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Requisitioned Meetings of Members

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.

The 5% threshold is designed to filter out requisitions that have insufficient membership support to warrant holding the meeting. While the corporation can lower the threshold in its by-laws or articles, the threshold cannot be raised to more than 5%.

The provisions of the by-laws (or articles) with respect to absentee voting apply to a member-requisitioned meeting.

The CNCA provides a default rule to the effect that the requisitionists are entitled to be reimbursed for the expenses reasonably incurred by them in requisitioning the meeting. This would include the reasonable costs of preparing and sending notice of the meeting to members, renting a facility to hold the meeting and, if applicable, establishing telephonic, electronic or other communications facilities to enable members to participate and vote at the meeting remotely. The costs of necessary legal advice should also be a reimbursable expense. However, members may, by ordinary resolution (that is, a resolution approved by a simple majority of the votes cast) elect not to reimburse the requisitionists, in whole or in part.

A requisitioned meeting usually seeks to remove and replace all, or a majority, of the sitting directors. The meeting could also 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, the business of a requisitioned meeting is not limited to matters that fall within the decision-making authority of the members.

A resolution that is passed at a requisitioned meeting has binding effect if it amends the articles or by-laws or otherwise falls within the decision-making authority of the members. However, if a resolution passed by the members is outside their allocated authority under the CNCA (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 still be bound to exercise their fiduciary duties to act in what they believe to be the best interests of the corporation. Stated otherwise, a requisitioned meeting is an alternative way to ensure that members can vote on the business lawfully allocated to members under the CNCA. However, the authority of the members is not expanded or altered merely because the special meeting was initiated by the members and not by the directors.

The directors are not necessarily required to call a requisitioned meeting even if they receive a valid requisition from 5% or more of the members. The CNCA provides for the following exceptions:

● late delivery of the requisition. There are two separate deadlines. First, a requisition is too late if the directors have already called a meeting of members and have given notice of the meeting to members. Second, the requisition is too late if a record date has already been fixed for determining the members entitled to receive notice of a meeting of members. In both cases, the business to be transacted at the meeting has been set, which may or may not address the concerns of the requisitionists. If not, the requisitionists are free to re-submit the requisition after the meeting of members has been held so that it is on the agenda for the following meeting of members;

● it clearly appears that:

● the primary purpose of the requisitioned meeting is to enforce a personal claim or redress a personal grievance against the corporation or its directors, officers or members; or

● the business of the requisitioned meeting does not relate in a significant way to the activities or affairs of the corporation;

● the same member failed to present at a previous annual meeting the business stated in a member 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 requisition;

● substantially the same business as stated in the requisition was submitted to members in a notice of members held within a prescribed period before receipt of the requisition and it did not receive the prescribed minimum level of support at the meeting (see the table below for details); and

● the rights to requisition a meeting of members are being abused to secure publicity.

With respect to the penultimate exception above, the minimum level of support that a resolution must receive before substantially the same business may be re-submitted at a requisitioned meeting is as follows:

Proportion of Support / No. of annual meetings

3%: one

6%: two

10%: three or more

For example, suppose that a resolution submitted to the corporation's members received only 2.9% of the votes cast thereon at the 2014 annual meeting. The directors need not call the requisitioned meeting to consider either that resolution or substantially the same resolution before the 2019 annual meeting (by 2019, the resolution defeated at the 2014 annual meeting will have reached its fifth anniversary) . However, if the resolution received 3% or more of the votes cast at the 2014 annual meeting, the directors cannot refuse to call a requisitioned meeting to consider either the same or substantially the same resolution at the 2015 annual meeting (or any subsequent meeting). If the same or substantially the same resolution receives 5.9% of the votes cast at the 2015 annual meeting, the directors need not call the requisitioned meeting to consider either that resolution or substantially the same resolution before the 2019 annual meeting (by 2019, the resolution would only have been considered at two meetings in the previous five years: 2014 and 2015). However, if the resolution received 6% or more of the votes cast at the 2015 annual meeting, the directors cannot refuse to call a requisitioned meeting to consider either the same or substantially the same resolution at the 2016 annual meeting (or any subsequent meeting). If the same or substantially the same resolution receives 9.9% of the votes cast, it cannot be re-submitted until the 2019 meeting (by 2019, the resolution would only have been considered at three meetings in the previous five years: 2014, 2015 and 2016). But if the resolution received 10% or more of the votes cast, either that resolution or substantially the same resolution may be brought at the 2017 or 2018 annual meeting (or any subsequent meeting).

If the directors have received a compliant requisition, the directors are required to call a meeting of members to transact the business stated in the requisition within 21 days after receiving the requisition. The meeting need not be held within 21 days. If the directors do not call the meeting within 21 days, any member who signed the requisition may do so. In either case, the requisitioned meeting must be called as nearly as possible in the manner in which meetings are to be called in the CNCA and by-laws.

The CNCA is not entirely clear as to what happens if the directors take the position that they are not required to call the meeting, based on one or more of the various grounds described above, but the requisitionists disagree and call and hold the meeting themselves. The CNCA provides that, in the case of an analogous dispute involving the rejection of a member proposal, either the aggrieved member or the corporation can apply to court for a ruling on the dispute. It is submitted that the court could extend these provisions to apply to a dispute involving whether a requisitioned meeting should be called and held.

In the case of a requisitioned meeting, the board needs to consider, first, whether it is on solid ground in refusing to call the meeting. If so, it should apply to court for an order blocking the requistionists from calling and holding a meeting (if it appears that the requisitionists may do so). Otherwise, chaos could occur if the meeting is held and the business is passed by those voting. The corporation would have to bring an application to set the resolution aside, which it could lose.

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