Food charities make up some of Canada’s oldest not-for-profits. These charities continue to play an integral part in Canada’s public support architecture. In our experience working and volunteering with food charities, the operations on the ground are wholly consuming: staff, management and directors are passionate about pursuing the charitable purposes of the organization. At times, non-operational aspects of some charities can end up shuffled down the agenda at board meetings, for better or worse.

It is for those organizations in Ontario, food focused or not, who we write to in this blog post. We want to tell food charities and not-for-profits that they likely have positive legal obligations to move their corporation from old legislation to new. Perhaps in a more positive vein, this transition – called a “continuance” – offers Ontario charities and not for profits the opportunity to re-evaluate how they engage with members and other key stakeholders. It’s a time to turn an organization’s mind to the question of whether it is structured appropriately to ensure compliance with Ontario’s regulations and engagement with its community.

The Ontario Not-for-Profit Corporations Act, 2010

The Ontario Not-for-Profit Corporations Act, 2010 (“ONCA”) came into force on October 18, 2021, replacing the previous Ontario Corporations Act (“OCA”). Every not-for-profit in Ontario is required to amend their existing articles through the process of continuance to comply with ONCA by October 18, 2024.

ONCA ushers in a new era for not-for-profits. It is designed to allow not-for-profit corporations to function more like a traditional business corporation. In many ways it follows a similar structure to the Canada Not-for-Profit Corporations Act which came into force on June 23, 2010, and regulates federal not-for-profit corporations.

Key Changes Under ONCA

Although ONCA continues to operate with members, rather than shareholders, ONCA provides additional rights to these members that resemble those of shareholders. Significantly more information is contained in the articles rather than by-laws, and there are clear majorities and thresholds set forth in ONCA. A hallmark of OCA not-for-profits and charities was that the corporation was, to a large degree, simply left to the members and directors to set out in their by-laws. By comparison, ONCA is far more prescriptive. Other key features of ONCA, include: the transition from the term “letters patent” to the term “articles of incorporation”, the ability for not-for profits to have purposes in their articles which are commercial in nature, and the requirement of a minimum of three directors who do not need to be members, unless the by-laws state otherwise.

Considerations for Not-for-Profits: Membership

These enhanced membership rights mean that members have rights under ONCA which need to be considered in relation to the purposes of the organization. Accordingly, from a process perspective, reviewing membership class terms should be done before amending the corporation to fit with ONCA. If you are creating more than one class of membership, these classes and their voting rights must be outlined in the articles. The by-laws will document the additional conditions required for membership.

Not-for-profits can create one, or two or more different classes of membership with varying conditions of membership. Common not-for-profit membership categories include:

1. Closed Membership: The directors and members are the same individuals. Other participants can be referred to as a non-membership category, like affiliates, associates, supporters, or congregants.

2. Open Membership: Anyone who supports your not-for-profit’s vision, mission, and values can become a member.

3. Semi-Open/ Conditional Membership: Conditions of membership can be outlined in the bylaws. For example, bylaws can specify who can become a member, how they can become a member, what code of conduct they must follow to stay a member, and the maximum number of members. The conditions of membership cannot take away the rights that members have under ONCA (for example voting right if there is only one class).

4. Self-Perpetuating Membership: Directors don’t have to be members under ONCA. However, bylaws can say that directors will be the only members. This structure is called “self-perpetuating” because the directors, acting as members, elect all new directors.

5. Hybrid Membership: The directors are your only voting members, and a non-voting class is open to anyone who supports your not-for-profit’s work.

6. Representative Membership: The directors make up one class of voting members. Also have one or more other voting classes made up of members who are elected by and represent different types of stakeholders.

Other Considerations for Not-for-Profits

Although not-for-profits are not required to pass new bylaws to conform with the new Act, strategically it makes sense to ensure your articles and bylaws align with your organization’s vision and mission at the same time as engaging in the continuance process. These changes may include amendments to both the articles of incorporation and the by-laws themselves.

There are a variety of other small and fundamental changes between the OCA and ONCA. We recommend for all not-for-profits to meet with a lawyer to discuss how this transition will directly impact their corporation. If you are a food not-for-profit in Ontario, ONCA will apply to you. The continuance involves various steps and drafting of some documents to transfer the corporation to ONCA. If you require advice and support regarding the transition to ONCA, please contact us at info@gsjameson.com.