Why and When You Are Required to Re-Incorporate Your Organization

A lot of sport organizations are hearing buzz about a major government law that will affect their operations and possibly their bylaws.  Organizations are coming to us, concerned, and wondering if the new “corporations law” affects them, when they have act, and what they have to do. We have written about these matters previously, but based on calls we are receiving, we think it is important to revisit that matter and update our readers.

Most national sport organizations are incorporated under Part II of the Canada Corporations Act (CCA-II) and most provincial sport organizations (as well as some local organizations) are incorporated under their province’s version of the same law.  In Ontario, most provincial sport organizations are incorporated under the province’s Corporations Act, which currently governs not-for-profit corporations.

The federal government introduced a bill (Bill-168) that would replace the CCA-II with a much more modern Not-For-Profit Corporations Act (NPCA).  The new modern NPCA changes a handful of items related to how corporations operate.  Bill-168 received Royal Assent in June 2009.  Before the bill becomes a law, it must go through a stage where regulations (relating to time limits, fees, and other variables within the bill) are discussed and debated by the public legal community.  In October 2010, debate on these regulations ended and Industry Canada is preparing to the release the completed law and its regulations.  The NPCA is expected to come “into force” at any time.

Once the bill comes into force as a law, corporations that were incorporated under the old CCA-II (the vast majority of National Sport Organizations) will have three years to comply with the new NPCA.  Complying with the NPCA means that organizations will have to review their constitutions and by-laws to ensure that they are not in opposition to the new law.  Industry Canada will produce forms that organizations will have to complete showing that they are compliant.

One possible major change to an organization’s operations is that any major adjustment affecting membership categories may only be passed with voting consent of the affected categories – even if those categories were not originally assigned voting rights. In fact, the new law provides that all members (voting or non-voting) must be given a say in certain fundamental changes to the organization’s bylaws.  During the three-year window in which to comply with the NPCA (the time in which constitutions and by-laws should be reviewed) organizations may wish to preemptively revise their membership categories while still incorporated under the CCA-II, so that they are not put in the position of needing to consult and entertain votes from ALL categories of members to make any fundamental changes. Consider the administrative ramifications for a NSO like Softball Canada if they had to provide the opportunity to vote for all coaches, players, officials, teams and leagues playing organized softball in Canada.

Many provinces are following the federal lead and are introducing their own new not-for-profit corporations acts.  In Ontario, Bill-65 received Royal Assent in October 2010 – though the regulations debate stage has not yet started.  The bill is expected to come into force in late 2011 as the Ontario Not-For-Profit Corporations Act (ONPCA).  Provincial sport organizations in Ontario (as well as some local sport associations that are incorporated) will have three years to transition into compliance with the new law.

At the Centre for Sport and Law, when the time comes, we are prepared to help organizations review and revise their constitutions and by-laws in order to be compliant with the new legislation.  For NSOs, this time will come when Industry Canada releases compliance application forms and the three-year window for compliance begins.  We have prepared a Guide to the NPCA and parts of this Guide will be among the new resources available on our new website in the New Year.   For Ontario-based PSOs, this time will come in late 2011 or early 2012 when the OPCNA comes into force.  We will prepare a Guide for that law as well.

Via our new website, we will let you know when the three-year compliance window begins and specifically what services we can provide to help you become compliant.  Compliance will not be a painful process and we can be there to help you find your way.

Originally published: Centre for Sport and Law Newsletter (2010) Vol. 6(4)

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