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New rules for Ontario nonprofits - the basics

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Recorded on November 5, 2013 (28 minutes) - The Ontario government is modernizing the law that governs how nonprofit organizations operate. The new law is called the Ontario Not-for-Profit …

Recorded on November 5, 2013 (28 minutes) - The Ontario government is modernizing the law that governs how nonprofit organizations operate. The new law is called the Ontario Not-for-Profit Corporations Act, or the ONCA. If your nonprofit organization is incorporated in Ontario, this webinar can help your board members or senior staff to prepare for the ONCA. The webinar briefly covers the following topics:

why it’s important
what’s in the bylaws and articles
members and voting requirements for directors
requirements for public benefit
corporations audits and financial review engagements
steps to prepare for the ONCA

An archived version of this webinar is available for viewing (along with copies of presentation materials), on the webinars and events page of http://nonprofitlaw.cleo.on.ca. Subscribe to the "Get Ready for the ONCA" ebulletin to get notice when the webinar and handouts are available online.

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  • TELL US WHO YOU ARE, ORGANIZATION, LOCATION. AND IF YOU HAVE MORE THAN ONE PERSON LISTENING IN OR AROUND THE COMPUTERCommunity Legal Education Ontario – specialty legal clinic – public legal education. Publishing house that produces clear, accurate and practical legal resources in plain language. If you do direct service with marginalizedgroups, or anyone who needs legal information, check out CLEO’s website or printed catalogue – lots for your clients. Many projects as well: e.g. Your Legal Rights, who is hosting this webinar This project – legal education for nonprofits. Exists because of ONNOne year project. In the middle of a need assessment now. Starting to do webinars and training: raising awareness now. Detailed resources ready by 2014. Hope to have a legal help service – not for individual organizations. But likely a way to submit your questions and get answers. POLL - Is this your first session on the ONCA? (multiple choice answers) This is the first presentation on the ONCA I’ve attended or seen I‘ve participated in a session on the ONCA presented by the Ontario Nonprofit Network I’ve participated in another webinar or session on the ONCA Other or not applicableDon’t present – for reference if necessaryNEEDS ASSESSMENT RESULTS – SURVEY AND KEY INFORMANTSAwareness of the ONCA varies widelyOrganizations need help. Many don’t know enough to identify specific concerns and there is little difference in the ranking of areas of concern.Timing - when the law will be final, and when requirements will applySimplicity - checklists, templates and sample bylaws were the most commonly requested resourcesExpertise -connecting to legal help
  • This is ONCA 101 – won’t write your bylaw or answer detailed technical questions or specific questions about your organizationI’m not a lawyer and none of what I say is legal advice. Every nonprofit is different. Convince you that’s it’s worth your time to pay attention, monitor developments and start getting ready. There are some things you might want to do at your organization’s next annual meeting, for example. Highlight a few issues to which you should pay particular attention, and suggest what you can do to prepare
  • Most nonprofits in Ontario are incorporated now under the Ontario Corporations Act. That act covers business corporations as well, written in 1907. several consultations since we started talking about it in 2007. Ontario NonprofitNetwori (ONN) active throughout - good background on concerns, proposals for amendments. ONN did webinars of their own.Federally – may have heard about the CNCA Canada Not-for-Profit Corporations ActMinistry of Consumer Services – government dept responsible for implementing the ONCAThis project - not changes, but how to transition to the new law whatever it is. Funded by MCS, citizenship and immigration and tourism, culture and sport2010 the Act Bill 65 passed. Not yet in force, not “proclaimed” June 2013 - Bill 85 - amendments and enabling legislation introduced - expected to pass fall of 2014. After it passes, then Expect the regulations and the forms. Take effect no sooner than six months after thatTake effect earliest in middle of 20143 year transition for most groups - have to comply by 2017Don’t panic -
  • Good thing for nonprofits - modernizes legislation made in 1917 and not really updated sine the 1950’s - allows email and internet communication for example, makes it easier and cheaper for small orgs to operate -i.e. easier and quicker to incorporateA lot more rules, but the rules are a lot clearer. for directors and for members - e.g. details on director’s duty of care, powers of corporation, conflict of interest. lower threshold for financial review vs audits, or agree to not have them at all for the smallest groupsGood opportunity: think about how you want your organization to operate and make sure your governance documents and practices reflect that. Could be saddled with rules that don’t fit - after transition period, act says “deemed to be compliant and to have adapted the default bylaw that’s available. Not likely that easy because change of what’s in articles and what’s in bylawsPoll audience about articles and bylawsFor charities - might trigger review of charitable status
  • - CNCA and federal incorporation – don’t get confused.horticultural, agricultural societies, conservation authorities - their act trumps the ONCA, but if their act is silent, the ONCA will apply. In the ONCA, Many more details about terms, audit requirements, etc. -- most of the provisions of the ONCA will apply to ‘special statute’ organizations Some exceptions: Co-ops have their own act, are their own beast, not covered by the ONCA
  • As I talk, I hope you’ll hank about how these areas might affect your organizationPOLLSDoes your organization have more than one type of member? Yes, no, not sure, not applicable. Does your organization currently allow proxies (voting in absentia)? Yes, no, not sure, not applicable. What is the length of term that your board members serve now? One year, From one to four years. More than four years. Not sure. Not applicable. Does a professional auditor conduct an audit of your organization every year? Yes, no, not sure, not applicableTell you some of the new requirements in these areas. If you have questions feel free to send them through the chat function.
  • Members have more rights under the ONCA. 10% of members to call a special meeting, 5% to nominate directors. Any member can make a proposal that has to be circulated and included in the agenda of the ne – if it meets certain conditionsPOLL– how many have ‘non-voting’ members?How many have more than one kind of member?The ONCA introduces Member classes – have rights as a class – veto over changes to conditions of that class – voting, price they pay, Access to info – admin burden – - required to share member contact info – can be email not personal addressProxies – electronic means okay, but n
  • Clearer expectations :Definition of standard of care, detailed conflict of interest guidelines in the legislationNumber of directors now in articles – much harder to change. But you can state a minimum and maximum number, instead of a fixed number.E.D. has liability if board resignsBoard can fill up to 1/3 of board members, without going back to the membership
  • the same thing called “soliciting corporations” in the federal lawIf you’re a registered charity – don’t have to think about it – you are a PBC and always will beIf you’re a nonprofit but not registered as a charity with CRA, and your funding varies year by year, your status could change. If you get public funds – over $10,000 in any one year, then you’re a PBC. Need to follow the requirements for PBC for three years after you receive the public fundsMajor requirements –minimum of 3 directors, only 1/3 of directors can be employees, financial reporting is more stringentIf you close down, your assets need to go to another public benefit corporation
  • Difference between audit and financial review engagement. Both done by auditors. Auditor can’t be a member Review engagement –statements seem to confirm to generally accepted accounting. Info is plausible. Less assurance than an auditdon’t do the testing and verification that an audit does. Financial reviews are cheaper, less time consumingAlways need member permisison in advance. Extraordinary resolution – 80% agreement.
  • The rulesIf you have income of less than $500, 000 a year, you members can give you permission to have a review, rather than an auditLess than $100,0000 members can give you permission to waive both. Still need to have a financial report to your members, - but it doesn’t need to be independently verified. Not a public benefit corp – members can allow can waive both Once the OnCA takes effect, At your annual meeting, ask your members to pass the right motions, so you can proceed with the financial reporting that you want and for which you are eligible.
  • Get educated – be clear about what your existing letters patent and bylaws say, Whether what you do actually match your documents. Put someone in charge – know when a date for proclamation is set, when the forms and regulations come outAlready we know ome things are mandatory under the ONCA – proxy, member rights, director rules Default – what’s laid out in MCS’s draft bylaw that is available on their site – links on the next slideone year term for directors. Quorum is 50% for members or directors’ meetings, , that the directors can borrow or loan funds without the members permissionsBut you can override these and set up different rules in your bylaws. But if you don’t do anything, you get the default.Alternate – electronic voting as a proxy, for example. Do one thing – think about your membership structure, and If you want to change it – do that at your next annual meeting – BEFORE the ONCA is proclaimed.
  • Lots of good stuff on the MCS site Also available in French if that’s important to your organizationGo to the legislation itself – 250 sections –Control F in your browser – to find what it says about directors, or quorum or whatever your specific questionIn 2014 we’ll have more tools to help you
  • Transcript

    • 1. ONCA Basics Webinar November 2013
    • 2. Outline • • • • • • What is the ONCA? Does the ONCA apply to my nonprofit? What has changed in the new law? Areas to watch – Q and A What do we have to do? Q and A
    • 3. How we got here • Few updates since the 1950’s • Consultations starting in 2007 • In 2010 the ONCA (Bill 65) passed, but it is not yet in effect • Likely in effect in 2014 • 3 year transition - comply by 2017
    • 4. What has changed • Easier and quicker to incorporate • More clarity for directors and for members • Audits or financial review requirements eased
    • 5. Does the ONCA apply to us? • Yes, if you are incorporated under the Ontario Corporations Act • Special statute corporations – the ONCA applies “except where otherwise expressly provided”
    • 6. Areas to Watch • • • • • Member classes and member rights Meetings, voting and proxies Directors terms and conditions Definition of public benefit corporations Financial reviews and audits
    • 7. Member rights and classes • Member rights – Lower numbers to propose ideas, call meetings or nominate directors • Types of members = member classes – e.g. supporters, clients, honorary members • More access to info – Articles, bylaws, members’ list, financial statements • Mandatory proxies
    • 8. Directors • • • • More and clearer rules Maximum four year terms Number of directors now in articles 1/3 of directors can be employees - but not if you’re a charity • Limit to # of vacancies a board can fill
    • 9. Public Benefit Corporations • Charities are automatically public benefit corporations (PBCs) • If you are not a charity, source of funding determines status – over $10,000 a year from gov’t or 3rd party (not members or employees) = PBC • Requirements are different for PBCs and non-public benefit corporations – e.g. financial reporting, dissolution requirements
    • 10. Audits and Financial Reviews • Qualified, independent auditors • Financial Reviews cheaper, less effort • For smallest organizations, members can agree to waive audits or reviews – 80% agreement renewed at each annual meeting
    • 11. Audits and Financial Reviews • PBCs < $500k a year – can waive audit, have review • PBCs < $100k a year – can waive both and have internal report only • Non-PBCs < $500k a year –can waive audit and review
    • 12. How will this affect you? • Members and Directors: will structures or practices need to change? • Meetings and Proxies: will member proposals, notice periods or the proxy requirement be a challenge? • Financial Audits and Reviews–what reporting can and will we do?
    • 13. What to do 1. Gather your documents 2. Monitor: things are changing as we go 3. Look at mandatory, default and alternate rules 4. Consider changing member structures now before the ONCA takes effect
    • 14. Useful Links • Ministry of Consumer Services site: – Transition Checklist – Guide to the ONCA – Draft organizational bylaw http://www.sse.gov.on.ca/mcs/en/Pages/Not_For_Profit.aspx • Bill 65 – ONCA legislation http://www.ontla.on.ca/web/bills/bills_detail.do?local e=en&Intranet=&BillID=2347
    • 15. Keep updated • Subscribe to ebulletin –www.nonprofitlaw.cleo.on.ca • Amendments –www.theonn.ca/onca
    • 16. Questions? Brenda Doner CLEO 416-408-4420 x 828 brenda.doner@cleo.on.ca