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Bill 154 proposes long-awaited changes for not-for-profits

Ontario’s introduction of Bill 154, the Cutting Unnecessary Red Tape Act will, if passed, allow the province’s not-for-profit sector to begin to modernize in the way it has wanted to for years, says Toronto health lawyer Kathy O’Brien.

“This is a big deal because the sector has been waiting for it,” she tells AdvocateDaily.com

“It’s a long-awaited step forward in what is really glacial progress for change.”

O’Brien, a partner with DDO Health Law, notes the proposed changes for not-for-profits will impact more than 100 Ontario hospitals, as well as community health centres, family health teams and community mental health agencies.

“They will welcome these changes,” she says. 

“The existing not-for-profit legislation is antiquated. It has not been robustly updated for many years. The proposed legislation is important for not-for-profit corporations because it sets out new rules, including how their board members get elected, what kind of terms they can serve and for annual member meetings.”

Bill 154 is an omnibus piece of legislation that proposes amendments to a host of different of laws, including the Ontario Corporations Act and the Charities Accounting Act

O’Brien says the sector has essentially been waiting for such changes since Ontario passed new and completely overhauled legislation called the Ontario Not-for-profit Corporations Act (ONCA) in December 2010, but it has never been proclaimed into law.

“So we’ve just been in limbo, according to the government, for two reasons: one they wanted to pass some technical amendments and they also needed to develop the technological infrastructure to support it,” she says. 

“I guess they needed to put into place the technological platforms to be able to do that. So we’ve been waiting seven years.”

Bill 154 includes those technical amendments to the ONCA and also changes the existing out-of-date legislation, the Ontario Corporations Act, O’Brien adds. 

The government says the timeline to roll out these changes involves passing Bill 154, after which the not-for-profit sector has two years before the ONCA will be implemented, she says. 

“That takes us to nearly 2020 and then the ONCA itself says the not-for-profit sector has an additional three years after it’s in place to transition under these new rules so we’re going to have to live with the antiquated Corporations Act for another five years,” she says. 

But O’Brien says it’s exciting that the Cutting Unnecessary Red Tape Act, if passed, not only will bring in the technical amendments to the ONCA, it will also put into force some aspects of the ONCA as soon as Bill 154 is enacted.

“So we get to have some of the cherries from the ONCA a little bit early,” she says. 

One of those changes relates to annual general meetings (AGM) for not-for-profits. Under the existing legislation, members can either attend AGMs in person to vote or send it in via proxy. Bill 154 proposes to amend the Corporations Act so that members can phone their vote into the AGM, which will modernize the process, O’Brien says.

“It has been a huge inconvenience for years,” she says. “This will make life easier for the members and brings the sector into the 21st century.”

Bill 154 also brings a section from the ONCA that maps out the legal expectations for directors of not-for-profit corporations, “O’Brien adds.

It outlines the duty the directors owe to the corporation and the standard of care that’s expected of them, she says.

“That’s a key piece of any corporate legislation, but the Corporations Act, being so old and not revised frequently, has not included that important component,” she says.

“The government, in Bill 154, has taken the language drafted in the ONCA and imported it into the Corporations Act and that’s a great piece of clarity. It sets the standard. 

“Without that in the Act, lawyers in the sector have been relying on the courts to set the rules for what not-for-profit directors are doing, and that’s not the way it should be. It should be set out in the statute so that everybody knows clearly what the rules are.”

Bill 154 also proposes changes to rights for not-for-profit corporation members, who elect directors to the board. One such amendment will allow members, by a majority vote, to remove directors, O’Brien explains. They only have this right under the existing Corporations Act if the individual board builds it into their bylaws and even then, it has to be two-thirds of the members and not the majority to remove a director. 

“This change is good for the accountability of directors,” she says.

O’Brien says the changes in Bill 154 overall are positive but “slow and tiny steps.”

“We’re still two years away from the new legislation being implemented and we’re at least five years away from the Corporations Act dropping off the books,” she says.

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