Nov 2017 Charity & NFP Law Update
As indicated above, Bill 154 received Royal Assent on November 14, 2017. Schedule 2 of Bill 154 includes amendments to the CAA that permit “social investments”, as explained in Charity & NFP Law Bulletin No. 407 dated September 28, 2017. The only change from the original wording of Bill 154 concerning social investments is the new subsection 10.2(7) added before third reading in order to provide liability protection for directors and trustees if certain conditions are met. The new subsection 10.2(7) reads as follows:
A trustee is not liable for loss to the trust arising from the making of a social investment if, in doing so, the trustee acted honestly and in good faith in accordance with the duties, restrictions and limitations that apply under this Act and the terms of the trust.
While this is a welcome addition to the original proposed legislation which had not provided any liability protection for directors and trustees with regard to social investments, the wording of section 10.2(7) does not go as far as the protection from liability provided for prudent investments under section 28 of the Trustee Act. In this regard, and for comparison purposes, section 28 provides that “a trustee is not liable for a loss to the trust arising from the investment of trust property if the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment of the trust property, comprising reasonable assessments of risk and return, that a prudent investor could adopt under comparable circumstances.”
It is expected that the Ministry of the Attorney General’s Office of the Public Guardian and Trustee (“OPGT”) will in due course provide some type of written guidance to clarify the new provisions of the CAA on social investments. As such, before making a social investment, charities may want to wait for what the OPGT has to say about these new rules under the CAA, which may include insight on the protection from liability available under subsection 10.2(7). As well, it will be important for charities wishing to make a social investment to first seek advice from their legal counsel to assist them with understanding all of the legal requirements involved in making a social investment, including whether or not to seek advice pursuant to section 10.4 of the CAA and what sort of advice it would need to be.