The Wait is Over at Last! How to Prepare Your Organization for the Coming into Force of ONCA

Recently, the Government of Ontario announced that the Not-For-Profit Corporations Act, 2010 (“ONCA”) is coming into force October 19, 2021.

If your corporation does not have share capital, has members rather than shareholders and was incorporated under an act of the Ontario legislature, including the Ontario Corporations Act[1], then ONCA will apply to your corporation. Affected corporations have been granted a three-year transition period to bring their incorporating and other documents in compliance with ONCA.

Please note that ONCA does not apply to not-for-profit corporations incorporated federally under the Canada Not-For-Profit Corporations Act and thus, reference to not-for-profit corporations in this bulletin shall be to those incorporated in Ontario.

Overview of Key Changes Introduced by ONCA

 ONCA will provide for a modern legal framework aimed at streamlining many of the processes and filing requirements found in the Ontario Corporations Act. Below is a list of key changes that ONCA will introduce:

  • Creation of a distinction between public benefit corporations and other not-for-profit corporations;
  • A more efficient incorporation process for not-for-profit organizations;
  • Streamlining of the incorporation process for charitable organizations. Documents will be submitted directly to Service Ontario and will not longer require approval from the Office of the Public Guardian and Trustee;
  • Clarification that not-for-profit corporations may engage in commercial activities; however, any such activity must be detailed in the not-for-profit corporation’s articles of incorporation and must support the not-for-profit purpose of the corporation (please note that not-for-profit corporations may still be restricted by other legislation, such as the Income Tax Act);
  • Implementation of a “review engagement” process which will simplify the process of reviewing a not-for-profit corporation’s financial records;
  • Provide clearer rules with regards to corporate governance and increasing accountability;
  • Provide for a due diligence and good faith reliance defence for directors; and
  • Provide members with greater access to financial records, etc.

Introduction of the Ontario Business Registry

 The Ontario Business Registry will also be launched on October 19, 2021 and will allow not-for-profit corporations to complete over  90 transactions online. These transactions include registrations or filings that were previously submitted by fax or mail (such as registrations, incorporations, annual return filings etc.). The Registry will also provide 24/7 access to Government services.

Until the Ontario Business Registry is launched, not-for-profit corporations are exempt from the annual return filing requirement if the return is due between May 15, 2021 and October 19, 2021. This means if your not-for-profit corporation’s year end is March 31, then your not-for-profit corporation is exempt from annual return filing requirements until the launch of the Registry.

If you would like to receive more information regarding the Ontario Business Registry and access to the registry, please register at Ontario.ca/BusinessRegistry for updates.

What does this mean for Not-for-Profit Corporations right now?

 Once ONCA comes into force, not-for-profit corporations will have three years to review, amend and ensure their governing documents conform with ONCA. At the expiry of the three-year transition period, any documents inconsistent with ONCA shall be deemed to be amended to comply with ONCA. Such deeming provisions may make these important documents difficult to interpret, creating uncertainty.

Thus, our recommendation is that you begin the process of reviewing and amending your governing documents now, as such process for some documents may take significant amounts of time, and ensure such documents are in compliance with ONCA within the three-year transition period.

How to begin preparing your corporation to ensure ONCA compliance

Below are some key items to review and consider in preparation for your corporation’s transition to ONCA:

  • Articles of incorporation: Existing not-for-profit corporations have letters patent under the Ontario Corporations Act, which will become articles of incorporation under ONCA. This document should state the corporation’s name, the corporation’s purpose (which should reflect its current and future activities), the address of the corporation’s registered office, and the classes of members and their respective voting rights.
  • By-laws: ONCA provides a standard organizational by-law, which can be used by existing not-for-profit corporations as a guideline to ensure its own by-laws comply with ONCA. The standard organizational by-law sets out, among other things, protection for directors and officers. It is prudent to ensure your corporation’s by-laws include the keys terms from the standard organizational by-law.
  • Director and officer provisions: Due to the introduction of certain protections for directors and officers, one item to consider is whether any provisions regarding indemnification and insurance require revisions.
  • Member provisions: ONCA requires that information regarding classes of members be included in the articles of incorporation, rather than the by-laws, if there are more than one class of members.
  • Borrowing powers: ONCA gives the corporation the rights and power of a natural person, which means the corporation may borrow money without member authorization. One question to consider is whether there should be any restrictions to such right and power.

If you have additional questions regarding ONCA, how it affects your corporation and how to ensure ONCA compliance, please contact Willis Business Law. We would be happy to assist and guide you through the coming changes.

[1] Corporations Act, R.S.O. 1990, c. C. 38.

By |2021-09-27T19:11:41+00:00September 27th, 2021|

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