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Proposed amendments to Ontario's charity laws welcome: O'Brien

Proposed changes to Ontario's charity laws offer needed clarity when it comes to paying directors for any goods or services they provide, says Toronto health and charities lawyer Kathy O’Brien.

O'Brien, a partner with DDO Health Law, says directors sitting on a charity board are currently prohibited from being paid by a non-profit organization.

"Directors cannot be employed by a charity when they serve on the board. They can't be a paid advisor or consultant unless they get court approval and they can't otherwise profit from their relationship with the charity," she tells

O'Brien, who says court approval is rarely granted, describes the existing legislation as a "pitfall" for charities and directors often find themselves snared by the rules if they offer services for payment.

"I get many questions on this topic," she says. "Charities are often offside of this rule in well-intentioned ways."

The proposed amendments to the regulations under the Charities Accounting Act would allow directors to be paid under specific conditions, she explains.

"I find that very welcome because for the first time in Ontario there would be a set of rules on the books that everyone can learn about and follow," O'Brien says. "Currently, it's part of the common law, but you need to engage a lawyer to find that out and many charities don't have the money to hire lawyers."

She hopes the changes, if passed, will make it easier for charities to comply with the regulations without the need for outside help.

"This is an implicit acknowledgement that directors who serve on the board have great insight to offer and may be better placed to provide services because they understand the charity," O'Brien says. 

The amendments would apply to boards with a minimum of five directors, that transactions with directors must be approved writing by all directors, conflicts must be identified and only 20 per cent of the directors could be eligible to receive payment in any given year.

"These regulations are proposing pretty reasonable checks and balances that should give some comfort to those who donate to the charity, that it's not going to be abused, that every single director thinks an expenditure is appropriate and it's in the charity's best interest," she says.

Many elements of the legislation will remain unchanged, including unlimited jail and fine limits for directors who misapply assets. The proposals would be melded with an existing regulatory scheme to ensure good faith and honesty among directors, and that all financial transactions would be recorded in annual reports, O'Brien says.

"I think there is great transparency and accountability there," she says.

The Office of the Public Guardian and Trustee (OPGT), which oversees provincial charities, is behind the proposal, O'Brien says.

The amendments, if passed, would allow charity directors to offer "reasonable services for reasonable payment" within the confines outlined in the legislation to ensure the organization isn't abusing or misapplying donations, she says. The services, goods or facilities provided must be required by the charity and the payment can't be beyond fair market value.

"All of this seems like a good idea to me and the rules they set out seem fair and not too onerous," O'Brien says. "A director still can't be an employee of the charity. It wouldn't apply to real estate transactions, only for services and goods. These regulations allow that a payment could be made to a director, but it has to be in the charity's best interest."

She says DDO Health Law can provide legal advice to charities about what directors can do under current legislation and to formulate comments on the proposals that the OPGT is accepting until Aug. 29.

"If they want any board training or education once the law changes, we would be happy to help with that too," O'Brien says.

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