The Canada Not-for-profit Corporations Act divides corporations into soliciting and non-soliciting corporations, depending on whether they receive more than $10,000 in funding from public sources in the corporation's current fiscal year or its two previous fiscal years. The default rule for both soliciting and non-soliciting corporations is that they must appoint a public accountant and audit their annual financial statements each fiscal year. However, in recognition that, for smaller not-for-profit corporations, the costs of appointing a public accountant and auditing its financial statements may outweigh the incremental benefits, the Act and regulations provide for various exemptions. These exemptions depend on the type of corporation (soliciting or non-soliciting), the aggregate revenue of the corporation in its most recent fiscal periods and annual membership approval.
The Canada Not-for-profit Corporations Act permits the members of non-soliciting corporations to enter into a unanimous member agreement ("UMA"). If the corporation has only one member, it may sign a unanimous member declaration ("UMD") that is deemed to be a UMA. As the name makes clear, all members of the corporation (including non-voting members) must be parties to the UMA. A UMA is an otherwise lawful written agreement that restricts the powers of the directors to manage, or supervise the management of, the activities and affairs of the non-soliciting corporation.
The Canada Not-for-profit Corporations Act permits a corporation, or any director or member of the corporation, to apply to court to determine any controversy with respect to an election or appointment of a director. (The Act also allows an application in respect of the election or appointment of a public accountant, but this would rarely arise and will be ignored for the purpose of this article.) Applications to court involving the election of directors may determine who controls the corporation and, therefore, are much more likely to arise in litigation.
In Keck v. Balgonie Early Learning Centre Inc. (released March 2018), Justice Zarzeczny of the Saskatchewan Court of Queen's Bench found that a non-profit corporation justifiably terminated a services agreement with a member. The case raises the larger question: should provincial courts have jurisdiction to hear matters involving not-for-profit corporations?
In Gill v. Kalgidhar Darbar Sahib Society (released May 2018), Justice Harvey of the Supreme Court of British Columbia refused to grant leave to a former executive member authorizing him to bring a derivative action on behalf of a religious society. The court found, in the circumstances, that the petitioner was not acting in good faith and that the derivative action did not appear to be in the best interests of the society.
The Canada Not-for-profit Corporations CNCA ("CNCA") entitles members of a corporation who hold at least 5% of the votes that may be cast at a meeting of members sought to be held (or such lower proportion as is set out in the by-laws or, less commonly, the articles) to requisition the meeting to be held. A requisition allows the threshold proportion of members to force the corporation to hold the meeting. It is an alternative to a member applying to for a court-ordered meeting of members. Indeed, members should always consider a member-requisitioned meeting before seeking a court-ordered meeting, as the courts strongly favour members exhausting their internal remedies before seeking judicial intervention in the affairs of the corporation.
Absentee voting refers to any permitted system whereby a member of a corporation can vote at a meeting of members, even though the member is not present in person at the meeting. Historically, voting by proxy was the only permitted form of absentee voting. However, as a result of advances in communications technology, modern corporate legislation has embraced new methods of absentee voting, while retaining older methods.
The Canada Not-for-profit Corporations Act ("CNCA") makes an important distinction between:
(a) member participation at a meeting of members through telephonic, electronic or other communication facility; and
(b) virtual meetings - where the meeting of members is held entirely by means of a telephonic, electronic or other communication facility.
What follows explores the similarities and differences between these two ways of conducting a meeting of members.
The Canada Not-for-profit Corporations Act ("CNCA") permits any director or any member entitled to vote at a meeting of members (or the Director appointed under the CNCA) to apply to the court for an order that a meeting of members be called, held and conducted in such manner as the court directs.
A corporation must give notice of the time and place of a meeting of members to each of its members entitled to vote at the meeting. The regulations under the Canada Not-for-profit Corporations Act ("Act") prescribe certain permitted methods set out in the following table.