In London Humane Society, Re (decided 2010), Justice Granger of the Ontario Superior Court of Justice held that a notice of a special meeting of members, while less than conspicuous, was sufficient to put recipients on notice that the corporation was replacing its open membership with a closed membership. However, he went on to find that the board had arbitrarily rejected eight applications for membership and that this amounted to bad faith.
Valid Notice of Meeting but Invalid Rejection of Membership Applications
Democratic Interpretation of By-Law
In Chu v. Scarborough Hospital Corp. (decided 2007), the Ontario Divisional Court interpreted the by-laws of a hospital corporation such that the term of annual memberships extended for a full 12 months and were in effect at the time of the corporation's annual meeting.
No Free Ride for Non-Contributing Members
In D.S. Park Waldheim Inc. v. Nagy (decided 2008), Deputy Justice Freeman of the Ontario Superior Court of Justice held that minority members of a non-profit housing association were liable to contribute to the cost of subdividing the land so that members would be able to register the title of their lands.
Misleading Notice of Meeting Leads to By-law Invalidity
In Trow v. Toronto Humane Society (decided 2001), the Ontario Superior Court of Justice set aside by-laws purportedly passed at a meeting of members on the grounds that the notice for the meeting was materially misleading.
Lack of Standing to Bring Proceedings Against an Unincorporated Association
In Varjacic v. Radoja (decided March 2018), Justice J.A. Ramsay of the Ontario Superior Court of Justice held that a corporation specifically incorporated to initiate litigation against the members of a unincorporated association had no standing to bring proceedings.
Directors' Terms of Office: Creative Variations
Under the Canada Not-for-profit Corporations Act (the "CNCA"), the default rule is that each director is elected at an annual meeting to a one-year term expiring at the close of business of the ensuing annual meeting. If no annual meeting is held or no replacement directors are elected at the annual meeting, the incumbent directors remain in office. But corporations and their members have considerable flexibility to craft other arrangements.
Class-Designated Director Structures: Pros and Cons
Under the Canada Not-for-profit Corporations Act (the "CNCA"), the default rule is that all voting members elect the entire board of directors at each annual meeting. Some organizations vary this default rule because it can result in a loss of board continuity if the entire, or substantially the entire, board is replaced at one annual meeting or because the default rule can expose the organization to a hostile take-over. The possibility of a hostile take-over is much greater in an organization in which there is a large membership body but a low membership turn-out at elections. In these conditions, there is widespread member apathy. Apathy creates an opportunity for a small group (measured as a proportion of the overall membership) to organize a coup - particularly if proxies can be used to obtain votes from members who are too indifferent to attend in person or who can be recruited by the dissident group to become members specifically to support the dissident slate of directors.
One method of deterring a hostile take-over is the use of a bifurcated class structure or class-designated directors.
Checklist for By-Laws of a Federal NFP Corporation
By-laws set out the governance rules of a not-for-profit ("NFP") corporation. The by-laws of a corporation incorporated, continued or amalgamated under the Canada Not-for-profit Corporations Act (the "Act") may include any provision relating to the activities or affairs of the corporation or the rights and powers of the corporation, its members, directors and officers. Typical areas covered by by-laws are set out below.
Consider Continuance to Saskatchewan for more Hospitable NFP Regime
The Canada Not-for-profit Corporations Act (the "CNCA") is inhospitable to directors in several respects. Nova Scotia and, especially, Saskatchewan, are more hospitable to directors than the federal regime.
Vexatious Litigant Loses to Statute of Limitations Defence
In Amir-Afzal Watto v. ICC (decided October 2017), Justice Diamond of the Ontario Superior Court of Justice dismissed the fourth separate proceeding brought by a disaffected member of a non-profit corporation on an preliminary basis, finding that a two-year limitation period had expired and therefore the claim was out of time.