Membership under the ONCA
Why should we look at our membership structure now, before the ONCA?
The ONCA gives members new rights and more powers than the old law. Membership structures are easier to change under the current rules. They will be harder to change as soon as the new law takes effect. Although you have up to three years to comply with most requirements in the ONCA, your existing members will have some new rights starting on the day that the ONCA comes into force. These members may get even more rights later.
What if we don’t have any members?
Every nonprofit must have at least one member. A member’s main role is to elect the directors and get the nonprofit’s financial statements. The directors who signed the documents to incorporate your nonprofit are likely its original members. Your current rules may also say how a person or organization can become a member or stop being a member of your nonprofit.
If your nonprofit has no members, it can ask the court to appoint members. You may need to talk to a lawyer.
Why does it matter?
Under the ONCA, members have rights similar to shareholders in a business. They have the right to:
- propose matters to be discussed at an upcoming annual members’ meeting, as long as the proposals meet certain conditions
- bind directors — that is, require them to do things that might be against the directors’ responsibilities under the law or what current contracts say
- take the directors to court if they think the directors aren’t looking after the nonprofit properly (derivative action)
Nonprofits have new responsibilities, too. They are required to keep a current list of members, communicate with them, and resolve disputes with them according to new rules.
What could go wrong?
- Member information could be used inappropriately: You must share your members’ names and contact information with any other member who asks. Privacy legislation does not apply, so members cannot opt out of sharing their information, unless they stop being a member. While members have to promise to use the information only in certain ways, there is the potential for the information to become public.
- Members vote in their own interest: Members aren’t required by law to act in the best interests of the nonprofit, but directors are. Some of your members could vote in their own interests, putting them into conflict with your directors’ duty to act in the best interests of the nonprofit as a whole. Members could also require directors to go in new directions that conflict with existing contracts.
- Voting becomes more complicated: If you have different classes of members, the ONCA says that each class has to vote separately on certain things. Each class of members can veto changes to the conditions of their class. But these changes will not apply for at least 3 years after ONCA comes into effect.
- Members not meant to govern the nonprofit now have a vote: The ONCA may give non-voting members the right to vote on big things, like mergers or closing down the nonprofit. But these changes will not apply for at least 3 years after ONCA comes into effect.
- Members can take the directors to court: Members can launch an action on behalf of the nonprofit if they believe the directors are not looking after the best interests of the nonprofit. This is called a derivative action.
What can we do to avoid problems?
Your current bylaws contain the rules for your current member structure and how you can make changes.
If what you have been doing is different from what your bylaws say, or if you want to make changes, you will need to ask members at an annual meeting for permission to work in a different way. The first step is to decide what membership structure suits your nonprofit.
Reviewed: May 2015