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What you need to know

In January, Christina Canagasabey joined the Acacia Group. Christina is a corporate and charity law lawyer. If your organization needs assistance with their corporate law needs, you can reach Christina at christina@acaciagroup.ca

The Transition to ONCA: What you need to know

The Ontario Not-for-Profit Corporations Act (ONCA) came into force on October 19, 2021, and you may be wondering whether and how it may apply to your organization. Below is a quick overview of what you need to know about transitioning to the ONCA.

Does the ONCA apply to my organization?

The ONCA applies to non-share capital corporations, which includes not-for-profit and charity organizations, which were previously incorporated under the Ontario Corporations Act (OCA). If your organization was incorporated under the Canada Not-for-Profit Corporations Act (CNCA), then the ONCA does not apply to you.

What is the timeline to get the letters patent and by-laws in order?

There is a grace period of 3 years to review and update the letters patent, supplementary letters patents and by-laws to ensure compliance with the ONCA (note that the ONCA replaces the term “letters patent” with “articles of incorporation”). This means, until October 19, 2024, all your documents are considered valid. Once the deadline is up, the provisions in the letters patent and by-laws will be deemed amended to the extent necessary to be compliant under the ONCA.

So, what are the changes?

Here are some key differences that you should be aware of:

(a) New Concept of “Public Benefit Corporation” 

The ONCA distinguishes between “public benefit corporations” and “non-public benefit corporations.” This distinction is similar to the language of soliciting and non-soliciting corporations. If a not-for-profit corporation receives more than $10,000 per fiscal year from either (a) donations and gifts from persons who are not members, directors, officers, or employees of the corporation, or (b) grants or financial aid from any level of government or government agency, it is considered to be a public benefit corporation.

A public benefit corporation has specific rules that apply to it, so it is important that you properly categorize your organization. For example, the ONCA allows employees of a not-for-profit corporation to be directors, but for public benefit corporations, only one-third of the directors can be employees.

(b) Directors and Officers 

There are many changes and additions in the ONCA regarding directors and officers.

For instance, whereas the OCA required a specific number of directors, the ONCA has set a minimum number of directors (3). However, unless your organization files articles of amendment, your board will remain at the last fixed number authorized when it was an OCA corporation. The ONCA also sets out eligibility requirements for directors. The OCA required choosing the president from among the directors, but the ONCA does not have such a requirement.

(c) Rights of Members 

The ONCA specifies that the number of classes of members and the attached voting rights be listed in the articles of incorporation (instead of the by-laws), and that the by-laws of a corporation must set out the conditions required for being a member of the corporation and the methods of voting permitted. If the articles are silent on voting rights, then each class of members will be deemed to have voting rights.

(d) Financial Review Engagement Process

While the OCA required an audit done by a certified independent auditor, the ONCA allows some corporations to have a “review engagement process,” instead of an audit. The review engagement process can be less time-consuming and less expensive than an audit. The ONCA prescribes what is considered “independent” of the organization for the individual chosen to conduct the review.

These are only a few key changes that will affect many Ontario not-for-profit corporations, but there are several nuanced changes that require attention. It is advisable to have a lawyer review your specific letters patent and by-laws to ensure that your organization is compliant and structured to continue succeeding under the new act.

This article is legal information and does not constitute legal advice. If you would like your letters patent and by-laws reviewed for ONCA compliance, please contact Christina Canagasabey at christina@acaciagroup.ca.

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