Ontario’s new Not-for-profit-Corporations Act (“ONCA”) is finally coming into effect on October 19, 2021, nearly a dozen fashionably-late years after it was first passed. The ONCA replaces an older act, the Ontario Corporations Act (“OCA”) which is over a century old and has become drastically outdated and out-paced by the more modern legislation modelled by the federal Canada Not-for-Profit Corporations Act and several similar provincial acts over the past few years. Whether your corporation has been anticipating this change for years, or is just starting to hear about it now, there is some important new information to be aware of.
What is happening?
The old OCA that governed a variety of Ontario corporations, including non-profit corporations, is being phased out. For non-profit corporations, it is being replaced by ONCA. This means that all corporations that are currently established under the old act will no longer be subject to its rules; instead, they will become governed by the rules in ONCA. And, all new non-profits going forward will be incorporated under ONCA to begin with. This change will happen automatically.
Who is affected?
The change affects most non-profit corporations (those that do not issue shares) that are specifically established under Ontario law. They will have governing documents called ‘letters patent’ from the province of Ontario. Several other types of non-profit corporations operate in Ontario, including many that were established under the federal CNCA by Article of Incorporation or Articles of Continuance. This change in the law does not affect them. It also does not affect non-share capital corporations that are governed by the Ontario Co-operative Corporations Act instead of the OCA.
There are also some corporations that do have shares but operate for social purposes, such as some golf clubs, etc. that are under the old OCA. As part of the OCA phase-out, these corporations will have a choice over the next five years to either become a non-profit under the ONCA, a co-operative under the Ontario Co-operative Corporations Act, or a business under the Ontario Business Corporations Act.
What do affected corporations need to do?
There are no active steps that corporations need to take to transition to being governed by ONCA; that will happen automatically as part of the change in the law. However, on October 19, 2021, the ONCA transition period will start. As of that day, affected corporations will have three years to review and amend their governing documents and bylaws to ensure they do not conflict with anything in the new legislation. During the three-year transition period, the corporation’s governing documents and bylaws will still be valid even if they conflict in places with ONCA. After that period is over, however, any conflicting provisions will become invalid and will be ‘deemed’ to be amended to be in compliance. Drache Aptowitzer LLP would be pleased to help your corporation review and update its governing documents, to ensure they properly serve your needs while staying in line with the new law.
Alexandra Tzannidakis is an associate lawyer at Drache Aptowitzer LLP. She practices in the areas of Tax and Charity Law. She can be reached at firstname.lastname@example.org.