Wednesday, April 09, 2008

Not-for-Profit Corporations Law Reform

CORPORATE LAW MODERNIZATION -
Sector weighs in
From: Canadian FundRaiser eNews, March 15, 2008, Article 4
http://www.canadianfundraiser.com/newsletter/article.asp?ArticleID=2578&ClientID=20032

The Ontario government, or its Government Services ministry, cannot complain there was no response to its request for input from the sector on the directions it should take in modernizing governance of the voluntary sector (CF August 15, 2007).

The bureaucrats are now dealing with two large missives from The National Sector Task Force on Not-for-Profit Corporations Law Reform – a co-operative effort of Imagine Canada and the Charities Bar – and a brief from the Ontario Nonprofit Network Expert Working Group.

All three documents are lengthy, technical and detailed in their recommendations, but essentially agree in their overall recommendation that Ontario needs a separate law governing the operation of nonprofit corporations.

As the National Sector Task Force puts it: “The Task Force recommends passage of a new Ontario Not-for-Profit Corporations Act. It should be an organizational statute drafted as companion legislation to the Ontario Business Corporations Act. These two statutes should be harmonized, except where there is a clear and compelling case for different measures.”

With a similar approach, the Ontario Nonprofit Network notes: “We believe a dedicated Not-for-Profit Corporations Act is needed. The revised act should focus exclusively on incorporation of not-for-profit and mutual benefit organizations that have public benefit objects.”

As background for its many detailed recommendations and the over-riding major one that a new act should be drafted to govern not-for-profit corporations, the National Sector Task Force notes in its Executive Summary to the second submission that the Ontario Corporations Act was first enacted in 1907 and updated in 1953. Since then, the scope of the act has been substantially reduced as a variety of acts detailing with specific business areas were carved out of it, and then in 1971 the Ontario Business Corporations Act was created.

Not updated

“As business and other types of corporations were modernized through new statutes, the OCA came to govern largely not-for-profit corporations,” says the Task Force. “While other corporate statutes were further updated and modernized, including the OBCA in 2007, the OCA was not. The OCA can no longer be considered effective framework legislation for Ontario’s nonprofit corporations.”

The OCA provides the statutory framework for creation, governance and dissolution of not-for-profit and charitable corporations in the province, it points out, prescribing a corporate structure and organizational model under the supervision of a board of directors of each organization.

However, it agrees with the government that the legislation is overdue for wholesale review, and to that end brings forward 27 recommendations in response to the seven issues raised in the government’s second of three consultation papers.

For the complete submissions: www.imaginecanada.ca/files/en/publicaffairs/mgs_ontario_submission1_20080215.pdf; www.imaginecanada.ca/files/en/publicaffairs/mgs_ontario_submission2_20080215.pdf; www.lynneakin.com/wp-content/uploads/2008/revising_corp_act.pdf.

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