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Court-Ordered Meetings under the CNCA

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 group of members holding not less than 5% of the votes entitled to be cast at the meeting (or such lesser proportion as is specified in the by-laws or, less commonly, the articles) have the alternative of requisitioning a meeting under the CNCA (which does not require judicial intervention). Members should always look first to invoking the statutory right to requisition a meeting before invoking the assistance of the court, which should be seen as a remedy of last resort. Courts strongly favour a policy of judicial non-intervention in the affairs of corporations, including not-for-profit corporations, and encourage the warring factions to exhaust their non-judicial recourses before applying to enlist the aid of the court.

Under the CNCA, the court can order a meeting if:

● it is impractical to:

● call the meeting within the time or in the manner in which it is otherwise to be called; or

● conduct the meeting in the manner required by the CNCA or the by-laws; or

● the court considers that the meeting should be called, held and conducted within the time or in the manner that it directs for any other reason.

Currently, the leading case on court-ordered meetings generally is Montreal & Canadian Diocese of the Russian Orthodox Church Outside of Russia Inc. v. Protection of the Holy Virgin Russian Orthodox Church (Outside of Russia) in Ottawa Inc., a 2002 decision of the Ontario Court of Appeal. However, the court was applying the impracticability requirement of Part II of the Canada Corporations Act (the "Old Act"), the predecessor legislation under which The Holy Virgin Church was incorporated. The CNCA has expanded the court's power to order meetings beyond a finding of impracticability. Under the CNCA, a court may order a meeting of members for any other reason (although courts still exercise their power cautiously and only in exceptional circumstances).

Russian Orthodox Church involved a contest over the assets of The Holy Virgin Church. Two warring factions sought control of the church. At trial, the court ordered a meeting of the members of the corporation, stating that "it is impracticable to call a meeting of members in the manner prescribed in the Church By-laws as the authority of the Parish Council to call such a meeting and the status of members who could attend would in all likelihood be in issue". This order was appealed to the Ontario Court of Appeal.

One of the issues on appeal was whether the trial judge properly exercised his discretion in ordering a meeting under the Old Act, which turned on whether it was for any reason "impracticable" to call of meeting of members.

The Court of Appeal stated that courts interpret "impracticable" narrowly, ordering meetings of members (or shareholders in the case of for-profit corporations) only in exceptional circumstances. This narrow interpretation reflects the judicial policy of non-interference in internal corporate affairs.

The court further found that the normal by-laws setting out the procedures for calling and holding a meeting had not been challenged and saw no confusion in the by-laws regarding the appropriate meeting procedures.

Instead, what the court saw was a power struggle between two opposing factions. It ruled that, except in extraordinary circumstances (which the court found not present in the case before it), the power to order meetings may not be invoked for the express purpose of placing in control of the corporation's directorate and affairs one of two or more contending factions among the members. Accordingly, the court set aside the order for the meeting of members.

The Court of Appeal ruling in the Russian Orthodox Church case is the leading authority on the exercise of judicial authority to order meetings of members of a not-for-profit corporation. A court is to order a meeting only where it is, for any reason, impracticable to convene and hold a meeting in accordance with the corporation's articles, by-laws or other applicable constating documents. Where it is possible to call and hold the meeting in accordance with the applicable constating documents, the corporation and its directors and members should be left to do so. The court's policy is to not intervene in the corporation's internal affairs except in extraordinary circumstances.

Examples of situations where it may be impracticable to call a meeting in accordance with the corporation's constating documents could include:

● Inability to meet the quorum requirement for a meeting of members (which, however, the board can generally amend with immediate effect and seek confirmation of the by-law amendment at the next meeting of members).

● Lack of membership records.

● Uncertainty over which by-laws are in force and, in particular, what the rules are for the admission of members.

● Rival or split boards each purporting to control the corporation and to respond to any requisition of a meeting by the members.

In most cases, a valid meeting of members can be convened - either by the board or by requisition of members. A board is not essential to the process. Therefore, the lack of a quorate board is not a barrier to holding a meeting of members. The meeting of members can cure any vacancies on the board or reduce the size of the board to restore a quorum. A meeting of members can also confirm, amend or repeal any by-laws - thereby removing any uncertainty in the status of the by-laws and the rules governing subsequent meetings of members.

Providing sufficient notice of the meeting to members would also rarely meet the impracticability threshold.

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