Changes re: directors

The ONCA changes or clarifies some of the rules for directors. For example, rules about conflicts of interest and the standard of care expected of directors are explained more clearly. There are some director requirements and conditions that are mandatory, but you can override some default provisions by outlining different provisions in your bylaws.

You can choose whether to have a fixed number of directors or a minimum and maximum number of directors. But you must state your choice in your articles, not in your bylaws as before, so it is harder to change the number than it was before.

Public benefit corporations must have a minimum of three directors, and no more than one-third of their directors can be employees of the nonprofit. The ONCA allows directors to be paid. But if you’re a registered charity, you should know that charity law does not allow employees to be directors or for directors of registered charities to be paid, except for reimbursement of expenses.

The maximum term for a director is now four years. There is no limit on term renewals, so you can re-elect directors for as long as you like. The default bylaw sets one year as the term for directors, or until the next election, but you can set other term lengths or overlapping terms in your bylaws.

A quorum of the board of directors can fill board positions that come open between annual meetings. A quorum of directors can also appoint new directors to serve until the next annual meeting, but only up to one-third of the total number of directors that were elected at the last annual meeting.

The ONCA does not require directors to be members, but if you want membership to be a requirement for directors, you can specify that in your bylaws. Directors who serve by virtue of their office (ex officio) are still okay.

The quorum for directors’ meetings that is in the default bylaw is a majority of the number of directors you have or a majority of the minimum number of directors you are required to have. But you can set any quorum you like in your bylaws.

If an entire board resigns, liability for the nonprofit’s actions transfers to the senior staff member until the members meet and elect a new board of directors. Executive directors need to be aware of the risks and be ready to call a members’ meeting or protect themselves in other ways.

You can choose alternatives to most of these and other default conditions in the ONCA that relate to directors by setting out different arrangements in your bylaws.

It’s unclear until the regulations and forms are available exactly whether or how existing nonprofits will be required to amend their articles and bylaws concerning directors. However, the government has provided a default bylaw that meets the requirements of the ONCA. This project will provide more information on which provisions in the ONCA are mandatory, which are default, and where alternate provisions are possible for this area and others.

 

Reviewed: May 2014