We wanted to share with our readers what we have learned about the requirements of the Not-For-Profit Corporations Act in relation to the timing of annual meetings of members.
By way of background, the Act says at Section 160(1)(b) that the annual meeting must be held within a prescribed period from the fiscal year-end which in Section 61(2) of the NFP Regulation is set at 6 months. Further, Section 160(2) of the Act says that a corporation can apply to Industry Canada to extend this time provided the members are not prejudiced.
We are aware that a great many NSOs (and MSOs) currently have a fiscal year end of March 31st yet hold their annual meetings well after the September 30th cut-off date. This is particularly the case with summer sports, whose membership is engaged and busy all summer and not likely to be able to prepare for a late summer or early fall annual meeting.
Added into the mix on this question is the Act's requirement that audited financial statements be provided to members a minimum of 21 days before the annual meeting (Section 175(1) of the Act and Section 77(1) of the Regulations). This means that those organizations who do hold their annual meeting in May or June will be under added pressure to complete their audits in time.
We have communicated with Colleen Kirby, in-house counsel with Industry Canada who is very much involved in the NFP Act transition process, to learn more about these issues. We wanted to know the likelihood of an organization being given an exemption to the 6 month requirement to hold the annual meeting. Here was her response:
- As with much of the NFP Act, certain provisions are modeled after the Canada Business Corporations Act. Under the CBCA, the 6 month requirement can only be relaxed by application to court. In the NFP Act this provision has been softened somewhat by allowing an application to the Minister of Industry.
- Even so, the short answer to the question of an exemption is a resounding NO - the provision was never intended to permit an organization to permanently escape the 6 month requirement. It is anticipated, however, that an organization may require some leeway as part of its transition process. For example, an organization may have scheduled its annual meetings some years in advance, or the transition from the old Act to the new Act might make it logistically or financially difficult to shift the annual meeting abruptly. There may also be a historical pattern of meetings that will need to evolve gradually through the transition process.
- Ms. Kirby allowed that Industry Canada will be open to applications for exemption in these time-limited, temporary situations. But she was clear that no organization will be given a permanent exemption and all organizations will have to adjust their practices to conform with the Act.
This leaves a good many NSOs with having to consider other options, especially those organizations that combine the annual meeting with a conference, professional development sessions and other member activity:
- One option is a slimmed down business-type AGM to carry out the minimum requirements of the Act such as elections and audit. Such a meeting could even be conducted electronically. At a later time, the members can gather for a meeting to deal with other relevant member issues such as governance, strategic planning, setting fees, etc.
- A second option is changing the fiscal year-end. A handful of NSOs (golf, diving, soccer, hockey, alpine, snowboard, CIS and CCAA) function perfectly well with year-ends that are not March 31st. March 31st is a meaningless date in terms of most sports programming, but it is the date to which provincial and federal funding is tied, which is why most organizations default to this date for financial reporting.
Sport organizations will also have to think about the requirement to publish audited statements at least 21 days before the annual meeting. This may not be feasible for those organizations holding annual meetings in late May or early June. Several NSOs have reported to us that audit costs are higher in the audit season (spring) and that by delaying their audits, they are saving money. This might be another incentive to change fiscal year away from March 31st.
Feel free to contact us if you have questions about these requirements, or would like more information on the NFP Act.