Not-for-Profit Corporations Act Presentation to Wheelchair - PowerPoint PPT Presentation

Not-for-Profit Corporations Act Presentation to Wheelchair Basketball Canada December 2012

Sport Law & Strategy Group Providing strategic insight to the Canadian sport community through professional services in these areas:  Legal Solutions  Planning & Governance  Strategic Communications

“The Perfect Storm” of 2011  Canada Not-for-Profit Corporations Act – affects all NSOs and MSOs  Sport Canada’s Governance Principles - will affect future funding  Amendments to the Income Tax Act – affects all RCAAAs  Overall trends to improve Canadian sport governance

“Arguably, organization and system mismanagement costs us more medals and more lifelong participants [in sport] than the culprits we prefer to blame, such as limited facilities and funding, or insufficient school sport and activity programs” -

Rationale for New Legislation  Strengthen member rights  Increase accountability  Increase transparency  Improve efficiency  Embrace new technologies  Other provinces will follow (Ontario, B.C.)

Efficiency Features  NFP Act contains mandatory rules, default rules and alternate rules  Bylaws can be slim as the rules are in the Act  Directors may change bylaws without approval of members, except for ‘fundamental’ changes  Industry Canada will be a storehouse, not a clearing house, for bylaws  Changes to bylaws will take immediate effect

Possible Approaches  Avoidance approach – do the minimum to comply with the letter of the law  Compliance approach – do more to comply with both the letter and the spirit of the law  Strategic approach – leverage opportunity to review governance model and improve effectiveness … this opportunity will not present itself again in our lifetimes …

Impact #1 - Member Rights  Members may pursue more ‘judicial’ remedies  Easier for members to ‘requisition’ a meeting  Members elect directors  Members may remove any, some or all directors by ordinary resolution  Members without voting rights may vote on certain ‘fundamental changes’  In some instances, member classes may vote separately  Member proposals

Impact #2 - Board Structure  The Act requires that members will elect directors … therefore: • ‘Ex-officio’ directors are prohibited • Appointed directors are restricted

Therefore …. You need to  Simplify and streamline membership classes  Move to an elected Board structure * “Organizations may wish to collapse voting member classes into one category, and eliminate non-voting members” - Carters Professional Corporation

Membership Models (51 NSOs – 2012)  Where PTSOs have  PTSOs vote  92% vote, 38% have equal  Clubs vote  14% vote, 62% have  Athlete reps vote  proportional vote 16%  2 NSOs ( Equine,  Directors/Officers Bobsleigh - Skeleton ) vote  37% have individuals vote

Board Composition (58 NSOs – 2011)  Board size 12 or less  Elected ‘Competency’  57% Board  53%  Board size 13 to 18  ‘Constituency’ Board  28%  36%  Board size 19 or more  Hybrid Board  16%  10%

What Other Sports Are Doing  Creating simpler membership structures  Eliminating non-voting individual members, creating ‘registrants’ and ‘honorary officers’  Choosing smaller, policy-based boards  Creating ‘Provincial Councils’ with defined mandates  Rethinking committees – standing/operating  Embracing nomination systems to recruit skilled/competent directors

Challenges Emerging  Importance of the transition two-step!  Timing of year end and annual meeting/ conference  Meeting CRA’s new requirements of ‘exclusive purpose and function’  Maintaining jurisdiction over individuals/athletes

Some Things to Watch For  Maintaining an effective athlete voice  Failure to consult with stakeholders, or  Stakeholders not engaging in consultation efforts  Evolution to more modern and corporate structures may backfire!  High demand for HQPs

Not the best approach ! Get started now!

Documents You Must File  Articles of Incorporation must contain name, location, # of directors, statement of purpose, classes of members, restrictions on activities, distribution of assets after dissolution  Bylaws must contain conditions of membership, method of giving notice for meetings  If an RCAAA , Canada Revenue Agency has to approve the Articles of Incorporation

Timing  Work backwards from October 2014  Member voting at AGMs, SAGMs, Special Meetings, telephone meetings?  Communication with members, trust issues  Two-step transition needed in most cases  Make a plan - and make a back-up plan

For more information, visit: http://www.sportlaw.ca/nfp-act/