Legal news and trends for Canadian in-house counsel and c-suite executives
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Poised Ontario's antiquated laws governing not-for-profit corporations are finally due to be updated. New leg- islation in the works sets out to enhance corporate governance and accountabil- ity, simplify the incorporation process, provide more rights to the organization's members, and increase personal liability protection for directors and officers. The current law has not been updat- ed since 1953; the province introduced bill 65, which will replace part III of the Ontario Corporations Act. By late August, the bill had passed first and second readings in the legislature, and was tentatively scheduled to receive the third reading in September. Wayne Gray, a partner at McMillan LLP in Toronto whose practice includes corporate governance issues for all types of companies, says the reforms are long overdue. "This law will be much more accessible for the not-for- profit community and the lawyers who serve them," says Gray. "The current law is very inaccessible, and even for lawyers it's hard to use, and most of these types of organizations don't have lawyers who specialize full time in not- for-profit law, so this will demystify this area of law, make it much more intui- tive and simpler, and is much more in line with federal laws." The Ontario bill comes on the heels of the new federal Not-for-profit Corporations Act, which has not yet been proclaimed into force but should come into effect late next year. "The new federal act is an excellent model," says Gray. He points out once the fed- eral act comes into force, not-for-profit corporations operating in Ontario will have the unique opportunity to choose which regime to operate under. In a for reform Not-for-profit governance laws in Ontario are scheduled to undergo much-needed changes. By Daryl-Lynn Carlson paper he authored about the new feder- al and provincial laws, he notes that the federal jurisdiction offers the advantage of a national platform and tends to be more inclusive for members, donors, and the public, along with the ability to carry on business in other provinces across the country. The federal act requires annual financial statements to be filed with Corporations Canada, where they are open to inspection by the public, which lends an element of transparency. In Ontario, there is no equivalent filing requirement. Yet Gray suggests the new Ontario law does have some shortcom- ings. "One of the issues that was not addressed was the personal liability for directors and officers from misfeasance or an error in judgment," he says. "That's a rather onerous thing to apply to a director or officer for a not-for-profit INHOUSE OCTOBER 2010 • 31