The Ontario government has recently passed new legislation making certain changes to the Ontario Corporations Act (OCA).   The changes received Royal Assent today.   One of the most important changes is with respect to membership. Now, the directors of Ontario corporations will no longer have to be members. This gives Ontario corporations much more flexibility to structure their membership in a way that is in the long-term best interest of the corporation.

Requiring that all directors of OCA non-profits be members created in certain circumstances some challenges – in some cases organizations they had to have two membership classes (both voting and non-voting) if they did not want directors to be voting members.

Here are some scenarios where allowing single members or at least not all directors to be members will be helpful:

  • If you are a major philanthropist and you set up your own foundation and you want to control it, now you can be the sole member of the Ontario corporation.
  • If you are a for-profit corporation and wish to have an affiliated charity, it is now easier. In this case, the for-profit corporation could establish a charity with the for-profit corporation as the sole member.
  • In the case of a foreign charity, if a Canadian affiliate is established, the foreign charity could become the sole member of the Ontario charity.

We have been encouraging most charities to avoid setting up an Ontario corporation for the last number of years because of the many changes coming down the pipe with ONCA. In almost all cases it is still far better to establish a federal non-profit corporation under the CNCA if you are starting from scratch.  In this interim period, which unfortunately sounds like it will be going on for many more years, setting up an Ontario corporation to have to make major changes later does not, in most cases, make much sense.

This change in ONCA gives much more flexibility to Ontario corporations and will in many cases help to clarify the important distinction between being a board member and being a member of a non-profit corporation.  While for many Ontario corporations moving the Federal as discussed in this article is most useful, for others who are staying in Ontario the change relating to membership will be welcome.  

Unlike some changes to the Ontario corporations that have recently passed, this change is effective immediately.

All Ontario non-profit corporations under the Ontario Corporations Act should review their corporate structure and membership and whether it is appropriate for your needs today.  Blumbergs can be retained to review your corporate documents and assist in the discussion.