This week the Ministry of Finance released a White Paper containing proposed draft legislation for an updated Society Act.
The Ministry began a review process in 2009 when it was identified that the current Act was in need of modernization. A Discussion Paper inviting public comment on proposals for reform was issued in 2011, and this White Paper reflects the feedback received throughout that process. The draft legislation in the White Paper is intended to show societies what is being proposed and what a new Act could look like, and does not constitute final government policy.
The White Paper can be accessed here: http://www.fin.gov.bc.ca/pld/fcsp/pdfs/SocietyActWhitePaper.pdf.
Here are the important highlights outlined in the White Paper’s Summary:
Updates for corporations: The draft White Paper updates and supplements the current Act with new corporate rules and procedures from the Business Corporations Act and other corporate legislation.
More internal governance options: Updates will provide societies with more internal governance options around matters such as proxy voting, the holding of general meetings and the creation of classes of members, and will remove current restrictions on the exercise of directors’ authority (such as member pre-approval of financial dealings). These matters would then be subject to the bylaws, to allow each society to structure itself in a way that meets its particular needs.
Reduced regulatory burden for member funded societies: The most important change will distinguish societies that are “member funded” from the majority of societies that are charities or that otherwise rely on public donations or government funding. Member funded societies will be subject to fewer accountability measures (see Part 12). These updates mean they need have only one director, need not provide public access to their financial statements, and are not subject to the same asset lock on dissolution as ordinary societies (see sections 187 to 197). This will ease the regulatory burden on privately-funded societies so they can function more efficiently.
Increased accountability for charities & publicly funded societies: Societies that have charitable status or that receive significant public funding will continue to be subject to the current Act’s requirements respecting directors, financial statements and distributions on dissolution. As well, in order to improve accountability and protect the public interest, these societies will be required to have a majority of their directors not employed by or under contract to the society (section 40). They will also be required to publicly disclose the remuneration paid to directors and their highest paid employees and contractors (section 35).
Other key proposals:
- Streamlining processes, by providing for incorporation by one person (section 12) and allowing indemnification and restoration without court order (sections 61 and 155);
- Clarifying record-keeping and access to records (sections 19 to 27);
- Setting out default governance provisions (Part 6);
- Rationalizing distribution rules to prevent assets from being improperly disbursed (section 4) and clarifying directors’ liability for improper payments (section 59);
- Providing greater protections for directors, who are often volunteers, including court-ordered relief in legal proceedings (section 103) and a defence for reasonable reliance on expert reports (section 60);
- Clarifying that bylaw authorization is needed if directors are to be paid for their services (section 45);
- Enhancing accountability by requiring disclosure of loans or other financial assistance (section 36);
- Giving societies more flexibility to meet changing needs by enabling unalterable provisions in a society’s bylaws to be altered by special resolution (section 16).
Mandatory online filing: The draft legislation supports the implementation of a mandatory online filing system for incorporation, bylaw changes and other filings at the corporate registry. Pre-existing societies will be required to “transition” to the new system by inputting their constitution and bylaws into an electronic data base. As a result, every society will have a perennially updated and searchable set of bylaws.
The Society Act directly affects approximately 27,000 non-profit societies in the province. Feedback received through this consultation process will help guide the government in the development of a new Act, so they need to hear from as many societies as possible.
The Alliance encourages members affected by the Society Act to review the White Paper and to submit comments to the Ministry on the proposed changes. We will review the full White Paper and share our comments with the Ministry as well as on our blog - check back in the coming weeks.
Deadline for submissions of comments on the White Paper: October 15, 2014.
Email submissions may be sent to email@example.com or written submissions mailed to:
Financial and Corporate Sector Policy Branch
Ministry of Finance
PO Box 9418 Stn Prov Govt