Big news for BC sports organizations! The new not-for-profit corporations act – the BC Societies Act – has been announced to come into force on November 28th, 2016. Every BC-based sport organization currently incorporated under the BC Society Act will be required to transition in order to comply with the new Act within two years of that date.
We updated our “BC Act” page of our website and this blogpost will outline some of the steps that BC-based sport organizations should be thinking of taking NOW and some plans that they should be considering SOON.
The Sport Law & Strategy Group assisted nearly 80 federal sport organizations with their transition to compliance with the NFP Act, and we’re in the process of helping Ontario-based organizations with their preparation for the Ontario Not-for-Profit Corporations Act (ONCA) which is expected to come into force in 2017. However, the new BC Societies Act is truly a made-in-BC legislation and there are many differences between the three Acts.
Here are some considerations for BC sport groups:
NOW – Every society is required to provide its bylaws amendments (resolutions) and an annual report to the BC Registry Services. If your organization has never done this before, or has not done so in a while, then you should contact BC Registry Services to obtain a copy of your constitution and bylaws on file with BC Registry Services. These versions of your governing documents are considered to be in effect – not whatever you are currently using. For example, if you last filed resolutions with the government in 2005 – then every resolution you have passed since 2005 is not considered to have occurred. Your organization will need to contemplate transition based on the 2005 version of your governing documents that are on file with the BC Registry Services.
NOW – Determine whether your organization would currently be classified as a “member-funded” or “public-funded” society – and whether you want to change this in the future. Importantly, organizations that are “publicly-funded” are required to submit a lot more information that would be available to the public. Here are five differences:
- Dissolution – member-funded societies can distribute assets in any manner, including to members, while public-funded societies must distribute assets to another public-funded society, or a charity
- Directors – public-funded societies must have at least three Directors, one of whom must be a BC resident, while member-funded societies are permitted to have only one Director
- Board Composition – the Board of a public-funded society must be unaffiliated – which means the Directors may not be employed or under contract with the society. In contrast, member-funded societies do not have these restrictions and an employee may be a Director
- Financial Statements – in a public-funded society, the public may access the society’s financial statements. In a member-funded society, the public does not automatically have this right (but the society’s bylaws can permit it)
- Remuneration – in a public-funded society, the financial statements (which are accessible by the public) must include all remuneration paid to Directors, as well as remuneration paid to staff or contractors if the amount is at least $75,000. Identities do not need to be revealed, but positions and roles with the society do. Member-funded societies are not required to disclose remuneration.
So what’s the difference between “member-funded” and “public-funded”? Member-funded societies are societies that do not receive external funding (from government funding or public donations, or a combination of the two) more than $20,000 or 10% of the society’s gross income, whichever is greater.
Determining your classification is important for a couple of reasons. First, organizations that are member-funded societies must declare so in their constitutions and, second, it will be difficult for organizations to transfer between the two designations. Moving to a public-funded society from a member-funded society is easy enough, but moving to a member-funded society from a public-funded society requires a special resolution of the members as well as a court order.
NOW – Determine whether or not your society is a charity, or wants to be one. The main difference is here is that your organization cannot be a “not-for-profit organization” as well as a “charity” at the same time. This is a distinction made under the Income Tax Act. However, both categories can be societies under the BC Societies Act. If your sport group issues tax receipts for donations then you are charity. Importantly, if you are a charity, you cannot be a “member-funded” society (see above) which means, among other things, that your financial statements will be available to the public. There will be other, smaller differences in your transition plan if your society is a charity and wants to continue to be one.
NOW – Review our BC Act webpage! We’ve listed some of the more important changes coming under the BC Societies Act that sport organizations should be paying attention to. Transitioning to compliance with these changes may be easy for some organizations (that are already partially-compliant) but more difficult for organizations that operate in a manner very different from what will be required. Members may also be reluctant to change or adapt – so a comprehensive vision for the future structure of the society should be a priority.
SOON – Appoint a champion! Or appoint a committee of champions. Or have the champion appoint a committee of fellow champions. Whichever method works for your organization, the result should still be a person or some people who will be knowledgeable about the process and vocal about the necessity of change. Simply, your organization must transition to compliance with the new Act and it may operate differently than it has before. That fact needs to be communicated in such a way that will empower your members to understand, accept, and vote for the changes.
Many of the changes required under the new BC Societies Act may not create as much discord as the changes required under the new Federal and Ontario Acts – but some parallels can still be drawn and lessons can be learned. Some BC sport groups may take this opportunity to make major governance changes to the organization. It would be worthwhile to review the articles and resources posted on our website from our experience with the other transitions. Although the specific numbers and requirements may not be the same – the process is still sound.
SOON – Start discussing changes at the next meeting of your Board of Directors. After reviewing the material on our website, and determining which areas are most relevant to your organization, the next step should be to determine how your organization will be affected. Is there anything that you can do to mitigate any effects? Should any modifications be made right now? Will a comprehensive governance review be necessary?
We recently worked with one BC provincial sport organization on their bylaws and we found that their voting structure was not in compliance with the current Act! We worked to propose some changes but the Members were hesitant to adapt to something new. With this new, required, transition process to the new Act – members will not have the liberty to be hesitant!
SOON – The transition process is not completely clear as of yet. We know that societies will be able to transition online, and the government has built (or is intending to build) an accessible repository of each society’s submitted information. For example, a member of the public will be able to view your society’s recent bylaws in an online database and, if you are a public-funded society, they will be able to see your financial statements too.
Transition will generally occur in one way – the organization should modify its bylaws for compliance within the transition window (before the deadline of November 26th, 2018) and submit documents that are compliant with the new Act. Importantly, for member-funded societies, the required statement about being member-funded must be amended into the constitution after the Act comes into force.
SOON – Let us know if you need assistance! We’ve been going through similar processes with sport groups since 2010 and we’d be pleased to help you – either to start or lead the process, to act in advisory role, or to review the progress you make on your own.
Kevin Lawrie – KRL@sportlaw.ca