10 Changes in the New Societies Act You Should Know About
|This information applies to British Columbia, Canada. Last reviewed for legal accuracy by Mary Childs, Michael Blatchford and Steve Carey in November 2016.|
If you work at a non-profit society in British Columbia or sit on a board of directors, the new Societies Act affects your world as of November 28, 2016. This section highlights 10 changes in the new Act that you should know about.
There is greater access to a society's records
Under the new Societies Act, members have greater access to a society's records. The Act spells out the records a society must keep, including a register of members, minutes of members' and directors' meetings, accounting records, and financial statements.
By default under the Act, members are entitled to inspect all records of the society (as are directors). For some records, member access can be restricted. For example, a society's bylaws can restrict members' access to accounting records.
The public is entitled to receive a copy of a society's financial statements and auditor's report if requested. A society can choose to grant access to the public to more of its records. The only record that is excluded from public accessibility is the society's register of members.
|Records a society must keep include these records (this list is not exhaustive)||Director access||Member access||Public access|
|Register of members||Yes||Yes, though directors may restrict||No|
|Minutes of members' meetings and copies of all ordinary and special resolutions||Yes||Yes||Bylaws may permit|
|Minutes of directors' meetings and copies of all consent resolutions of directors||Yes||Yes, though bylaws may restrict (except relating to conflicts disclosures)||Bylaws may permit|
|Any disclosures by directors or senior managers of a conflict of interest||Yes||Yes||Bylaws may permit|
|Accounting records, including a record of each transaction materially affecting the society's financial position||Yes||Yes, though bylaws may restrict||Bylaws may permit|
|Financial statements and any auditor's report on the financial statements||Yes||Yes||Yes|
Remuneration paid to directors and certain employees and contractors must be disclosed
Under the new Act, a society must disclose any remuneration paid to a director. Remuneration is money or other compensation paid for work or services performed. Amounts paid to a director for being a director and for acting in any other capacity must be disclosed separately. The disclosure must be made in a note to the annual financial statements, which are available to society members and to the public.
(In a change that takes effect in 2018, a society must not remunerate a director for being a director unless the bylaws expressly permit; see below.)
As well, societies must disclose the remuneration of any employees or contractors making over $75,000. If a society has more than 10 employees or contractors making over that amount, they must disclose the top 10.
To counterbalance privacy concerns, the names of the directors, employees and contractors need not be included in the financial statements. The disclosure can be done by position or contract; individual names don’t have to be disclosed. As well, a society can pool the information by disclosing the total number of employees and contractors making over $75,000 and the total amount of remuneration paid to them.
The new rules relating to disclosure of remuneration paid to directors and certain employees and contractors apply from when the new Societies Act came into force. Any financial statements prepared or presented by a society after November 28, 2016 need to comply with these new requirements.
There is greater flexibility in conducting members' meetings
The new Act provides greater flexibility in conducting members' meetings. Participating by telephone or other communications media is recognized as the norm. Unless a society's bylaws provide otherwise, members can participate in meetings by phone or using other technology so long as all the people participating are able to communicate with each other.
An annual general meeting can now be held entirely in writing. All voting members must consent to a written resolution covering the matters that must be dealt with at the AGM, including the presentation of the financial statements and any auditor's report.
The voting threshold for a special resolution has been lowered
The new Societies Act lowers the voting threshold for approving a special resolution. A special resolution approved by a society’s members is required to make fundamental changes to a society, including changing its name or bylaws.
Under the old Society Act, a special resolution required at least 3/4 of votes cast at a members’ meeting in order to be approved. Under the new Act, a special resolution requires 2/3 of the votes cast.
The new Act also allows societies flexibility in setting a higher threshold for special resolutions if they choose. In its bylaws, a society can provide a threshold of up to 100% of voting members. The higher threshold can apply generally or be set for specific special resolutions. For example, the bylaws can require a unanimous vote to change the bylaw that sets out where the society’s assets are to go on dissolution, while retaining the default threshold of 2/3 of the votes cast for other bylaw amendments.
If your society’s bylaws currently require that a special resolution be approved by at least 3/4 of votes cast, then that threshold still applies under the new Societies Act. Under the new Act, the default voting threshold to pass a special resolution is 2/3 of the votes cast at a members’ meeting. But if a society’s bylaws impose a higher threshold, the higher threshold in the bylaws prevails. The exception is for a vote to remove a director from office – the new default threshold of 2/3 applies to that situation regardless of what the bylaws say.
Members now have the right to bring a "member's proposal"
Members of a society have always been able to requisition a member's meeting for a specific purpose, provided that at least 10% of voting members sign the requisition. The new Act introduces a right for members to add specific issues to the agenda of an annual general meeting. A member proposal must be added to the agenda if the proposal is signed by at least 5% of the society’s voting members. The proposal must be received by the society at least seven days before notice of the AGM is sent.
A society's board of directors have the discretion to reject the proposal if it is substantially similar to an issue that has already been voted on at a member's meeting in the previous two years.
Members have more remedies
Under the new Act, members are able to apply to court for a remedy if the society’s activities are oppressive or unfairly prejudicial to one or more members. In applying for such an oppression remedy, a member will need to show they had a reasonable expectation to be treated in a certain way. They will also need to show that the society's conduct was burdensome, harsh and wrongful, or had an unjust and inequitable effect on them.
If a member's oppression claim succeeds, the court has wide discretion to make things right, including by directing or prohibiting any act, removing or appointing a director, varying a transaction or a resolution, directing compensation, or appointing an investigator.
Also under the new Act, members may bring a derivative action. In such an action, a member can enforce rights of the society when the directors refuse to act.
There is a new category of "senior managers"
The new Act introduces a new category of senior managers. These are individuals appointed by the board of directors to manage the activities and internal affairs of a society or a principal unit of a society.
A senior manager may be an employee, a contractor, or a volunteer. The intent of the individual or the board doesn’t matter; so long as the individual is appointed by the board and has the requisite authority, they are a senior manager under the Act.
Being deemed a senior manager does not alter a person’s job title, duties, authority, or legal relationship with the society.
The Act imposes duties on all senior managers, including the duty to act "honestly and in good faith with a view to the best interests of the society" and the duty to disclose a conflict of interest (see the next item). The Act also limits the liability of senior managers, inviting a court to relieve the manager from liability for any negligence or breach if the manager "acted honestly and reasonably and ought fairly to be excused".
There are expanded procedures for managing conflicts of interest
Under the new Societies Act, there are expanded procedures for how conflicts of interest are managed. A conflict of interest is a situation in which someone has a duty to act in the best interests of an organization, yet they may have personal interests that conflict with that duty. For example, a board director may work at a law firm that the society is considering retaining. Or an executive director may be related to a web designer that the society is contemplating hiring.
A director or senior manager is in a conflict of interest when they have a "direct or indirect material interest" in a contract or transaction with the society or a matter for consideration by the board. A "material interest" is an interest that is not insignificant and could reasonably be considered to affect a person’s decision-making.
A director or senior manager who is in a conflict of interest must:
- promptly and fully disclose the conflict to the directors
- leave the room during any discussion or vote at a board meeting on the conflict matter
- refrain from any action intended to influence the discussion or vote
- in the case of a director, abstain from voting on the conflict matter
As well, societies must now keep records of any disclosures by directors or senior managers of a conflict of interest.
Changes are coming in 2018 relating to who can be a director
Changes that take effect for pre-existing societies in November 2018 affect the qualifications to be a director of a non-profit in BC. Under the new Act, a director must be at least 18 years old, unless the bylaws expressly allow directors who are age 16 or 17. If the bylaws allow directors who are age 16 or 17, the majority of the society’s directors must be age 18 or over.
As well, a director of a society cannot:
- be declared incapable by a court,
- be an undischarged bankrupt, or
- have been convicted of fraud or certain other criminal offences within last 5 years (unless they received a pardon).
These are ongoing requirements. If a director becomes disqualified, he or she must resign. It is an offence for a non-qualified person to act as director.
These provisions don't come into effect for pre-existing societies until November 28, 2018.
Changes are coming in 2018 that affect whether directors can be paid
Also coming into effect in 2018 for pre-existing societies is a provision that a society must not remunerate a director for being a director unless the bylaws expressly permit. Remuneration is money or other compensation paid for work or services performed – in this case, the work of being a director.
Reimbursement of a director for reasonable expenses is permitted, unless the bylaws restrict reimbursement.
Subject to the conflict of interest rules, a director can be paid to be an employee of or contractor to the society. However, at all times a majority of directors must not be getting paid as employees or contractors.
Finally, another provision coming into effect in 2018 for pre-existing societies is a requirement that a director must consent to act as a director. The consent can either be by signing a written consent or by being present at a meeting where the appointment or election was made and not refusing to be a director.
Even though the requirement that a director must consent to act doesn't come into force until 2018, many societies are introducing a consent to act form beforehand. On the form, you can also set out the qualifications for directors that come into effect in 2018, and have the director self-certify that they meet those qualifications.
|Transitioning an Existing Society: A How-to Guide for Non-profits in BC © Drew Jackson is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 2.5 Canada Licence.|