The Society Act
The Society Act has not been substantially revised since 1977. In December, 2009, the Ministry of Finance (“Ministry”) commenced a review of the Act by asking for suggestions from stakeholders. The Ministry used this input to publish the Society Act Review Discussion Paper (“Discussion Paper”) in December, 2011. The Discussion Paper puts forward a number of proposed changes to regulation of societies that attempt to balance the comments of the stakeholders, and the desire for a modern legal framework with the need for a simple and accessible set of laws for not-for-profits.
The Discussion Paper invites further comments on reform to the Society Act, which must be received by April 30, 2012. Legislation to amend or replace the Act is targeted for 2013 at the earliest.
It is important to note that the proposals in the Discussion Paper are intended to stimulate discussion and further input, and do not reflect government policy or the views of the Ministry or the Legislature.
The Discussion Paper raises two fundamental framework issues. The first concerns what corporate law provisions ought to apply to societies. In this regard, the Discussion Paper suggests that select provisions of the British Columbia Business Corporations Act (BCA) ought to be imported into the current Society Act framework. The second issue is the extent to which the Society Act should contain regulatory provisions that constrain the operation of societies.
Importing the BCA into the Society Act
Generally, the Discussion Paper contemplates importing select provisions of the BCA into the current Society Act. The paper suggests changes that would bring the Society Act more in line with business corporate law while leaving out certain features of the BCA that would jeopardize the special nature of societies and the distinctive role that they play. Among the array of proposals are the following notable proposed changes:
- a system for electronic filing with the Corporate Registry;
- the ability to hold meetings of members and board of directors virtually or outside of BC;
- new rules around holding donor bequests in perpetuity that would allow societies to adapt to changing operating environments and not be debilitated by unalterable provisions;
- removal of restrictions on non-voting members to allow for more flexibility around voting rights and annual general meeting attendance;
- simplified incorporation by a single member;
- allow special resolutions to proceed by 2/3 vote;
- add qualifications for directors and officers, such as a requirement that such individuals be at least 18 years of age;
- allow societies to indemnify directors and officers;
- allow for restoration, amalgamation, and other reorganization arrangements; and
- allow member proposals and provide remedies for societies and members.
Some features of the BCA that the Discussion Paper recommends should not to be adopted include:
- the BCA does not require that companies be formed with stated purposes. The Discussion Paper recommends that societies be required to state their purposes in their constitutions;
- the BCA does not require that companies file bylaws. The Discussion Paper recommends that societies be required to continue to file their bylaws with the Corporate Registry;
- no ability to provide financial assistance to the society’s directors or members;
- no ability to waive AGM’s;
- no ability to waive the preparation of financial statements;
- the Society Act’s approach to determining directors and directors’ conflict of interest disclosure would be maintained to the exclusion of related provisions in the BCA; and
- no ability to continue out to another jurisdiction.
Issue 2: Regulatory Provisions
The Discussion Paper poses for discussion the degree of regulatory control that ought to be imposed on societies in consideration of the trend of most ‘business corporate statutes’ to become non-regulatory. The key elements of this discussion are:
- Removing unnecessary and outdated requirements of oversight by the Registrar of Companies of BC. This includes removing: (1) the Registrar’s ability to require a society to alter its purposes before incorporation; (2) the requirement that the Registrar approve of constitutional changes; and (3) the requirement to file all special resolutions.
- Categorization of societies into two types: private (membership) and public (charitable). Higher standards of government oversight and regulation will be applied to public societies, where it can be justified as a means of protecting the public. The classification would be based on a society’s own designation in its bylaws, but societies that solicit or receive public funds would be deemed to be public societies. Existing societies with charitable purposes would also be deemed public societies. Certain regulatory requirements regarding financial disclosure and accountability would only apply to public societies. For example, public societies would be required to have at least three directors and make financial statements publicly accessible.
At this time, amendments to the Society Act have not been tabled for review by the legislature, and there is no information on how current societies will be expected to transition. However, it is likely that once changes are made to the Society Act, existing societies will need to make changes to their governing documents. Davis LLP will keep its clients apprised of changes as they develop and ensure that any future transition process will occur smoothly and without delay.