Society Act Reform

The B.C. government has released a white paper http://www.fin.gov.bc.ca/pld/fcsp/society_act_discussion.htm  outlining proposals for a new Societies Act to regulate the governance of non-share capital entities incorporated in British Columbia. The full text of a proposed new act is presented, along with substantial commentary on the various provisions and issues.

The deadline for submissions and comments is October 15, 2014. This white paper is the latest instalment in a law reform dialogue which has been underway for several years.

The proposed legislation would essentially preserve and build on the format and structure of the existing legislation. For the moment the government has decided not to adapt for non-profit purposes the structure and model of the Business Corporation Act (BC)  (“BCA”) applicable to share capital corporations. However, selected provisions from the BCA have been adapted and introduced into the proposed draft legislation where appropriate.

Existing societies would need to expressly transition into the new governance regime, once it is in place, within a two year period.

Many of the changes would result in a modernization of governance which will be welcomed. However, specific provisions may affect particular societies more than others, so all societies are urged to review and consider the white paper proposals.

We will be preparing a detailed review and analysis of the White Paper. Set out below are a few early comments and highlights.

  1. Societies will still have Constitutions and Bylaws, copies of which will be filed electronically with the Registrar of Companies. Changes to those documents will result in an updated “consolidated” set of governance documents on file in with the Registrar.
  2. The Constitution will only contain name and purposes. Existing societies with other clauses in their Constitutions will need to move that extra material into the Bylaws. “Unalterable” clauses will no longer exist, and existing “unalterable” clauses would be able to be amended by special resolution.
  3. Certain public disclosure and governance restrictions will apply if a society uses public or government funding. This is similar to the recently enacted federal legislation governing non-profits.
  4. A BC resident director will still be required; there will be restrictions on employees serving as directors, and on director compensation; ex officio directors will be permitted only in limited circumstances.
  5. Classes of membership will be permitted; some classes can be non-voting; for voting classes, the rule is still one member, one vote (multiple voting schemes not permitted), but some delegate voting and imbalanced voting is permitted in the board election process.
  6. The existing requirement for court approval of director indemnity payments would be removed.
  7. Annual member meetings could now be conducted by unanimous written resolution in lieu of a meeting.
  8. Existing provisions on mortgages, subsidiaries, compulsory filing of special resolutions, branch societies, and ultra vires would all be removed.
  9. Greater flexibility would exist for auditors and fundamental changes such as amalgamations.
  10. Societies will now have registered offices and specific lists of records which must be maintained (and can be accessed).
  11. It appears that a fairly unique complaint right of the general public (not just members or directors) would be introduced.