By C. Yvonne Chenier, Q.C.
On September 22, 2014, amendments to the Alberta Societies Act that we have previously alerted our readers to were proclaimed in force. New sections 36.2 and 36.3 now allow certain not-for-profit organizations to either continue from other jurisdictions into Alberta or continue from Alberta to other jurisdictions. This article will discuss a few things any not-for-profit organization considering continuing into Alberta needs to know before moving day.
What does continuance mean?
Any organization that has had the recent experience of transitioning from the Canada Corporations Act Part II to the new Canada Not-for-profit Corporations Act on a federal level will know that continuance means, in a practical sense, taking an organization and changing it so it fits the mould of the new legislation that one wants to “continue” or “transition” into. In the case of the federal legislation this has been moving not-for-profit organizations from an older type of regime of corporate governance into a modern regime where members have rights and directors are protected. This is similar to what has happened over the past few decades on the for profit business corporations models in federal and other provincial statutes. Continuance can also mean moving from one legislative authority to another legislative authority such as federal, provincial or territorial legislation and leaving the former governance regime behind. Unlike citizens of Canada who mostly enjoy the freedom to move from place to place, not all not-for-profit organizations enjoy this same privilege. Until the Societies Act was amended in Alberta no not-for profit organization could easily “move” or continue into Alberta if they wanted to make it their primary home. They would have to start from the beginning and create a new legal entity.
Who can move?
Each individual jurisdiction’s legislation dictates who they will allow to move into their jurisdiction. For example, the new section in the Alberta Societies Act states that only those whose continuance is authorized by the laws of their current jurisdiction can continue into Alberta under the Societies Act. There is no director or member residency requirement but an organization must keep a registered office in the province. The application for continuance must satisfy the requirements for incorporation under the Societies Act.
Similarly, those societies that are already incorporated under the Societies Act and are looking to move to another jurisdiction would need to check if the other jurisdiction will accept them under their own continuance provisions of their not-for-profit legislation. At this time it appears that the Canada Not-for-profit Corporations Act would accept them as well as similar statutes in Saskatchewan, Manitoba and Newfoundland. For those who want to move out of Alberta they have to have the continuance authorized by the members of the society by special resolution and obtain the approval of the registrar of the Alberta Corporations.
Considerations before moving to Alberta
Not-for-profit organizations (and that includes registered charities as well who are considering it and whose home jurisdiction makes them eligible) who want to move to Alberta and put themselves under the Societies Act should take note of the following considerations.
Directors and officers Rights and Obligation
Look at the needs of your director and officers. Under certain some legislation in Canada, such as the Canada Not-for-profit Corporations Act, there is built in protection for directors and officers. This gives the senior management of the not-for-profit organization a statutory scheme governing their actions. This is what we call in law an objective standard. The Societies Act however, has a subjective standard and no directors or officers rights and obligations are codified. In that regard, the directors and officers of the organization could be held up to the standard of care of their own profession as they perform their duties. This often leads to uncertainty on boards as to what steps each board member can or should take without putting themselves into personal jeopardy. Errors and omissions insurance, properly drafted bylaws, rules and policies, and to a lesser extent indemnitees are ways to protect directors and officers of an Alberta society.
Member Rights and Remedies
Those organizations wishing to move to Alberta should consider whether they have members that have been granted and need to rely on specific rights under the legislation that they exist under. Then they should look carefully at the lack of member rights in the Alberta Societies Act. Even though members are specifically not liable for a debt or liability of the society under section 21 of the Alberta Societies Act, unless they are given them by the bylaws that are used when continuing into Alberta, they will also not have many rights. Under the Alberta Societies Act generally the powers of the members are limited to the election of the directors of the society, unless the bylaws can broaden these rights.
Perhaps the most important element of the Alberta Societies Act to look at is the minimal level of financial disclosure that is required under this Act if the decision is made to move. On the one hand, if the not-for-profit organization is coming from a jurisdiction that requires full and frank financial disclosure and the members and other stakeholders of the organization are used to seeing that kind of disclosure then extensive bylaw provisions should be drafted to override those minimal provisions of the Alberta regime. On the other hand, some not-for-profit organizations may feel that they are unnecessarily burdened by a jurisdiction that has onerous financial disclosure and the minimal provisions of the Alberta Societies Act might be welcome.
Being a Natural Person
This concept admittedly may be better left to the consideration of the academics, but in legal disputes it can become a thorny issue. Look at the capacity of your organization under your current legislation. Some organizations such as those incorporated under the new Canada Not-for-profit Corporations Act have the capacity of a natural person and as such their powers of what they can do is unrestricted unless specifically so by the provisions of either their incorporating legislation or their own incorporation documents. The Alberta Societies Act does not grant societies who come under it natural person capacity but rather imposes restrictions such as the prohibition of having a purpose of carrying on a trade or business and imposes many formalities that must be followed such as getting members approval for various corporate actions. Bylaws and incorporation documents cannot overcome the specifics of many of these restrictions.
For those not-for-profit organizations who have decided that they want to move into Alberta under the Societies Act it is a simple matter of filling out the new Form 6 that has been created for this purpose, paying a fee of $50 to the Alberta treasury and making sure that the documents that you have sent into the Registrar of Corporations will comply with all of the provisions of the Alberta Societies Act including the bylaws. Section 9 of the Alberta Societies Act has all of the information that needs to be contained in your incorporating documents and should be reviewed. This includes the inclusion of provisions in your bylaws that must cover the following:
(a) terms of admission of members and their rights and obligations;
(b) the conditions of withdrawal of members and the manner, if any, in which a member may be expelled;
(c) the mode and time of calling general and special meetings of the society and number constituting a quorum at any of those meetings and rights of voting;
(d) the appointment and removal of directors and officers and their duties, powers and remuneration;
(e) the exercise of borrowing powers;
(f) the audit of accounts;
(g) the custody and use of the seal of the society;
(h) the manner of making, altering and rescinding bylaws;
(i) the preparation and custody of minutes of proceedings of meetings of the society and of the directors, and other books and records of the society;
(j) the time and place, if any, at which the books and records of the society may be inspected by members.
If you still want to move into Alberta, well, welcome! However just as many other governments have done in the recent past, you never know when reforms will be proposed in Alberta that may change the playing field for not-for-profit organizations. The Alberta Law Reform Institute has been looking at just that issue.