New Societies Act Coming to B.C.

You may have heard there is a new Societies Act (the "Act") coming into force this November, 2016 which will replace the current Society Act. 

The new Act will bring significant changes to the current regime which governs some 27,000 non-for-profit entities in the province. From November 2016, societies will have two years to transition under the new Act. During this time societies will need to determine how the new Act will affect their society, and file a transition application with the BC Registry along with a copy of its constitution, bylaws, and statement of directors and registered office of the society.

The B.C. Registry website has released a summary of the changes brought on by the Act. I would highly recommend bookmarking and staying tuned as the province makes announcements on the changes:

http://www.bcregistryservices.gov.bc.ca/bcreg/societiesact/overview.page  

The new Act brings changes that will serve to increase flexibility for governance but also beef-up certain disclosure and accountability mechanisms. The following is a highlight of some of the major changes:

Electronic-Filing

If you work with a society you have likely experienced the joy of filing an annual report or incorporation package by traditional snail-mail. Let me tell you, this is one change that I'm certain 100% of us can get behind. Gone will be the days of sending off packages to Victoria, never knowing quite when they receive the package until you follow-up with them several days (or weeks) later.

The Act will permit e-filing via the BC Registry website. Existing societies will need to consolidate their bylaws and submit these as a part of their transition under the new Act.

Member-funded vs. Public-funded societies

  • The Act brings a new distinction that didn't exist before: treating member-funded and public-funded societies differently, and requiring unique requirements for each on corporate governance, financial disclosure, and distribution of assets upon dissolution (I will touch on a number of these in the post).
  • Member-funded societies are those that are primarily funded by its own members to carry on activities for the benefit of its members. Sports clubs and professional organizations fall in this category. 
  • Public-funded societies are those that receive government or public funding above a threshold amount (which will be set by future regulations). Registered charities and hospital societies fall in this second category.

Director Requirement and Ex-Officio Directors

  • A public-funded society must have at least 3 directors, at least 1 must be a resident of B.C..  Whereas a member-funded society needs only 1 director, without any residency requirement.
  • All directors must have no recent convictions for fraud, be bankrupt and in almost all cases be at least 18 years of age. If a director doesn't meet these qualifications they will be required to resign. Additional qualifications may be set by a society's bylaws.
  • The Act creates and permits a new type of “ex officio” director – a director who holds a position because of a particular attribute or position, not as a result of an election.

Dissolution

  • Upon dissolution, a public-funded society may only distribute assets to a "qualified recipient" such as a registered charity. This requirement does not apply to a member-funded society.

Remuneration

  • A public-funded society must set out in its financial statements the remuneration of its directors and 10 most highly remunerated employees/contractors above a threshold amount (which will be set by future regulations).  This requirement does not apply to a member-funded society.
  • For a public-funded society, a majority of its directors must not receive or be entitled to receive remuneration under contracts of employment or services other than remuneration for acting as a director. This requirement does not apply to a member-funded society.

Special Resolution

  • The Act will change the threshold for passing a special resolution in meetings from 75% to 66%; bringing it in-line with the same threshold required by corporate law in B.C. However, if a society wanted it could set a higher threshold for special resolutions - up to 100%. This gives societies greater flexibility in decision-making.

Unalterable Provisions

  • Under the current regime, a society's constitution could have unalterable provisions - provisions that could live on to the end of time. Not surprisingly, these have been somewhat problematic as societies have had no way to remove them. Until now. Under the new Act, unalterable provisions will no longer be allowed and when a society transitions, any "unalterable provisions" must be moved to the society's bylaws and then may be alterable.
  • Even though unalterable provisions will no longer be permitted under the new Act, societies could set a special resolution at 100% to ensure changes with respect to that provision could only be made on a unanimous basis.

These are just some of the big changes expected. Some societies will be impacted more than others in modernizing its organizing documents and reviewing its board composition. The transition will impact all societies; as, at the very least, all societies will be required to complete and submit a transition application to B.C. Registry.

It will be interesting to see how B.C. Registry manages with the influx of submissions and queries generally from societies during (and in anticipation of) the transition period. The transition doesn't have to be difficult but it would be wise for societies to begin the preparation early. Now would also be a good time for societies to look over and revise its bylaws and constitution and see what other changes might be relevant moving forward.

If you'd like more information, visit http://lawfornonprofits.ca/ and sign up for events/workshops and news on legislation as it's released. Law for Non-Profits is an initiative of the Pacific Legal Education and Outreach Society.