By Esther S.J. Oh

A The decision of Bose v Bangiya Parishad Toronto (“Bose Decision”), released on September 30, 2019, involved the Prabasi Bengal Cultural Association, which organizes cultural events for members of the Bengali community (“Cultural Organization”), and the Bangiya Parishad Toronto (“Religious Congregation”), which are both not-for-profit corporations incorporated under the Corporations Act (Ontario).

The Bose Decision considered two proceedings before Justice Belobaba. For several decades, the two organizations had operated in tandem. The two organizations had a common board of directors and issued consolidated financial statements. The Religious Congregation owns the community centre from which both organizations have carried out their programs over the years. Since a dispute arose in 2016, the Religious Congregation, under the control of its self-proclaimed board of directors, has excluded the Cultural Organization from the community centre.

The Cultural Organization was properly organized under its incorporating statute and held membership elections. In contrast, the Religious Congregation was never properly organized from a corporate law perspective. The board of directors of the Cultural Organization functioned as the board of directors for both corporations, and members of the Cultural Organization were always treated as members of the Religious Congregation, even though the by-laws of the Cultural Organization did not mention the Religious Congregation. 

When a dispute arose concerning the election of officers for the Religious Congregation as a result of factions at the two organizations, the president-elect for the Religious Congregation, supported by a minority of its directors, purported to nullify the election of directors for the Religious Congregation and self-proclaim a new board of directors and membership list for the Religious Congregation. As a result, there were competing boards of directors and uncertainty concerning the proper, lawful board of directors of the Religious Congregation. The Cultural Organization and its directors brought an application to determine this question in a proceeding which was heard in part on August 26, 2019 before Justice Belobaba. Pursuant to that application, Justice Belobaba provided a handwritten endorsement ordering a new election of the board of directors for the Cultural Organization and Religious Congregation, and adjourning the balance of the application (the “Order”). 

The second proceeding involved a motion filed on September 19, 2019 requesting a stay pending an appeal to the Court of Appeal from the Order. In this regard, the appellants (the self-proclaimed board of directors for the Religious Congregation) sought an urgent stay to prevent the election of a new board of directors for the Religious Congregation scheduled for that upcoming Sunday, September 22, 2019 and to preserve the status quo pending the appeal.

In dismissing the motion, the court found the balance of convenience was even or tilted slightly towards the respondents, and it was neither just nor convenient to grant a stay of the Order. In this regard, the court found that the appellants had failed to establish that they were likely to suffer irreparable harm unless the election was stayed. In addition, the court did not “see much risk of harm” in permitting the members to vote at the election. The court stated that even if the appeal was later allowed, “member democracy” was required to end the “wrongful usurpation” of the Religious Congregation.

This Bose Decision is instructive of what can happen when factions within a not-for-profit corporation attempt to take over control of the board of directors in a manner that is prejudicial to the rights of its members. This case also underscores the importance of complying with basic corporate law requirements (including adoption of an appropriate by-law and complying with by-law provisions) as one measure that may help to reduce the opportunities for factional interests to attempt to seize control and disrupt the governance of a corporation.

​Read the October 2019 Charity & NFP Law Update