New legislation will come into force the end of this November to govern societies formed or operating in BC. The new Societies Act (the “Act”) replaces the outdated Society Act with a more comprehensive framework that includes modern governance provisions that provides societies more flexibility in how they are created and operated. Similar to what was done when the federal legislation governing non-profits was replaced, the Act borrows various provisions and concepts from the Business Corporations Act to allow societies to function and be run more like companies.
The following are some of the more significant features of the Act.
- More Flexibility with Membership Structure. The new Act clarifies that multiple classes of members are permitted and has no restrictions when it comes to minimum numbers of members. Under the new Act only one member is required for incorporation and after, without imposing any additional liabilities on the directors. In addition, if there are both non-voting and voting members, there is no longer a requirement that there be more voting members than non-voting.
- Member-Funded Societies. A new type of society is permitted under the Act called “member-funded societies”. These societies exist primarily for the benefit of their members and not the public. In order to qualify as a member-funded society a society must (a) not be a charity; (b) not be in receipt of public donations or government funding in excess of a prescribed amount for a two year period; and (c) include a provision in its constitution that it is a member-funded society. When the Act first comes into force the threshold for donations and funding that a society can’t exceed is the greater of $20,000 and 10% of the society’s gross income for those two years. Member-funded societies only need one director, do not need to disclose remuneration of its directors and employees, are not required to disclose their financial statements to the public, and have fewer restrictions regarding how assets can be disposed on dissolution.
- Elimination of Unalterable Provisions. Societies will no longer have unalterable provisions in their constitution or elsewhere. Any unalterable provisions must first be moved to a society’s bylaws and noted as previously unalterable. After the society has transitioned it may amend any previously unalterable provisions as it would any other provision in its bylaws.
- Qualifications for Directors. The new Act sets out minimum qualifications for individuals to be directors, which are similar to those qualifications for a director of a company, and requires an individual to consent in writing to be a director or to have been present at the meeting at which they were elected as a director and to not have objected to such election. Additional qualifications can be specified in a society’s bylaws. The new Act also permits, if provided for in a society’s bylaws, individuals to become directors of a society by virtue of a current or past position held by them and not by election.
- Special Resolutions. The threshold for a special resolution under the Society Act is 75%, under the new Act the threshold will be lowered to 66% unless a higher threshold is specified in the society’s bylaws.
- Online Filings. All incorporations, transition applications, annual filings and other forms changing a society’s records will be able to be filed electronically. In addition, special resolutions will no longer need to be filed with the Corporate Registry.
- Electronic Meetings. Societies will be permitted to hold meetings electronically, unless restricted by their bylaws. Calling such meetings will be at the discretion of the directors.
- Increased Disclosure Requirements. All societies, except member-funded societies, will be required to disclose, as a note in their financial statements, any remuneration paid to the society’s directors and the remuneration paid to the 10 highest paid employees and contractors of the society, if more than the prescribed amount. In addition, societies must provide a copy of their financial statements to anyone who requests a copy and pays any applicable fees.
- Director Liability. There are new and more comprehensive provisions in the Act dealing with directors liability, conflicts of interest, limitations of liability, and indemnities that societies and their directors should be aware of.
- Senior Managers. The Act introduces the concept of senior managers, however these provisions will not be in effect until two years after the Act is in force. A senior manager is defined as a person appointed by the directors of a society to exercise the directors’ authority to manage the activities or internal affairs of the society as a whole or in respect of a principal unit of the society. A senior manager must meet the same qualifications as directors and has some of the same duties and liabilities as a director under the Act.
- Remedies. The new Act makes additional court proceedings and remedies available to members and directors of societies, including oppression remedies and derivative actions, similar to what is available to directors and shareholders of companies.
Stay tuned for an additional post next week on transitioning to the new Act.