted three key points for Ontario corporations to consider in preparation for the ONCA.
Going forward, corporations will now be able to complete applications and filings online through the Ontario Business Registry launching on October 19, 2021 (the "Registry"). Currently applications and filings under the OCA are done by mail, fax and email, taking 6-8 weeks, on average, to be processed by the Ontario Ministry of Government and Consumer Services. Processing times can take considerably longer for not-for-profits that are also registered charities. Under the new system, it will soon be possible to incorporate, dissolve and amalgamate online through the Registry. The efficiency of the filing process is expected to improve with the transition from paper to online, although a two-step process involving the Office of the Public Guardian and Trustee (the "OPGT") may still apply in certain circumstances for registered charities making changes to their documents.
The Ministry has confirmed that any documents submitted by mail on or after September 17, 2021, may not be processed before the launch of the Registry. The Ministry is suggesting that these documents may be returned for resubmission using the Registry.
Corporations should review their incorporating documents, by-laws, policies and other governing documents to ensure that they comply with the ONCA. Most Ontario corporations will have three years from the ONCA's proclamation date to make any necessary changes to their governing documents to bring them into conformity with the legislation.
Any existing provision in a corporation's letters patent, supplementary letters patent, by-laws or any special resolution that does not conform with the ONCA will remain valid until October 19, 2024. With several exceptions, any non-compliant provisions will be deemed to be amended to bring them into conformity with the ONCA on that date.
Corporations with hybrid by-laws drafted to comply with both the OCA and the ONCA, especially those with more than one membership class, should also review the bylaw to ensure it still complies with the ONCA. As of December 31, 2020, several significant provisions of the ONCA were repealed. One significant change was the deletion of specialized voting rights for otherwise "non-voting" membership classes. Many hybrid by-laws included complicated provisions included to work around the initially proposed ability for non-voting members to vote (such as providing for special groups of non-member patrons, affiliates, etc.). Because the relevant provisions of the ONCA were not extended in December 2020 with the rest of the statute and are therefore not included in the ONCA, those complicated provisions that may be contained in hybrid bylaws could be simplified substantially.
Importantly, a different transition period applies to social clubs incorporated as share capital corporations under the OCA. A share capital social club will have five years to continue under another Act, as follows:
(a) as a corporation without share capital under the ONCA;
(b) as a co-operative corporation under the Ontario Co-operative Corporations Act; or
(c) as a corporation with share capital under the Ontario Business Corporations Act.
If a share capital social club does not continue under another Act by October 19, 2026, the social club will be dissolved automatically.
The OPGT has a prescribed authority over any organization holding charitable property in Ontario, with a limited exception for hospitals. The new system comes with a proposal to change the OPGT involvement in corporate matters for charities. Currently, the OPGT must pre-approve the charitable purposes used when incorporating a charitable entity. Under the ONCA, such pre-approval will no longer be required, significantly speeding up the incorporation process. That said, the OPGT will still need to pre-approve applications for articles of amendment, amalgamation and continuation, with some exceptions.
If you are involved in the governance and operations of an Ontario non-profit corporation, you should familiarize yourself with the changes that are coming. Ontario corporations should take proactive steps to bring their governance documents into compliance.
We would be pleased to assist with this review if you are unsure of what the transition to the ONCA means for your corporation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
