Directors And Officers (Societies Act FAQs)
- 1 What are the minimum qualifications for directors?
- 2 We want to have a director who is 16 or 17 years old. How do we do this?
- 3 What is a senior manager?
- 4 We are a church. Can the priest/minister/pastor be a member of the Board?
- 5 What is the difference between a director and an officer?
- 6 Can we remunerate our directors?
- 7 What does remuneration mean?
- 8 What does remuneration of a director mean?
- 9 What is a conflict of interest?
- 10 What is an ex-officio director (unofficial director)?
- 11 What is the role of a lawyer on a Board?
What are the minimum qualifications for directors?
The New Societies Act adds new criteria for the eligibility of directors:
- Directors have to be at least 18 years of age.
- Directors cannot have been found by any court to be
- incapable of managing their own affairs;
- be an undischarged bankrupt; or
- be convicted of an offence in connection with promotion, formation or management of a corporation or unincorporated entity, or of an offence involving fraud (subject to exceptions under section 44 of the new Societies Act).
These requirements are not exhaustive and the bylaws of a society may set out more requirements. If a director ceases to be qualified, the director must resign promptly.
Every Society should start using a Consent to Act as Director form to ensure that every Director has indicated whether or not they are qualified. An example can be found on the Law for Non Profits website. (Note, however, that you do not need to add the requirement to sign a consent form in your bylaws)
We want to have a director who is 16 or 17 years old. How do we do this?
Societies wishing to have a director of 16 or 17 years of age may do so if they have a bylaw permitting them to do so. Those wishing to do so should also create a policy to guide the society. Among other things, 16 and 17 year olds do not have the legal capacity to enter into contracts so it is important to consider the limits that may be operating upon them before they become directors.
What is a senior manager?
A senior manager is any individual that is appointed by the directors to exercise their authority and manage the activities or internal affairs of the society. Senior managers can be an employee, contractor or volunteer, so long as they exercise decision-making authority. Senior managers are subject to a duty to disclose conflicts of interest. If they happen to also be a director, they are subject to the same duties as directors as well.
We are a church. Can the priest/minister/pastor be a member of the Board?
People employed by or under contract with the Board of Directors can sit on a society’s board as long as the majority of the board is not employed by or under contract with the society. Any society with these practices should have a conflict of interest policy in place to guide directors.
What is the difference between a director and an officer?
A director is a person in charge of managing, or supervising the management of the activities and internal affairs of a society. Directors are elected by the membership subject to the bylaws. Officers are those directors who have specific roles under the Society Act. They are president, VP, secretary, and treasurer. They are often referred to as the executive.
Can we remunerate our directors?
Under the new Societies Act, the society is allowed to remunerate directors so long as its bylaws provide authorization for this. However, most funders do not permit directors to be remunerated.
What does remuneration mean?
Remuneration means money paid to someone for their work or services. Most funders expect society directors to be acting as volunteers and not to be paid for being directors. A director can be remunerated for performing work for the society such as catering an event. However, this would require the director to declare a conflict of interest and not vote on the Board consideration of the contract. The Board can then decide to waive the conflict and enter into the contract for services with the director.
What does remuneration of a director mean?
Remuneration for being a director means that the Society is paying a fee to the director for coming to meetings and doing the duties of a director. It is common in the business context but not in the non profit world. A society can pay a director their expenses for coming to meeting but most societies do not pay directors for being directors. Section 46 of the Societies Act states that a director can only be remunerated if this is allowed by the bylaws.
What is a conflict of interest?
A conflict of interest is a situation in which an individual or organization is involved in multiple interests that may be incompatible, where acting upon one interest could compromise another. A conflict of interest includes not only a material interest but the perception of an interest. In the legal context, this term is used to describe a situation in which a person has a duty to act in the best interests of an organization or party, yet they may have personal interests that conflict with that duty. For example, a board director voting on an increase in salary for a family member who works for the society. The new Societies Act requires societies to keep records of any conflicts of interest. You can find a policy in our resources page on the lawfornonprofits.ca website.
What is an ex-officio director (unofficial director)?
An ex-officio director is a person who is a director “by reason of their office” rather than by being elected or appointed to the position. This means that this person’s director position is due to their power or influence. Ex-officio directors can hold the same rights as other directors. The specific rights for ex-officio directors may vary from organization to organization, and can be clarified by writing them in the organization’s bylaws.
What is the role of a lawyer on a Board?
(Thanks to Paul Wood for providing this answer)
The willingness of lawyers to contribute their time, experience and knowledge to the not-for-profit sector by serving on Boards, or Committees, is laudable and rewarding. Nonetheless lawyers serving on Boards must be mindful of some of the risks that flow from these activities.
Key risks, insurance coverage issues aside for a moment, go the heart of your knowledge and expertise; namely whenever a “legal issue” arises in a meeting, everyone will turn to you for your thoughts, your input and, more critically, your advice. The fundamental challenges as everyone awaits your response include
- do you have the full and complete information that a lawyer, retained to provide advice, would insist upon?
- do you have time to thoughtfully consider a response?
- is the issue one that falls within your area of knowledge and expertise?
- is your advice “independent”, or is it clouded by loyalty to the organization, or a particular policy position you may feel strongly about?
While it will likely bring frowns to the faces of other board members, or quizzical looks, the response, “this question raises important legal issues, we need to get the advice of outside counsel” is more often than not the correct response.
The Law Society of British Columbia provides guidance to members.
This guidance includes a link to a useful checklist from Law Pro [Lawyers Professional Indemnity Company, Ontario]
This information is not provided to dissuade you from contributing your time and expertise, but rather to let you do so “eyes wide open”.
As pointed out in the Law Society of British Columbia’s guidance, having a frank discussion of the constraints on your role on accepting a position on a Board, and refreshing that discussion annually, is excellent advice.
Having dealt with the risks and constraints, you still have a great deal to contribute to, and benefit from, service in the not-for-profit sector.
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