On July 10, 2017, the Office of the Public Guardian and Trustee of Ontario (“PGT”) posted Proposal Number 17-MAG008 (the “Draft Amendments”), which contains draft amendments to Ontario Regulation 4/01 under the Charities Accounting Act (“CAA”). The Draft Amendments were open to public comment until August 29, 2017. The Draft Amendments propose to amend Ontario Regulation 4/01 to provide relief from the common law rule prohibiting the remuneration of directors of charitable corporations and persons related to them by outlining certain circumstances where charitable corporations would be authorized to pay directors and related persons for goods, services, or facilities. Previously, Ontario Regulation 4/01 did not address director remuneration. The Draft Amendments would not apply to directors of unincorporated associations or trustees of charitable trusts.
Currently, in order for directors of charitable corporations to receive remuneration in a capacity other than as a director, charitable corporations and their directors must obtain a consent order from the PGT under section 13 of the CAA. This process can be time intensive and generally requires the assistance of legal counsel. The Draft Amendments would simplify this process by dispensing with the need for a consent order in prescribed circumstances for charitable corporations. Under the Draft Amendments, directors would continue to be prohibited from receiving direct or indirect payment for services they provided in their capacity as directors or employees of the charitable corporation, for fundraising services, for selling goods or services for fundraising, or in connection to the purchase or sale of real property.
Before payments can be made to a corporate director or a related person, the charitable corporation would first need to meet a number of conditions set out in the Draft Amendments. For example, the amount paid must be reasonable considering the goods or services received; the amount must be paid with a view to the best interests of the charity; and the board must have (a) at least five voting directors for every director who is either receiving payment or connected to a person receiving payment, or (b) a minimum of four voting directors excluding such director.
The Draft Amendments, if enacted into law will ease the process for incorporated charities that want to rely upon their board members who can provide services in another capacity without the need for a consent order. As such, incorporated charities should continue to follow developments with respect to the Draft Amendments should they wish to be able to remunerate their directors in another capacity.