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NAFC Continuance under Canada Not-for-Profit Corporations Act

The National Association of Friendship Centres (NAFC) explains the process of continuance under the Canada Not-for-Profit Corporations Act (CNPCA) and addresses challenges and proposed solutions. Consultation with members and a formal vote on by-law continuance will occur in 2014.

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NAFC Continuance under Canada Not-for-Profit Corporations Act

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  1. NATIONAL ASSOCIATION OF FRIENDSHIP CENTRES CONTINUANCE UNDER THE CANADA NOT-FOR-PROFIT CORPORATIONS ACT

  2. INTRODUCTION • The National Association of Friendship Centres (“NAFC”) is a not-for-profit corporation incorporated under the Canada Corporations Act – Part II (“CCA”). • The CCA was originally enacted in 1917. • Since approximately 1974, Industry Canada and its predecessors worked to enact a modern statute to govern not-for-profit corporations. • The Canada Not-For-Profit Corporations Act (“CNPCA”) received royal assent on June 23, 2009.

  3. INTRODUCTION – cont. • The CNPCA is now in force with respect to corporations like NAFC (October 17, 2011). • The CNPCA draws heavily from the Canada Business Corporations Act. • Part II CCA corporations like NAFC have until October 17, 2014 to continue under the CNPCA. • What is involved in continuance? • NAFC will file 3 documents to continue: • Articles of Continuance (these replace your Letters Patent under the CCA); • By-laws (amended to conform to the CNPCA); and • Form 4002 (listing the then current directors of NAFC)

  4. INTRODUCTION – cont. • The detailed content of the proposed Articles and By-laws is found in the NAFC By-Law Review Chart made available to all members on the NAFC web site (www.nafc.ca). • The intention now is to present these documents for initial consultation with the membership and that, following member input, a formal vote on the by-laws continuance will take place at the next NAFC AGM in 2014.

  5. INTRODUCTION – cont. • Through this we propose to discuss (i) the overall strategy which NAFC is taking to continuance: (ii) some of the challenges posed by the CNPCA and the proposed solutions to those challenges; and (iii) certain of the technical amendments which will be necessary for continuance. • We are open to any questions you may have about this presentation or the documents provided for this activity.

  6. NAFC STRATEGY • The NAFC strategy in connection with continuance is simple: • preserve to the greatest possible extent the existing governance structure of the NAFC while at the same time complying with the CNPCA.

  7. CHALLENGES POSED BY THE CNPCA • The main challenges posed by the CNPCA relate to the NAFC Board and its membership. • Starting with the Board: • The general rule under the CNPCA is that directors are to be elected at an annual meeting of members (Section 128(3)). This is an issue for NAFC because many of your directors are appointed. • “Ex-officio” directors – meaning directors who became directors by virtue of an office held – are not permitted under the CNPCA. This is an issue for NAFC because the current members of your Executive Committee become directors by virtue of an office held (President, Vice-President, Treasurer, Secretary, Youth Executive member).

  8. CHALLENGES POSED BY THE CNPCA – cont. • The CNPCA places restrictions on the ability to remove a director from office. This is an issue for NAFC because its by-laws currently contain broader rights regarding removal of directors (Code of Ethics, loss of credentials).

  9. NAFC SOLUTION TO CNPCA ISSUES • How has the NAFC proposed to deal with these issues: • All members who previously “appointed” board directors will “nominate” a director. The NAFC Secretary will gather up the names onto a nominee slate. The slate will be presented to the members at the annual meeting for “election” of the nominees. The slate will also include candidates for Executive Committee positions (Chart, page 29). • To preserve the integrity of the nomination process, there will be no nominations from the floor of the meeting other than for Executive positions (Chart, pages 27 to 29 and pages 37 to 41).

  10. NAFC SOLUTION TO CNPCA ISSUES – cont. • To avoid the restrictions on “ex-officio” directors, members of the Executive Committee will now be elected as (board) directors and officers by the members (Chart, page 18, Section 4). • The director removal provisions will be amended to comply with the CNPCA (Chart, pages 29-31).

  11. NAFC SOLUTION TO CNPCA ISSUES – cont. NAFC also has certain challenges on the membership side. The CNPCA greatly enhances membership rights. It provides for proposal rights of members (Section 163), deemed voting rights for non-voting members (Section 199(2)), class voting rights – which amount to a veto right for one class of member (Section 199), an oppression remedy (Section 253) in addition to investigation and derivative action provisions (Part 15 and Section 251). Given these and other rights and obligations of members under the CNPCA, it is important to precisely define your membership.

  12. NAFC SOLUTION TO CNPCA ISSUES – cont. NAFC has traditionally had one class or group of members including Friendship Centres and Provincial/Territorial Associations. Notwithstanding this, the By-laws do contain certain provisions which might be construed to indicate more than one class or group of member. For example, Board members currently vote at members’ meetings. Does this mean that the Board should constitute a separate membership class?

  13. NAFC SOLUTION TO CNPCA ISSUES – cont. The view is that the Board is not intended to be a separate membership class and so amendments have been suggested to the By-laws to clarify this (Chart, page 17). We have taken the same approach to the Aboriginal Youth Council. Currently, each member of the Aboriginal Youth Council votes at AGMs and yet there is not an intention to create a separate membership class (Chart, page 17).

  14. TECHNICAL AMENDMENTS • Outlined here are some of the numerous technical amendments required for continuance. Examples include: • The “head office” becomes the “registered office” (Chart, page 1); • The provisions regarding by-law amendments proposed by members have been amended to meet the “proposal” requirements of the CNPCA (Chart, pages 3 to 5); • The annual meeting timing and notice provisions have been amended to comply with the CNPCA (Chart, pages 12 to 14);

  15. TECHNICAL AMENDMENTS – continued • The “auditor” becomes the “public accountant” (Chart, page 15); • Special meetings of members are required to be called when requested by members holding 5% of the votes (Chart, pages 19 to 20); • “Affairs” of the NAFC become “activities and affairs”; • The mandate of the Executive Committee has been modified to comply and reflect Section 138 of the CNPCA (Chart, pages 36 and 41); • The legal protection of directors’ and officers’ provisions have been updated to conform to the CNPCA (Chart, pages 57 to 60);

  16. TECHNICAL AMENDMENTS - continued • The conflict of interest provisions have been updated to conform to the CNPCA (Chart, pages 61 and 62); • The borrowing provisions have been updated to conform to the CNPCA (Chart, pages 62 to 65); • “Fiscal year” becomes “financial year” (Chart, page 66);

  17. ARTICLES OF CONTINUANCE The NAFC Articles of Continuance replace the NAFC Letters Patent. The detailed draft suggestions are found at the end of the Chart document on pages 71 to 75. “Objectives” becomes “purposes” (Chart , page 71); Other changes conform the Articles to existing by-laws; CNPCA requirements including membership class and associated rights need to be described in the Articles (Chart, page 75).

  18. Contact Information: Wayne B. Warren Gowling Lafleur Henderson LLP 160 Elgin Street, Suite 2600 Ottawa, Ontario K1P 1C3 Tel: (613) 786-0191 Fax: (613) 788-3481 Email: wayne.warren@gowlings.com

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