Authored by Nevena Urosevic
The law governing charities in British Columbia may change this year. Bill 24, the new Societies Act,[i] was introduced into the British Columbia legislature for its first reading on March 25, 2015.[ii] The new legislation would replace the current Society Act, which was enacted in 1977 and governs some 27,000 societies in British Columbia, ranging from small community-based organizations to large charitable organizations.[iii] The updated and modernized statute provides rules for the creation and governance of not-for-profit organizations in British Columbia. While the proposed legislation maintains the basic framework of the current act, the newer elements of the Societies Act are intended to improve and simplify the functioning of societies, while strengthening the accountability of charities to the public.
Publicly Funded Societies vs. Member-Funded Societies
The new Societies Act distinguishes between publicly funded societies and member-funded societies. Publicly funded societies include entities such as charities and other entities that receive significant public funding. Member funded societies, on the other hand, are societies funded mainly by its members to carry on activities for the benefit of its members. Member funded societies may take the form of sports clubs or professional organizations. The new Act provides different rules regarding corporate governance, financial disclosure, and distribution of money or other property on dissolution by societies that are not charities and do not receive a large amount of public funding.
While the member-funded societies will enjoy a reduced regulatory burden under the new Act, publicly funded societies will bear a greater regulatory burden through several new accountability measures.
|Publicly Funded Societies||Member-Funded Societies|
|Charities and other entities that receive significant public funding||Funded primarily by its members to carry on activities for the benefit of its members|
|Required to have 3 directors and at least one of the directors must be ordinarily resident in British Columbia||Only required to have one director and none of the directors need be ordinarily resident in British Columbia|
|Public access to financial statements must be provided upon request||Does not apply to a member funded society|
|A majority of the directors of a society must not be employees or contractors of the society||Does not apply to a member funded society|
|Required to disclose the remuneration paid to its directors and (up to) its 10 most highly remunerated employees and contractors||Does not apply to a member funded society|
Corporate and Governance Procedures
The new Societies Act also adopts specific corporate and governance procedures from British Columbia’s Business Corporations Act and other corporate legislation, yet generally provides societies with a greater flexibility in creating governance by-laws that can be tailored to suit the particular needs and preferences of the society and community it serves. Examples of adopted governance procedures include, but are not limited to, proxy voting[v] at members’ meetings,[vi] reducing the threshold to pass a special resolution from 75 percent to two thirds,[vii] and creating multiple classes of membership.
Mandatory Online Filing
The new Act will implement a mandatory online filing system whereby societies will be required to file documents, such as those pertaining to by-laws and incorporation, electronically with the corporate registry. Existing societies will be required to input their constitution and by-laws into an electronic, searchable database.
Other Noteworthy Amendments to the Act
Other areas affected by the new Act include:
- Record-keeping obligations, including what records must be maintained and who has access to those records
- Requirements to become a director and the election of directors
- Allowing societies to change unalterable by-law provisions by special resolution
- The requirement of by-law authorization if directors will receive compensation for their position as directors[viii]
- Disallowing societies from creating branch societies
- Introducing and defining a subsidiary of a society, which is a corporation (including a society) that is controlled by a society. If a member or security holder of a society that has a subsidiary requests a copy of the subsidiary’s most recent financial statements, and pays any corresponding fees, financial statements along with any reports prepared by the auditor must be provided.
Subject to the approval of the legislature, the Ministry of Finance has announced that the government expects the new Act will come into force when new regulations are finalized, approximately 18 months after royal assent. Once in force, apart from certain specific exceptions, the new governance rules would apply to all existing societies. However, they will have a two-year transition period to file a transition application and to adopt the changes to their constitution and by-laws as required by the new legislation. It should be noted that pre-existing societies may not alter their by-laws or amalgamate with other corporations until they have transitioned and are in compliance with the new Act.
[i] Bill 24 -2015: Societies Act, 4th Session, 40th Parliament, Legislative Assembly of British Columbia (retrieved April 13, 2015), online: <https://www.leg.bc.ca/40th4th/1st_read/gov24-1.htm#section78>.
[ii] Progress of Bills, 4th Session, 40th Parliament, Legislative Assembly of British Columbia: <https://www.leg.bc.ca/40th4th/votes/progress-of-bills.htm>.
[iii] “New Societies Act provides flexibility, accountability”, March 25, 2015, News Release, Ministry of Finance, British Columbia <http://www2.news.gov.bc.ca/news_releases_2013-2017/2015FIN0024-000396.htm>.
[iv] Note: this will not apply to pre-existing societies until two years after the new Societies Act comes into force.
[v] Proxy voting is a form of voting whereby some members of a decision-making body may delegate their voting power to other members of the same body to vote in their absence, and/or to select additional representatives.
[vi] However, proxy voting must be provided for in the by-laws.
[vii] Unless the by-laws provide for a higher threshold.
[viii] Again, pre-existing societies have two years after the new Act comes into force to comply with this provision.
Noteworthy is provided for general information purposes and does not constitute legal or professional advice. Every organization’s circumstances are unique. Before acting on the basis of information contained in this blog, readers should consult with a qualified lawyer for advice specific to their situation.