Waiting for ONCA: Don’t put your by-laws on hold

Wondering what’s happening with ONCA (Ontario’s long-awaited Not-for-Profit Corporations Act, 2010)?

Answer:  nothing.  We’re in limbo.  Back in September, the Ontario government announced that ONCA would be further delayed, indefinitely.  The announcement reassured that the government remains committed to bringing in ONCA “at the earliest opportunity”, but it did not identify a planned (or even anticipated) proclamation date.  Instead, it promised the sector at least 24 months’ prior notice of ONCA coming into force and effect.

There have been no developments or updates since September.  Practically speaking, the earliest we can hope to see ONCA come into effect is Spring 2018.

Everyone in the not-for-profit sector is eager to take advantage of ONCA, which will bring the sector participants into the 21st century.  Yes, there will be preliminary effort and resources needed to transition under ONCA – particularly applying for Articles of Amendment (which will amend the existing Letters Patent) and updating your organization’s by-laws.  But there’s a 3-year window to do that, so no urgent action will be required on the day ONCA comes into effect.

What we are looking forward to:

  • Once a not-for-profit corporation is transitioned under ONCA, member relations will be much easier. ONCA facilitates electronic communication with members and the holding of electronic member meetings.
  • ONCA allows the Board itself to appoint directors to the Board, on an annual basis, up to a threshold number. This could be a very valuable tool, allowing the Board to supplement its skill sets on an annual basis, as its priorities and objectives change.
  • ONCA allows the Board much more flexibility in delegating decision-making down to Board committees. This needs to be managed thoughtfully, but a stronger committee structure can allow the Board to focus its attention on the most strategically challenging decisions it faces.
  • ONCA offers not-for-profit boards comfort that, should they take actions that are inadvertently or technically off-side their articles of by-laws, those actions are nevertheless valid. Business corporations have enjoyed this reassurance for decades.

Areas of ongoing concern:

  • There is unease about the provisions of ONCA that give non-voting members voting rights in specific circumstances: g., amendments to rights attached to a group of members, amalgamation, and the sale of substantially all of the corporation’s property.  The Ontario government previously proposed (via 2013’s Bill 85) that those provisions would be delayed for a further 3 years after ONCA comes into force, presumably to give the government and sector further opportunities to consider the appropriateness of this scheme for the sector.  We will be watching to see if similar amendments to ONCA are introduced and passed by the Ontario government before ONCA comes into force.

Are you waiting for ONCA to update your by-laws?  Please don’t.

In chatting with a number of our not-for-profit clients, I’ve learned that many organizations that typically review their by-laws every 3 to 5 years – a good governance practice – have put that project on hold, waiting for ONCA.  Some haven’t touched their by-laws since 2010, when ONCA was passed by the Legislature.  Those by-laws are now at least 6 years stale, and in real need of some fresh eyes.

Reviewing and refreshing your organization’s by-laws should not be put on hold.  Best governance practices evolve.  Your governance structure changes.  Your by-laws are a governance and business critical legal document.  They need nurturing and care from time to time.

Don’t by like Lucky and Pozzo (that’s a Waiting for Godot reference) – stop waiting and be proactive.  Task your board’s Governance Committee with a full by-law review, if such a review hasn’t happened in the last 3 to 5 years.