ONCA

Ontario’s Not-for-Profit Corporations Act (ONCA) information session Summary and Video link provided

Athletics Ontario held an ONCA information session on October 9 and for those who were not able to attend, we have provided below, a link to the recording and a couple of good informational links, as well as an AI-generated summary.

Link to Audio recording: https://drive.google.com/file/d/1288BKWuBPJ-7Y6A0VfsVdA9iiuRllZoo/view?usp=sharing
Link to ONCA guide: https://www.ontario.ca/page/guide-not-profit-corporations-act-2010
Steps to transition to ONCA: https://nonprofitlaw.cleo.on.ca/transition-to-onca/need-to-act/

Meeting summary for AO ONCA Information Session (10/09/2024)

Quick recap

Paul and Boris led a discussion on the Ontario Non-Profit Corporations Act and its new rules, emphasizing the importance of compliance and understanding the validity of documents post-transition. They also discussed the process of filing articles and annual returns, the implications of being a Public Benefit Corporation, and the requirements for directors and officers in a club setting. The conversation ended with a summary of action items and a reminder for anyone with further questions to reach out to Paul or Boris.

Next steps

Club leaders to review their current bylaws and articles to assess compliance with ONCA requirements.
Club leaders to file articles of amendment and update bylaws to align with ONCA if not already done.
Clubs to ensure they have at least 3 directors as required by ONCA.
Clubs to file annual corporate returns to maintain good standing.
Clubs with over $10,000 in non-member revenue to address audit requirements or obtain member approval to dispense with audit.
Clubs to consider implementing electronic financial systems like QuickBooks to streamline bookkeeping and reduce audit costs.

Summary

Ontario Non-Profit Corporations Act Discussion

Paul initiated the meeting, ensuring all participants were muted to minimize background noise. He also mentioned that the session would be recorded and shared with attendees for reference. The main topic of the meeting was the Ontario Non-Profit Corporations Act and its new rules that came into effect a year ago. Boris Nevelev, a board member of Athletics Ontario and a lawyer, was invited to lead the discussion. He clarified that the session was about Ontario-based non-profits and not those under Canadian law. Boris also mentioned that the Ontario Non-Profit Corporations Act took 14 years to be implemented and that the transition period started in 2021, giving non-profits three years to ensure compliance. The meeting was intended to be interactive, with Boris encouraging participants to ask specific questions.

Transition Period and New Statute Discussion

Boris discussed the transition period ending on October 19th, emphasizing that the law does not automatically do anything negative if an organization has not made necessary amendments. He highlighted the importance of understanding the validity of documents post-transition, as it may be difficult to determine which provisions remain in force. Boris also explained the shift from letters patent to articles under the new statute, noting the flexibility it offers. He stressed the need to include certain provisions in the articles, such as the organization’s name, purposes, and membership classes with their respective voting rights.

New Provisions and Annual Corporate Returns

Boris discussed the new provisions in the organization’s articles, emphasizing the need for at least three directors and the importance of stating the minimum and maximum number of directors in the articles. He also mentioned that the maximum term for directors is four years, with no term limits, and that the organization must file annual corporate returns to maintain good standing. Boris advised that if the organization fails to file these returns, it may face dissolution by the government agency. He encouraged any questions and offered to answer them.

Bylaws and Articles Compliance Discussion

Boris discussed the importance of bylaws and articles in the context of Ontario’s new statute. He suggested that organizations should start with the government’s recommended form and build their bylaws accordingly, rather than trying to revise existing ones. Boris emphasized that bylaws need to be approved by directors and then confirmed by members at the next meeting, while articles can only be approved by members. He also noted that articles can be amended at any time, but require a two-thirds majority vote from members. Boris concluded by stating that while the process may seem complex, it is essential for maintaining compliance with the new statute.

Ontario Corporate Filing and Meeting Procedures

Boris discussed the process of filing articles and annual returns for corporations in Ontario. He clarified that anyone can submit annual returns, but articles must be submitted through the new corporate registry. Boris also explained the importance of the annual return form, which must list all current officers and directors. He highlighted that the notice period for special resolutions is the same as for regular meetings, and that these resolutions must be part of a special meeting. Boris also discussed the process of submitting articles electronically, suggesting that this could be done by printing a copy and mailing it. He further explained that directors cannot participate in board meetings by proxy, and that the new statute allows for electronic meetings, voting, and attendance. Lastly, Boris clarified the different types of resolutions, including ordinary, special, and extraordinary resolutions, and their respective voting requirements.

Public Benefit Corporation Implications and Financial Standards

Boris explained the implications of being a Public Benefit Corporation for clubs receiving more than $10,000 annually from non-members, including the requirement for an annual audit and the possibility of dispensing with it through an extraordinary resolution approved by 80% of the members. He also outlined three levels of financial statements and clarified that clubs with annual revenues under $100,000 can dispense with the audit requirement and review engagement, but those with revenues between $100,000 and $500,000 can only dispense with the audit requirement. Paul confirmed that most clubs have revenues above $10,000 and some above $100,000. Boris further discussed the financial standards for organizations, emphasizing that they must meet a compilation review standard, and confirmed that an organization with $200,000 in annual revenues could dispense with the audit and still require an 80% member resolution.

Quorum and Voting Requirements in Meetings

Paul and Boris discussed the requirements for quorum and voting percentages in meetings. They clarified that the 80% threshold refers to the percentage of members in attendance, not the total number of members. They also noted that as long as quorum is met, the 80% threshold can be achieved by those in attendance. Boris suggested that if the meeting’s purpose is highlighted, more people may choose to attend and participate in voting. They also discussed the concept of quorum in the context of club bylaws, with Boris clarifying that the default quorum is a majority of the members entitled to vote, but this can be altered in the bylaws. However, any changes to the quorum would need to be approved by the directors and then confirmed by an ordinary resolution at the next meeting of members. Paul raised a concern about clubs not having a lower quorum in their existing bylaws, which could make it difficult to change them. Boris suggested that a new bylaw could be adopted by the board of directors, which would then be valid and could include a different quorum requirement. However, he emphasized that this was not legal advice and that the members would have the right to reject the new bylaw if they attended a meeting and disagreed with it.

Public Benefit Corporation Governance Discussion

HOC and Boris discussed the implications of becoming a Public Benefit Corporation. Boris clarified that there were no significant changes beyond the governance practices, and that the board’s responsibility to approve annual financial statements remained. He also mentioned the importance of financial literacy for directors. HOC asked if Onca placed a higher responsibility on directors, to which Boris responded that it simply codified the existing standards. Paul added that financial literacy was crucial for directors, especially in the context of Athletics Ontario.

Directors and Officers Liability Insurance Discussion

Paul and Boris discussed the directors and officers liability insurance for non-profit organizations. Paul clarified that the insurance only covers negligence and not intentional misconduct. Boris added that the insurance company would undertake a detailed investigation if the level of exposure was significant. They also discussed the maximum payment limit of $2 million for directors and officer liability and $10 million for general liability, with a $1,000 deductible. Paul mentioned a case where a club was unable to apply for a funding grant due to non-compliance with the Ontario not-for-profit Corporations act. Boris emphasized that compliance with Onca does not guarantee satisfaction of requirements by granting agencies, which may require audited financials.

Financial Audit Process and Bookkeeping Strategies

Paul and Boris discussed the financial audit process for their organization. Paul shared that their auditor, Coulson, Thompson, Turnbull, had recently expanded and was very reasonable in their pricing. Boris emphasized the importance of having a high-quality system of internal bookkeeping to avoid high audit costs. He suggested using software platforms like QuickBooks for better organization and presentation of financial records.

Statute Alignment, Funding Sources, and Compliance

Boris discussed the alignment of two statutes and their implications for funding sources, suggesting that an unincorporated association could transition to an Ontario corporation more easily. He also highlighted the transition process for non-compliant provisions and the requirement for an audit in public benefit corporations. Andrew Peters summarized the action items as making the articles of amendment and updating the bylaws to be in compliance with the new Onca requirements. Boris and Paul discussed the requirements and responsibilities of directors and officers in a club setting, with Boris clarifying that there is no set number of directors required but at least three are required by the statute. Paul encouraged anyone with further questions to reach out to him or Boris.

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