On April 17, 2015, the Ontario Superior Court of Justice released its decision in the matter of Vaughan Community Health Centre Corporation v Annibale (“Vaughan”). In contrast to the decision in Saskatchewan WTF Taekwondo et al v Taekwondo Canada, discussed earlier in this Charity Law Update the Court in Vaughan declared that the subject matter of a proposed resolution that the members of a not-for-profit corporation governed by the Corporations Act (Ontario) (the “OCA”) wanted to pass was inconsistent with the OCA and the corporation’s by-laws, and also stated that the resolution was not consistent with the role of corporate members.
In this regard, a portion of the corporate membership of Vaughan Community Health Centre Corporation attempted to requisition a meeting to remove certain directors, and make amendments to the by-laws of the corporation concerning the qualifications and number of directors.
After a review of the facts, the Court determined that the members are not entitled to unilaterally make amendments to the by-laws of a not-for-profit corporation under the OCA. In this regard, the OCA provides that the ability to pass by-laws, subject to confirmation or rejection by the members, rests solely with the directors, which was mirrored in the by-laws of the corporation. In addition, with respect to the changes concerning directors, the OCA requires a special resolution to increase or decrease the number of directors, which by definition first requires a resolution to be passed by the directors, then confirmed by the members. In addition, while the OCA provides for the ability for the membership to remove directors if the by-laws so provide, in this case, the by-laws required that reasons for removal be given and that the directors be allowed to respond. Since that did not occur in this instance, the Court found that such removal would not comply with the by-laws.
While this case does not provide any new interpretations of significance concerning the OCA, the detailed review of both the OCA and by-laws by the court in relation to the resolution that the members wished to pass indicates that a not-for-profit corporation will not always be provided any latitude with respect to compliance with its governing documents. As such, it is important to confirm that corporate decisions taken by a not-for-profit corporation, whether under the OCA or other not-for-profit legislation, will not be off-side either the statutory provisions or the by-laws.