Ontario’s new Not-For-Profit Corporations Act (“ONCA”) was officially proclaimed in force on October 19, 2021. It provides a modern legal framework for the not-for-profit sector in Ontario. This new Act applies to existing not-for-profit corporations, as well as those incorporated after ONCA’s effective date. Existing not-for-profit corporations have a three-year transition period to make changes to their governing documents to bring them in line with ONCA.

It is important to note that ONCA does not apply to all not-for-profits operating in Ontario. For example, those incorporated federally will be governed by the Canada Not-for-Profit Corporations Act. Not-for-profits incorporated under other Ontario statutes, including Ontario’s Corporations Act, may fall under the governance provisions of ONCA, but there are some exceptions. Therefore, not-for-profits should assess if ONCA provisions apply to them.

Review and Update Governing Documents

Once it is established that ONCA applies to a not-for-profit, its governing documents should be reviewed to determine if any changes are needed in order to comply with ONCA. Documents such as Articles of Incorporation, letters patent, by-laws, and any amendments to these documents should be reviewed. If any of these documents do not comply with ONCA, they should be updated.

One example of a need to update its governing documents is the new voting rights requirements for each class or group of members to be listed in the Articles of Incorporation. If members’ voting rights are not listed in the Articles, each member of the not-for-profit may be entitled to one vote at a meeting of the members, even if another governing document states otherwise.

ONCA also provides not-for-profits with all the rights and powers of a natural person, eliminating the need for a by-law that confers the capacity to borrow money, sell assets, or enter into contracts. Decisions of this nature are typically made by the Board. If members, Boards, or incorporators wish to restrict the powers of a not-for-profits’ Board, they should consider including such restrictions in the Articles to ensure that the Board can act effectively.

New Categories of Corporations

In addition to changes that may require a review of governing documents, not-for-profits should be aware of ONCA’s new categories of corporations, which include charitable corporations, public benefit corporations, and non-public benefit corporations. Each of these categories comes with its own set of requirements, including audit and reporting requirements. It is essential for not-for-profit organizations to understand these new categories and the requirements associated with them.

Failure to comply with these requirements can lead to penalties, fines, and even the dissolution of the corporation. Reviewing your organization’s governing documents and ensuring they align with the ONCA‘s requirements is a crucial step in staying compliant.

New Modern Legal Framework for Ontario’s Not-For-Profit Sector

While ONCA does not require not-for-profits to update any of the governing documents, it may be practical to do so. Not-for-profits that do not update their governing documents by October 18, 2024, will be deemed to be in compliance with ONCA and will have the unique challenge of determining which provisions of their by-laws, letters patent, and articles are still valid and in force.

In conclusion, the new Ontario Not-For-Profit Corporations Act (ONCA) provides a modern legal framework for the not-for-profit sector in Ontario. Not-for-profits should take steps to determine if ONCA applies to them and review their governing documents to ensure compliance by October 18, 2024. Not-for-profits should also be aware of the new categories of corporations established by ONCA and consider updating their governing documents to reflect these changes.

Contact the Lawyers at Duncan, Linton LLP in Waterloo for Trusted Legal Advice

At Duncan, Linton LLP, we are happy to assist not-for-profits in navigating the new legal framework established by Ontario’s. Not-For-Profit Corporations Act. To speak with one of our experienced business lawyers, please contact us online at [email protected] or by phone at 519-886-3340 to make an appointment.