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DETAILS ON THE NEW BC SOCIETIES ACT

Posted on Wednesday, May 20, 2015

What is the new Societies Act?

British Columbia is adopting a new Societies Act to replace the current Society Act. This Act will govern the approximately 27,000 non-profit organizations in BC. Societies are very diverse and include organizations such as independent schools, churches and temples, sports organizations, care providers, preschools, environmental agencies, and community groups. Approximately half of societies are also registered charities.

Why is BC adopting a new Societies Act?

The current Act is dated and out of step with modern corporate legislation in BC and other provinces. The government, led by the Ministry of Finance, has decided to implement a new Act.

Will the new Act apply to my organization?

Yes, if your organization is provincially incorporated in BC under the current Society Act.

Yes, indirectly, if your organization is incorporated as a society in a province other than BC, or federally under the Canada Not-for-Profit Corporations Act, and has been extra-provincially registered to operate in BC.

Potentially, if your organization is provincially incorporated in BC under a “special act.”

No, if your organization is federally incorporated under the Canada Not-for-Profit Corporations Act and is not extra-provincially registered to operate in BC.

What is the status of the new Act?

As of the date of posting: The new Act passed third reading on April 22, 2015, and received royal assent on May 14, 2015. The new Act is expected to come into force approximately 12 to 18 months after receiving royal assent. The bill, as passed at third reading, can be read here: https://www.leg.bc.ca/40th4th/3rd_read/gov24-3.htm

What do I need to do now?

As of the date of posting: Nothing. The new Act is not yet in force. Once the new Act is in force, you will have a two-year transition period in which to file transition documents with the Corporate Registry, revising your society’s constitution and bylaws to comply with the new Act.

However, this would be an appropriate time to begin considering how to update your society’s constitution and bylaws.

What are the positive aspects of the new Act?

There are many positive aspects, many of which provide greater flexibility for societies. The new Act:

  • Provides for electronic filings;
  • Clarifies the limitations on distributions of the money or other property of societies;
  • Clarifies directors' liability  issues;
  • Clarifies record keeping and access to corporate records;
  • Provides default rules for the internal governance of societies;
  • Allows the alteration of previously unalterable provisions in the constitution of a society;
  • Sets out clear qualifications for directors and senior managers;
  • Allows indemnification of directors and senior managers without court approval;
  • Allows directors' resolutions to be passed without a meeting;
  • Allows voting members to pass a unanimous resolution instead of holding an AGM;
  • Allows special resolutions of voting members by a 2/3 vote instead of a 3/4 vote;
  • Provides for court remedies in cases of unfair treatment of members, contraventions of the Act or regulations or defects in the conduct of societies' activities or internal affairs;
  • Allows restoration of societies without court approval; and
  • Provides different rules regarding corporate governance, financial disclosure and distribution of money or other property on dissolution by societies that are not charities and do not receive public funding greater than an amount provided for in the regulations.

What are some negative aspects of the new Act?

The new Act introduces several new provisions to foster accountability; however, societies may find some of these provisions to be offensive to individual privacy interests. For example, subsection 24(b) permits any person to inspect society records (other than the register of members), meaning that a disgruntled member of the public could access potentially sensitive minutes of member or director meetings. This right can be limited through the bylaws, but smaller and less sophisticated societies may not realize they should take this step.

The new Act also includes an “oppression remedy” for members: members may apply to court if they think the society is acting in an oppressive manner. This provision is drafted broadly and may open up societies to unnecessary and costly litigation. The comparable provision in the Canada Not-for-profit Corporations Act is more limited in its scope.

What does “prescribed by regulation” mean?

The Act refers to accompanying regulations, which will fill in certain details and specific amounts not set out in the Act itself. The regulations are being drafted and likely will not be released to the public until 2016.

I heard about some issues with section 99, in terms of giving the public the right to bring claims against a society for not acting in the public interest. What happened with this?

The government responded to pressure from the non-profit sector and deleted this section from the bill.

What other changes were made from the August 2014 draft to the current bill?

The new Act clarifies and limits provisions from the August 2014 draft that were overly broad or vague. For example, “senior manager” was defined in the draft to include individuals performing a policy-making function. The non-profit sector raised concerns that this was imprecise and could impose liability on unsuspecting individuals. In response to these concerns, “senior manager” is now defined specifically as an individual appointed by the directors to exercise the directors’ authority to manage the whole or part of the society.

The August 2014 draft permitted previously unalterable provisions to be amended by special resolution. The new Act still allows for amendment of previously unalterable provisions, but societies may now set their own higher thresholds for amendment, up to and including unanimity.

What does my society need to consider in transitioning to the new Act?

In general, you should take this opportunity to consider issues like:

  • Who do we want our members to be?
  • Who do we want our directors to be, and how should they be elected?
  • Who should have access to society records?
  • What are the procedural rules for meetings and for the society?

You should also assess your administrative systems and records. For example, the transition process is an opportunity to determine such things as whether the society knows who its members are, whether the society holds AGMs annually or whether the Society has readily-available constitution and bylaws.

Why is the new Act called the Societies Act, while the current one is the Society Act?

Most other similar legislation uses the plural form: for example, the Canada Not-for-profit Corporations Act, BC Business Corporations Act, BC Financial Institutions Act, and Alberta Societies Act.

Should we use the standard form bylaws that go along with the new Act?

Probably not. The standard form bylaws attached to the new Act are a useful starting point, but should not be adopted without due review and adjustment to fit the specific requirements of your society.

Will this change affect my society’s charity status?

In most cases, no. If your society, however, is a registered charity, you will need to notify the Canada Revenue Agency Charities Directorate once you amend your bylaws and constitution and provide them with a copy of your amended documents.

For more details on these developments, contact De Jager Volkenant & Company.

 

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