Wait and Hurry Up! New Corporations Act to Take Effect October 17, 2011

Published October 15, 2011

Industry Canada has very recently published their transition guide (HTML) for the new Not-for-Profit Corporations Act (NPCA) that will take effect in a few short days. They have also published all sorts of materials on their web site about the new Act, how to transition, and all the various forms and documents you will  need.

We have written about this extensively - most recently in June 2011. We are also in the process of working with a number of NSOs and MSOs to chart their path forward under the new Act. As we have noted in this blog before, many federally-incorporated sport organizations will have to undertake significant changes of their membership structures and board models in order to comply and operate smoothly under the new legislation.

These changes will be required due to two major features of the new Act: namely 1) that directors must be elected and ex-officio directors will be prohibited and 2) that member classes that don't have voting rights must nevertheless be involved in voting on fundamental changes to the corporation. This creates a scenario where certain classes of members, who otherwise have no vote, could effectively carry a veto power over certain future changes to a corporation's governance structure.

For many NSOs with complex membership structures, and for some MSOs that have no members at all, these two legislative requirements may lead to some interesting problems! There are also going to be changes to the requirements of charitable RCAAAs (Registered Canadian Amateur Athletic Associations) and these will have an impact on the changes that potentially need to be made under the new Act. These challenges are not insurmountable however - they just need to be carefully planned.

Here is a hot tip, based on advice we have received and also based on materials now published by Industry Canada. If your organization has complex classes of voting and non-voting members, and you plan to restructure member classes to make your life simpler under the new Act, its a good idea to make those changes first under your current bylaws and under the current Canada Corporations Act. Once those changes take effect, you can then proceed to the continuance process under the new NPCA. This introduces an additional step in the transition and may take a little more time, but the result is well worth it, as all those non-voting membership classes that your organization now has would have to be involved in the continuance application.That's a real headache!

There is lots of time to comply (three years) but probably no time to waste in terms of getting started. You also need to factor in approval from the Canada Revenue Agency of your new articles of incorporation, and some organizations may want to tidy up their affairs and do a name change at the same time (for example, Canadian Federation of Amateur Baseball might want to change their legal name to Baseball Canada).

Please do not hesitate to contact us for more information or guidance on the process of continuance. We can also help you negotiate the member consultation and discussion that may be necessary to make potentially significant changes to your membership, governance and board models. Feel free to email any member of our our Team.