Proposed Amendments to the Canada Not-for-Profit Corporations Act

Sport Law has provided governance support to sport organizations at every level of the Canadian sport system, from national sport organizations, provincial/territorial sport organizations, to local clubs and associations from coast to coast to coast.

We cannot recall a period where there was a more intense focus on the governance of sport organizations than right now. It seems that every year there is a new development – updated legislation, government requirements, and new leading practices such as the Canadian Sport Governance Code.

As the sport sector continues to process the findings of the Future of Sport Commission’s Final Report and continues to adjust to how sport programming is delivered across the country, we anticipate even more focus on governance and corporate structures in the coming years, impacting all levels of sport.

For organizations incorporated under the federal legislation, a key development to monitor involves changes to the Canada Not-for-Profit Corporations Act, 2009 (the “CNCA”).

Potential Statutory Amendments

Public consultation for amendments to the CNCA recently ended. When it came into force in 2011, the CNCA replaced Part II of the Canada Corporations Act. We wrote about the CNCA and its implications, and helped national sport organizations comply with it, since the legislation was first introduced.

The CNCA is the legislation under which most national sport organizations are incorporated, and it has never undergone a major review since it was introduced in 2011. However, many of the provinces and territories have passed new legislation for not-for-profit organizations, specifically British Columbia and Ontario, which have been accompanied by new developments and new ‘lessons learned’ with respect to governance practices for not-profit organizations.

The proposed amendments to the CNCA look to build off the evolution in modern governance practices, and include:

• Allow virtual and hybrid meetings as the default option
• Enable the Board to appoint up to one-third of directors without requiring an express provision in the Articles
• Permit the appointment of ex-officio directors
  • An ex-officio director is an individual who automatically secures a seat on a Board by virtue of holding another specific job or title, rather than being elected or appointed
• Allow delegate voting to be authorized through the By-laws rather than the Articles
• Remove the voting rights currently granted to non-voting members under the CNCA
• Require proxyholders to submit their proxies to the corporation at least 48 hours before a meeting of the Members
• Clarify that members are entitled to reimbursement of their membership fees in the event of a cancelled membership

A full description of the amendment proposals to the CNCA and supporting rationale is available here.

As the public consultation period has closed, we are waiting to see the specific language of the legislative amendments.

Review of the Proposed Amendments

Overall, the proposed amendments are straightforward. Allowing the Board to appoint up to one-third of directors without an express provision in the Articles is a welcome, practical change – many of our clients already do this through their By-laws and having it enabled directly in the Act removes an unnecessary drafting requirement.

We are cautious about permitting ex-officio Directors. We support these individuals when they are in a non-voting Board Observer role, but we advise organizations that an ex-officio Director with full voting rights can give rise to conflicts of interest, particularly as they are appointed rather than elected to their position by the members.

Similarly, permitting delegate voting to be authorized through the By-laws rather than the Articles raises concerns, as this shift could undermine the rights of Members. In Canadian sport, the dominant structure is provincial/territorial sport organizations as members of the NSO, and with a single membership category, such a shift is unnecessary.

On the more administrative proposals, we support requiring proxyholders to submit their proxies at least 48 hours before a meeting of the Members, which mirrors what many organizations already require, and we welcome the clarification that members are entitled to reimbursement of their membership fees if their membership is cancelled.

We hope that the language regarding virtual meetings is clarified to ensure that the details of meetings (e.g., zoom link, voting instructions) can be provided after notice and closer to the meeting itself.

We support removing the voting rights currently granted to non-voting members under the CNCA, as asking members to vote on amendments – when they normally have no vote – has caused confusion for organizations and their (non-voting) members. Our practice is to include individuals, which are the standard group included as non-voting members, as registrants or participants to provide a connection with the organization and ground jurisdiction over anyone participating in sanctioned activities with a sport organization.

Conclusion  

The identified amendments largely represent a positive development for federally incorporated sport organizations.

As always, we will stay engaged with any new governance developments and will inform our clients as information becomes available, including the specific proposed amendments to the CNCA.

If you need support to enhance your bylaws and governance practices, please connect with Steve, Kevin or Will for assistance.