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 new rights starting on the day that the ONCA comes into force.
What if we don’t have any members?
Every nonprofit must have at least one member. A member’s primary role is to receive the financial statements and elect the directors. Your original members were probably the directors who signed your original incorporation documents. Look in your bylaws for your current rules that explain how individuals or organizations stop being or become members of your nonprofit.
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: Under the ONCA, if you have different classes of members, each class must vote separately as a class on certain matters. Each class of members can veto changes to the conditions of their class.
- Members who were not meant to govern the nonprofit now have a vote: Even non-voting members have the right to vote on major matters, like mergers or the dissolution of a nonprofit.
- 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