Published May 6, 2013
As most readers know, we are working with a great many NSOs and MSOs on transition to the new Canada Not-for-profit Corporations Act. Recently, we have discovered that not all sport organizations are up to date on their filing of bylaws with Industry Canada. In fact, to tell you the truth, a majority of the organizations we are working with are NOT up to date. This is creating some unexpected havoc with the process of doing the transition in two steps, which is necessary for those organizations that have many different classes of members and/or many hundreds (or thousands) of non-voting members.
As background, bylaws created under the Canada Corporations Act must be reviewed and approved by Industry Canada before they take effect. This is also true with any amendments to bylaws. After the members approve amendments, they are to be sent to Industry Canada who reviews them, and if they pass muster with the Act and the government's various corporation policies, then Industry Canada writes back a "Letter of Ministerial Approval". It is only when this letter is received that the amended bylaws come into force. Of course this is a very inefficient system, and efficiency is one of the goals of the new legislation, so once your organization has transitioned to the Canada Not-for-profit Corporations Act it will no longer be necessary to get Industry Canada approval (thank goodness!).
But here is the problem we have discovered - many organizations have NOT filed bylaw amendments with Industry Canada. Thus, the bylaws which your organization relies upon may not be the bylaws that are legally in force. This point has been brought home in several cases, as organizations have filed amendments in 2012 0r 2013 (which would ordinarily meet with Industry Canada approval) only to discover that the remainder of the bylaws have deficiencies. Thus, Ministerial Approval cannot be obtained unless the all the deficiencies are corrected which requires that you return to your membership for more amendments. Logistically, this might be impossible.
The result of this situation, which we have encountered numerous times already, is that an organization's pathway to compliance with the new Act becomes considerably more complicated. We have even encountered one NSOs that has no bylaws on file at all! A dark cloud perhaps, but one with a silver lining because the organization may be able to transition from a 'clean slate', which could be easier than transitioning from existing bylaws. Possibly a good problem to have ....
In recent months we have added a 'due diligence' step in our work with NSOs and MSOs, which is to confirm with Industry Canada exactly what is in their files and has been approved. The Clerks and Examiners at Industry Canada have been understanding and helpful in this step. Depending on what Industry Canada comes back with, your organization's transition strategy may need to be adjusted.
If you would like to learn more about this little problem, or if you would like our help in retrieving or reviewing what you have "on the record" (versus what you think you have), please contact any one of us. And, our kudos to those NSOs and MSOs who have been doing a good job with their bylaws, keeping them current with Industry Canada. We know who you are, and you do too - congratulations!