Less Than 2 Years Left for Compliance with the NFP Act - Some Thoughts on Plans and Timing

Published November 21, 2012

NSOs and MSOs in Canada have less than two years to make a successful transition from the Canada Corporations Act to the Canada Not-for-profit Corporation Act. So what is the best plan for becoming compliant? There is no easy answer to this beyond a strong suggestion that organizations should start thinking about it now.

We all know that the most significant governance changes made necessary by the new Act relate to classes of membership and the structure of the board of directors. There are also many other changes, less substantive in nature, that will be required to comply.

Here are some thoughts about planning and timing your transition:

-- Examine how many AGMs you have between now and October 17, 2014. For most organizations it will be two. Some organizations are set up to have two member meetings a year which in effect doubles their opportunities to have members vote on the required changes. Start to build your plan around these member meetings, because your members have to vote on the governance changes you are making.

-- Do you have multiple classes of members and many non-voting members? If so, it is recommended that your first step of transition is to streamline member classes down to just one or a few categories of voting members, and to eliminate non-voting classes of members. To keep tabs on all those athletes, coaches, officials and administrators in your sport, who may currently be in a class of non-voting member called "Associate", you should redefine them to be "registered participants" but not members. These changes to member classes in your bylaws should be done under the Canada Corporations Act, and likely you should be looking to make them at the earliest opportunity, or your next AGM.

-- Do you have a representative, constituency-based board structure made up of many ex-officio directors and appointed directors? If so, this will have to change. The change can be done all at one time, or can be phased in over a year or more. The choice is yours, but whatever the choice, these changes can only be made through member approval of bylaw changes. So you have to plan these changes around member meetings.

-- Is it possible for your organization to call a special meeting of members at any time? Do your current bylaws allow you to make bylaw changes at a special meeting? Can this meeting be done by telephone? If your current voting members are relatively few in number, and your bylaws are flexible in allowing you to make changes at any meeting of members, then a special meeting via telephone is easy and inexpensive to do. Your ability to do this will help immensely in your transition efforts and timeline, as it means you are not bound to a single AGM each year.

-- Do you have members who are highly engaged in governance? Or are they more hands-off? Do you have provincial/territorial associations who are mistrustful of each other and of your national office? Do you have other stakeholders who need to be consulted? The extent of member consultation required varies from organization to organization. Some NSOs have been consulting their members for 18 months already, while others have not yet started.

-- Are your objects of incorporation up to date? Objects are set out in your Letters Patent (or Supplementary Letters Patent, if they have been changed from their original at some point). These will need to be reviewed, especially as there have been changes to the Income Tax Act that affect those NSOs who have charitable status. Ultimately, Canada Revenue Agency will have to improve your purposes and other matters set out in your transition documents.

-- Full transition will require submission of two documents - Articles of Continuance/Transition and Bylaws (Bylaws can be submitted up to 12 months after the Articles but for the purposes of governing your organization it is suggested that they be approved and submitted at the same time). You will possibly need some expert guidance to prepare these documents correctly.

-- Does your organization want to use this opportunity to make other changes? As we like to say, 'while the patient is on the table' it might be an opportune time to diagnose other ailments. Are there new governance practices you could adopt? Should you examine your committees and their mandates? Should you redefine your officers? Should your Executive Director's mandate and authority be reviewed? Do you want to change your legal name?

As you can see, there are lots of things to consider when making your plan. We suggest you start developing your timeline now, by working backwards from October 2014, figuring out key points for decisions, and including phases to consult members about ideal member classes, voting rights, and board representation. We also suggest you leave a little 'cushion' of time, in the event a vote doesn't go as planned. In other words, make a plan, but also make a back-up plan.