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Member Proposals Under the CNCA

The Canada Not-for-profit Corporations Act entitles any member who has the right to vote at an annual meeting to submit a member proposal to the corporation, which proposal would be raised as special business at the meeting. The member is also entitled to discuss at the meeting any matter with respect to which the member would have been entitled to submit a proposal.

A corporation cannot contract out of this statutory right in favour of members.

Proposals may include a resolution to amend the articles (which requires approval of the members by at least two-thirds of the votes cast) or to make, amend or repeal a by-law (which, in most cases, only requires the approval of the members by a simple majority of the votes cast). However, proposals are not limited to matters that fall within the decision-making authority of the members. A proposal that is passed may have binding effect if it amends the articles or by-laws or otherwise falls within the decision-making authority of the members. However, if a proposal passed by the members is outside their allocated authority under the Act (and therefore is within the authority of the directors), it would only be advisory (or non-binding) on the directors - who could consider it but would not still be bound to exercise their fiduciary duties to act in what they believe to be the best interests of the corporation.

The proposal may also include nominations for the election of directors. In that case, not less than 5% of the members entitled to vote at the meeting (or such lesser proportion of the voting members as may be specified in the by-laws) must make the submission together (or in the same submission executed in one or more counterparts).

A corporation is not required to circulate every proposal sent to it. The Act provides for the following exceptions:

(a) premature delivery of the proposal (i.e., a proposal that is submitted more than 150 days before the anniversary of the previous annual meeting of members). An annual meeting must be held after each financial year of the corporation but before the expiry of six months from the end of its financial year and not later than 15 months after its previous annual meeting;

(b) late delivery of the proposal (i.e., a proposal that is submitted less than 90 days before the anniversary of the previous annual meeting of members);

(c) enforcement of a personal claim or redressing a personal grievance against the corporation or its directors, officers or members;

(d) failure of the proposal to relate in a significant way to the activities or affairs of the corporation;

(e) failure of the same member to present at a previous annual meeting a proposal that at the member's request had been included in the notice for that meeting, such failure occurring within two years of submission of the current proposal;

(f) recent failure of substantially the same proposal (see the table below for details); and

(g) abuse of the member-proposal rights, in order to secure publicity.

With respect to exception (f) above, the minimum level of support that a proposal must receive before substantially the same proposal may be re-submitted by a member (meaning any member, including a member who submitted a previous similar proposal) is as follows:

Proportion of support at a previous meeting of members

Number of annual meetings at which substantially the same proposal has been presented within the five years before submission of the new proposal

3%

one annual meeting

6%

two annual meetings

10%

three or more annual meetings

For example, suppose that a member, M1, submits a proposal that received only 2.9% of the votes cast thereon at the 2014 annual meeting. Neither that proposal nor substantially the same proposal may be presented (by M1 or another member) before the 2019 annual meeting. However, if the 2014 proposal received 3% or more of the votes cast, either it or substantially the same proposal may be brought at the 2015 annual meeting (or any subsequent meeting). If substantially the same proposal is brought at the 2015 annual meeting and it receives 5.9% of the votes, it cannot be re-submitted until the 2019 annual meeting (by 2019, the proposal would only have been considered at one meeting in the previous five years, 2015). However, if the 2015 proposal received 6% or more of the votes cast, either it or substantially the same proposal may be brought at the 2016 annual meeting (or any subsequent meeting). If substantially the same proposal is brought at the 2016 annual meeting and it receives 9.9% of the votes cast, it cannot be re-submitted until the 2019 meeting. But if the 2016 proposal received 10% or more of the votes, either it or substantially the same proposal may be brought at the 2017 or 2018 annual meeting (or any subsequent meeting).

Members who submit a proposal may have to bear the incremental cost of circulating the proposal and any supporting statement (which, together with the proposal, cannot exceed a total of 500 words) unless the by-laws provide otherwise or the members pass an ordinary resolution that the corporation bear the cost. Apart from the statutory excuses for failing to circulate a proposal and supporting statement and the incremental costs that may be imposed on members who avail themselves of the member proposal regime, a corporation has few devices to prevent members from exercising their proposal rights to the maximum possible extent.

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