Corporate Update
Jan 2022 Charity & NFP Law Update
Published on January 27 2022

By Theresa L.M. Man

Ontario Proposes Permanent Changes to Enable Digital and Virtual Processes for Businesses

On January 4, 2022, the Ontario Ministry of Government and Consumer Services released draft permanent changes to various corporate legislation, including the Corporations Act and Not-for-Profit Corporations Act, 2010 (“ONCA”), regarding virtual processes. A consultation on the draft changes closed on January 21, 2022.

By way of background, since as early as May 2020, Ontario has provided temporary relief to corporations under various corporate statutes in response to the COVID-19 pandemic. Of note, relief under these statutes includes permitting electronic meetings despite provision in a corporation’s constating documents that provide otherwise. The current temporary relief framework will expire on September 30, 2022.

The Ministry is now proposing permanent changes or further temporary changes to the various corporate statutes in relation to virtual processes. For example, proposed changes to the ONCA would include:

(1) allowing corporations to hold virtual or hybrid meetings by default unless the constating documents provide otherwise, and removing the requirement for unanimous consent from directors in order to hold hybrid or virtual directors' meetings;

(2) allowing votes and elections to be conducted virtually by default, unless a corporation opts out in their constating documents, clarifying that hybrid voting/elections are allowed, and removing the requirement that voting by mail or by telephonic or electronic means must allow votes be verified as having been made by members entitled to vote and not being able to be identified by the corporation how each member voted;

(3) permitting notices to directors and members be sent by electronic means in accordance with the Electronic Commerce Act, and addressing waiver of notice and abridgement of time; and

(4) permitting affected corporations to store records by electronic means and facilitating the electronic examination and inspection of records as applicable.

My ISED Account Now Required to Access Corporations Canada’s Online Filing Centre

As of January 19, 2022, anyone wishing to access the Corporations Canada’s Online Filing Centre is required to first log in to My ISED Account in order to perform transactions that require a secure connection. Registered intermediaries must also log in to their My ISED account. Once logged in, they can access the same services as before. Users will not need a corporation key (which is unique to each corporation) to sign into their My ISED Account, but will need the corporation key for individual corporations to file certain transactions with Corporations Canada. However, users may continue to access the following services of the Online Filing Centre without being logged into their My ISED Account: Ordering uncertified copies, getting a certificate of compliance, getting a certificate of existence, subscribing to email notice, and ordering a corporate profile.

Minister Releases Report on 10-Year Review of CNCA

As reported in the November 2021 Charity & NFP Law Update, the Minister of Innovation, Science and Industry published a report (the “Report”) on its statutory review of the Canada Not-For-Profit Corporations Act (“CNCA”) on November 23, 2021. The Report was published following a public consultation on the implementation of the CNCA launched in June 2021, and provides the federal government the opportunity to assess whether the CNCA “continues to meet its objectives and remains a sufficiently flexible statutory vehicle for not-for-profit corporations” ten years after its enactment.

The Report sets out a brief history of the CNCA, followed by a summary of the Act’s objectives, which generally include setting out the legal and regulatory framework for federally incorporated non-share capital corporations through legislation that was designed to “promote accountability, transparency and good corporate governance, while being flexible enough to meet the needs of organizations both small and large”. This was done through a combination of mandatory and default provisions.

Generally speaking, the consultation found that the CNCA “remains a modern corporate statute and a legislative vehicle of choice for many not-for-profit organizations across the country”, with a streamlined incorporation process and efficient service from Corporations Canada. There were several general suggestions for reform, including suggestions related to audit and reporting obligations, to the conduct of meetings, with suggestions that the in-person default was outdated, as well as for clarification and/or correction of terms and concepts concerning the distribution of assets to members.

More specific comments were also provided, touching on issues related to audit and reporting obligations (including issues associated with the soliciting and non-soliciting corporation distinction); boards of directors (including issues associated with ex officio appointments, the “one third rule”, and the prohibition on appointing officers or employees); hybrid and virtual decision making (including support for fully virtual meetings and general interest in permitting electronic voting outside of formal members’ meetings); classes of membership; member rights (including issues associated with non-member voting rights and absentee voting); distribution of property; the soliciting and non-soliciting distinction; and the applicability of new corporate governance measures to non-profit organizations (including issues related to diversity disclosures, individuals with significant control, and further elaboration on fiduciary duties).

The Report concludes by reiterating the objectives of the CNCA, and stating the importance of periodic review of the legislation. While it indicates that the COVID-19 pandemic has highlighted how certain requirements under the CNCA could constrain organizations in times of change, it also found helpful proposals to increase flexibility and facilitate better comprehension of the CNCA that are “worthy of examination”. Going forward, a Parliamentary committee is expected to review the Report and produce its own report this year.

Saskatchewan Proposes New Non-profit Corporations Act, 2021

On December 7, 2021, the Government of Saskatchewan introduced draft not-for-profit corporate legislation to replace its current Non-profit Corporations Act, 1995. In this regard, Bill 75, The Non-profit Corporations Act, 2021 (“New Act”) and Bill 76, The Non-profit Corporations Consequential Amendments Act, 2021 were introduced in the Legislative Assembly for First Reading on December 7, 2021, and were both most recently debated at Second Reading on December 8, 2021.

Bill 75 contains draft legislation for the new proposed Non-profit Corporations Act, 2021. According to a government announcement, the New Act is modelled after Saskatchewan’s new for-profit corporate legislation, The Business Corporations Act, 2021, which received Royal Assent on May 13, 2021. The New Act is intended to modernize provisions to reflect current practices, replace outdated rules and language, reduce red tape, and create efficiencies for organizations by emphasizing the use of modern technologies.

As currently drafted, the New Act will update provisions for boards of trade and chambers of commerce; remove certain notice and filing requirements with the registrar; permit corporate names to be in Cree, Dene, or other prescribed Indigenous languages; expressly permit the use of electronic technologies, such as sending financial statements electronically and holding electronic meetings; remove the current requirement that at least 25% of directors be Canadian residents; and remove the registrar’s ability to appoint non-accountants to conduct audits or reviews, while allowing for increased dollar thresholds for mandatory audits or review requirements.

In conjunction with Bill 75, Bill 76 contains consequential amendments to other legislation, including The Business Corporations Act, 2021, The Business Names Registration Act, and The Charitable Fund-raising Businesses Act, among others. The consequential amendments are generally housekeeping in nature.

Read the January 2022 Charity & NFP Law Update