Unanimous Members’ Agreements: A New Era in Not-for-Profit Management
By Alexandra Tzannidakis
The new Canada Not-for-Profit Corporations Act makes a general attempt to regulate not-for-profit corporations in a manner similar to the Canada Business Corporations Act. As part of this vision, it allows non soliciting corporation (generally those that are not supported with public funds) to enter into a powerful arrangement similar to the unanimous shareholders’ agreements of business corporations. This arrangement is known as a unanimous members’ agreement (UMA).
A UMA is any lawful written agreement, signed by all the members of a non-soliciting corporation, which restricts in whole or in part the powers of the directors to manage or supervise the activities and affairs of the corporation. A UMA can be terminated by special resolution of the members (unless it provides otherwise). Unlike a corporation’s articles or bylaws, the UMA need only be signed by the members and does not require the approval of the directors. Essentially, it allows all the members to come together and restrict the directors’ powers to manage the affairs of the corporation. This could be an attractive option for organizations that wish to have their members be a guiding force.
The Act explicitly mentions a number of things that can be achieved via a UMA, such as overriding the directors’ authority to appoint officers and specify their powers, and removing the directors’ power to make, amend or repeal bylaws by resolution. A UMA can even be used to entitle a complaining member to demand the dissolution of the corporation on the occurrence of a specified event, a provision that is outside the purview of articles or bylaws. Most important, however, is the Act’s blanket permission to use a UMA to change the directors’ default authority to manage and supervise the corporation. Although this aspect of the Corporation can also be controlled via its articles, a UMA can alter this arrangement with no input from the directors.
As part of its scheme of financial requirements, the new Act distinguishes any corporation with an annual public income greater than $10,000 as a “soliciting corporation”. UMAs are restricted to non-soliciting corporations, which in practical terms means that they will not be available to most charities. Despite the UMA’s potential usefulness, this may be welcome news to larger charities whose directors wish to maintain exclusive direction. Because a charity does not exist to benefit its members in the same way that a business corporation exists to benefit its shareholders, the importance of unanimous shareholder power does not necessarily translate to the charitable context.
The UMA is part of an overall trend in the new Act towards granting members more power. Other provisions of the CNCA entitle non-voting members to vote on fundamental changes to the corporation and give members the right to remove directors at any time by ordinary resolution. However, the UMA’s unique flexibility means it can be used to re-balance corporate power in ways that benefit both members and directors. A director’s mantle can be quite heavy, especially in a smaller organization where every individual takes on a larger share of the responsibilities. Because a UMA can be used to remove not only power but also liability from a director, it can be a useful way to grant directors relief from time requirements and other pressures. The range of issues a UMA can encompass makes it a potentially valuable tool for redistributing power and responsibility as the members see fit.
 CNCA ss.170(1)
 CNCA ss.170(8)
 CNCA ss.142(a)
 CNCA ss.152(1)
 CNCA ss.224(1)(b)(i)
 CNCA s.124
 CNCA ss.170(5)