Bill 154 suggests ONCA may finally be proclaimed

By Rob Lamberti, Contributor

Governance improvements offered by Ontario's omnibus Bill 154 — the Cutting Unnecessary Red Tape Act — signal the province is ready to bring meaningful change for not-for-profit organizations' regulatory regime, says Toronto health lawyer Michael Gleeson.

The bill is an omnibus piece of legislation that proposes amendments to a host of different of laws, including the Corporations Act and the Charities Accounting Act.

While the bill has been ordered for third reading, Gleeson tells that its amendments, which include incorporating electronic advancements for not-for-profits, may suggest the government is getting closer to proclaiming its umbrella legislation, the Not-for-profit Corporations Act, 2010 (ONCA).

That law was passed in 2010 but has yet to be proclaimed. In the meantime, not-for-profits are governed by the Corporations Act, a law many describe as antiquated. Bill 154 offers updates to the Corporations Act allowing not-for-profits to modernize, while waiting for ONCA to be proclaimed, Gleeson says.

"The amendments are significant and it's a sign we're moving forward to perhaps having this new legislation in effect," says Gleeson, a partner with DDO Health Law, but corporations will not be required to comply with certain amendments for at least five years.

Waiting for new legislation has meant not-for-profits, which include hospitals and long-term care homes, have been “sitting in limbo since 2010," he says.

The wait is likely related to how the government has been working on ONCA's technical amendments, Gleeson says.

"Our understanding is that much of the delay has been around getting technical capabilities in place before the government will implement the act and some of the electronic filing options made available by the legislation," he says.

"The amendments in Bill 154 are exciting because it's a sign the government is ready to go ahead to implement ONCA, which everyone has been waiting for," Gleeson says.

The bill hosts technical amendments allowing for filing and searching of documents in an electronic format.

"It's all in the theme of modernizing the legislation and moving it forward into our current reality of electronic documentation and access to documents," Gleeson says.

It's one of many changes the act contemplates, he says,

It also alters the voting rights for members of certain not-for-profit organizations, Gleeson explains.

"It creates a mechanism whereby different classes have the ability to vote on important matters independently of other classes — and these matters won't be passed unless each individual class of members independently passes the related resolution," he says.

Gleeson says that means a not-for-profit will be required to have current non-voting classes of the organization vote on and approve important amendments.

"That's different from the way the Corporations Act is set up now. It changes the way not-for-profits look at their membership classes and decide whether they should have multiple classes," he says.

"In the past, there have been non-voting classes, such as honorary members, to recognize significant contributions that individuals provided to that corporation."

They were recognized as non-voting members but Gleeson says in the future, they may have the right to vote on significant internal issues.

Bill 154 proposes that the changes to voting rights not come into effect until three years after the legislation is proclaimed. The Ministry has stated that a two-year notice will be provided before ONCA is proclaimed to be in force.

"I say five years because there'll be a two-year notice period before ONCA comes into effect and once it does, there'll be an additional three-year period before organizations have to accommodate the required changes in voting rights," Gleeson says.

The proxy-voting procedure is also proposed to change under the bill where it becomes optional, he says. Proxy voting will only be required for an organization if it's permitted in its bylaws or articles and each not-for-profit can determine rules as to who can be a proxy, Gleeson adds.

"I suppose it provides some flexibility for organizations that really value the members themselves voting so they're not handing over their voting rights to someone else to exercise them," he says.

In addition, the new act sets a requirement for financial statements to be circulated to all members 21 days before an annual meeting but Gleeson says that could be onerous for smaller organizations.

"The amendment in Bill 154 allows the government to set an alternative number of days by way of regulation," he says.

What it will look like — whether the shortened lead-up time will be determined by type, income or size of organization — remains to be seen, Gleeson says.

"We're guessing that it's to allow for flexibility for a lower number of days, but all the amendment says is 'an alternate number of days,'" he says.

"The government seeking to implement an amendment that would allow for a change in the notice period looks like an indication they will exercise it at some point."

To Read More Michael Gleeson Posts Click Here