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.
The content and amount of detail in the by-laws depends largely on whether the corporation and its directors and members prefer to restate the provisions of the Act and regulations in the by-laws for ease of reference or are content to have minimalist by-laws.
● What are the conditions (or eligibility requirements) for being a member? May corporations become members, or are only individuals allowed to become members?
● Will the corporation have an open membership or will it be closed to directors only?
● Is membership automatic (such as on payment of annual dues or contributions) or discretionary?
● If discretionary, who decides whether a person will be admitted as a member - the board of directors, a membership committee or some other board committee?
● What is the term (or duration) of a membership - annual or permanent?
● Will memberships be transferrable? The default rule is that they are non-transferable.
● Will there be annual membership contributions or dues? If so, will members have the right to approve increases, or will the amount be at the discretion of the board? When will a membership cease if the annual membership contributions or dues have not been paid?
● How is a membership terminated? In addition to death, resignation and expiration, can a member be expelled?
● Will the board have the authority to suspend, expel or otherwise discipline a member? If so, on what grounds - breach of the articles and by-laws or more subjective tests?
● If there is provision for expulsion or other discipline, what process will apply? How much notice will be given to the member? Will reasons be given? Will there be an opportunity for the member to respond in writing? Will there be a hearing or internal appeal process? Will the member have the right to appeal any discipline decision to the courts, or will the decision of the board be final and binding and not subject to any appeal?
2. Meetings of Members
● Where will meetings of members be held? Will this be a board decision, or will it be at a fixed location such as the corporation's registered office or club house?
● How many members is the corporation likely to have?
● Will the board set a record date for meetings of members or rely on the default rules under the Act (that is, the close of business on the day immediately before notice of the meeting is given)?
● How will notice of meetings of members be given - electronic means only, affixation to a notice board, mailing, or publication in a newspaper, or a combination of mail, personal delivery and electronic means? Notice in a publication distributed to members is permitted only if the corporation has more than 250 members.
● Depending on the methods for giving notice of meetings to members, how much notice will be provided?
● What is the quorum requirement at meetings of members? The default rule is that quorum consists of a simple majority of the members entitled to vote at the meeting. But, to avoid failed meetings and expensive applications for court-ordered meetings (particularly for a corporation with a large membership base), the quorum is often set at a much lower threshold (either as a lower proportion of the voting membership or a lower fixed number of members).
● Will proxies be permitted? If so, will proxy-holders be counted in determining quorum?
● If the corporation has more than one class of members, consider the quorum requirement for separate meetings of the members of the class.
● Apart from the members, directors and public accountant, who else may attend a meeting of members? Can the chairperson admit attendees by invitation?
● Who will act as chairperson at meetings of members? Who will act as secretary of the meeting? Will alternatives be specified if the chairperson or secretary are unable to attend?
● Will members be entitled to attend remotely if the corporation makes available a telephonic, electronic or other communication facility? The Act requires that all participants be able to communicate adequately with each other during a meeting of members.
● Will the corporation permit virtual meetings (that is, a meeting of members held entirely by telephonic, electronic or other communication facility)?
● Will the chairperson have a casting or second vote in case of a tie vote at a meeting of members? Or will a casting vote be expressly denied? The latter is the default rule under the Act.
● Will the corporation allow a means of absentee voting, or may members vote only in person at the meeting? If there is absentee voting, will it be by paper proxy, mailed-in ballot, electronic ballot or a combination of mailed-in and electronic ballots?
● Will the corporation require scrutineers at meetings of members? If so, must the scrutineer be independent, or may the corporation use an employee as scrutineer?
3. Board of Directors
● What will be the term of office of each director? A director's term may expire at the close of the first, second, third or fourth annual meeting following his or her election.
● Will terms be staggered (that is, expiring at different annual meetings) or un-staggered? If staggered, specify how many directors there will be and when the terms of each portion of the board will expire. Provide for the board to fill any vacancy on the board by appointing a director for the unexpired balance of the term of his predecessor.
● Will the board hold regularly scheduled meetings or only ad hoc meetings when called?
● Who may call ad hoc board meetings? How much notice is required?
● Can board and committee meetings be held by means of telephonic, electronic or other communication facility? If so, all participants must be able to communicate adequately with each other during the meeting.
● Who will preside as chairperson at board meetings? Who will act as secretary? Will provision be made for alternates?
● What will constitute a quorum at meetings of the board?
● Will provision be made for the appointment of committees of the board and of advisory bodies to provide non-binding recommendations to the board? Will provision be made for duties of any specific committees, such as an audit committee (which requires a minimum of three directors, at least two of whom are not employees), executive committee, membership committee, governance or nominating committee?
● Will the directors be exculpated from liability for the acts or omissions of other directors and subordinate officers and employees?
● Will directors and officers be indemnified to the maximum extent permitted by law?
● Will directors be entitled to receive an advance of their defence costs before the final disposition or settlement of a claim against the director?
● Will the corporation require the appointment of specific officers, such as a chairperson, vice-chairperson, president, chief executive officer, executive director, chief financial officer or treasurer, secretary or vice-president? Can one individual hold more than one office concurrently?
● If specific officers will be appointed, what are the specific duties of each such officer?
● Can the duties of officers be delegated to another officer or to a director?
5. Notices to Members and Directors
● How will notices (including notices of meetings) be given to members, directors and the public accountant - for example, by personal delivery, mail, telephonic, electronic or other communication facility, or electronic document (e-mail)?
● In each case, when will the recipient be deemed to have received the notice?
● Will the accidental failure to give notice to any member, director, member of a board committee or public accountant affect the validity of any action taken at any meeting to which the notice pertained?
6. Dispute Resolution
● Will disputes among the corporation, its members, directors and officers be left to be resolved in the courts, or will the corporation provide for alternative dispute resolution ("ADR").
● If ADR is chosen, will it include mediation or only final and binding arbitration? With narrow exceptions, final and binding arbitration ousts the jurisdiction of the courts.
● Will only one arbitrator be appointed, or will there be a panel of three arbitrators, with each party designating one arbitrator and the two arbitrators appointing a third arbitrator to act as chair of the panel?
● If there is to be only a sole arbitrator, how will this arbitrator be appointed?
● What rules of arbitration will apply? Will the rules of an arbitral institute be adopted or the provisions of a provincial statute governing domestic arbitration applied?
● How will the costs of the arbitration be divided between the parties?
● Will the corporation have a corporate seal? Who will have custody of the seal? Will only the board decide whether the seal will be affixed to any document?
● Has the corporation determined its financial year-end?
● Will annual financial statements be disseminated to members, or must members specifically request a copy of the financial statements? If requested, the financial statements must be provided free of charge.
● Who will be authorized to execute contracts, deeds, obligations and other instruments on the corporation's behalf?
● Who will have control over banking arrangements?
● Will there be any restrictions (such as membership approval if the borrowing is in excess of a specified amount) on the borrowing authority of the board?
8. Amendment or Repeal
● Will this by-law amend or repeal any previous by-laws?
● Enumerate those provisions that can only be amended by special resolution of the members. The Act provides that a special resolution is required to amend by-laws dealing with membership conditions, methods of giving notice of meetings of members, absentee voting and transfers of membership interests. Other provisions of the by-laws can be amended or repealed by ordinary resolution unless the articles provide that the by-laws (or by-law amendment or repeal) is approved by a majority or super-majority of the members.