In Ahmed v. Hossain (released September 2017), the Ontario Superior Court of Justice held that the actions of a charitable corporation's board of trustees in purporting to dissolve the board of directors and assume their powers were not in accordance with the corporate constitution and, therefore, were invalid; and likewise that the board of trustees' purported suspension of the rights of certain members for 10 years also violated the constitution and was, therefore, also invalid.
In London Humane Society, Re (decided 2010), Justice Granger of the Ontario Superior Court of Justice held that a notice of a special meeting of members, while less than conspicuous, was sufficient to put recipients on notice that the corporation was replacing its open membership with a closed membership. However, he went on to find that the board had arbitrarily rejected eight applications for membership and that this amounted to bad faith.
Under the Canada Not-for-profit Corporations Act (the "CNCA"), the default rule is that each director is elected at an annual meeting to a one-year term expiring at the close of business of the ensuing annual meeting. If no annual meeting is held or no replacement directors are elected at the annual meeting, the incumbent directors remain in office. But corporations and their members have considerable flexibility to craft other arrangements.
Under the Canada Not-for-profit Corporations Act (the "CNCA"), the default rule is that all voting members elect the entire board of directors at each annual meeting. Some organizations vary this default rule because it can result in a loss of board continuity if the entire, or substantially the entire, board is replaced at one annual meeting or because the default rule can expose the organization to a hostile take-over. The possibility of a hostile take-over is much greater in an organization in which there is a large membership body but a low membership turn-out at elections. In these conditions, there is widespread member apathy. Apathy creates an opportunity for a small group (measured as a proportion of the overall membership) to organize a coup - particularly if proxies can be used to obtain votes from members who are too indifferent to attend in person or who can be recruited by the dissident group to become members specifically to support the dissident slate of directors.
The Canada Not-for-profit Corporations Act (the "CNCA") is inhospitable to directors in several respects. Nova Scotia and, especially, Saskatchewan, are more hospitable to directors than the federal regime.
The Canada Not-for-profit Corporations Act ("Act") provides that a director can avoid liability for any resolution or action taken at a board meeting by having his dissent recorded. This post explores how and when such dissent must occur in order to preserve the liability shield.
In Hadjor v. Homes First Society (decided 2010), the Ontario Superior Court of Justice explicitly recognized and applied the business judgment rule to the decisions of a charitable housing society on the re-composition of its membership. The case is particularly significant because it is the first explicit judicial recognition that the business judgement rule ("BJR") applies to a charitable corporation, and as an illustration of how the BJR is applied.
In 3716724 Canada Inc. v. Carleton Condominium Corp. No. 375 (decided August 2016), the Ontario Court of Appeal recognized and applied the business judgment rule to the decision of the board of a condominium corporation, which is a type of corporation without share capital. Therefore, the case is significant for other types of non-business corporations, including charitable and other not-for-profit corporations.
In Saskatchewan Housing Corp. v. Gabriel Housing Corp. (decided 1998), the Saskatchewan Court of Queen's Bench appointed a receiver-manager to restore proper administration to a publicly funded non-profit housing corporation that had utterly lost its way.
In Fairbrass v. Hansma (decided in 2010), the British Columbia Court of Appeal held that the conflict of interest provisions of municipal legislation did not extend to the immediate family of the mayor of Spallumcheen.