The New Societies Act: Don’t Panic. Be Prepared.
/
Via Non Profit Charities Legal Outreach:
There are more than 27,000 non-profit societies in BC, providing services and programs that touch virtually every citizen. The Society Act, which governs those organizations, was last revised in 1976. Since the British Columbia Law Institute's 2008 ‘Reform of the Society Act’ Project, the Ministry of Finance has been considering a new Act.
In April 2015, the new Societies Act, (currently known as Bill 24), began its 3rd and final reading stage. It is hoped that it will receive Royal Assent this summer. The official proclamation of the new Act will likely take place in fall 2016. This will give the BC registry time to get new forms and electronic systems up and running. There will be a two year transition period by which time all societies in BC will have to make the switch to the new Act.
All organizations that are incorporated under the current Society Act must be planning to complete their “transition application,” with revised constitution & bylaws, by the time of their 2017 AGM.
The central challenge is the transition process itself, which will require all societies to file their constitution and bylaws in a new form. Many will have to revise their existing constitution and bylaws, which can be an opportunity as much as it will be a challenge.
Key Changes
The new Act provides many positive benefits. We will finally have an electronic filing system (evergreen), making it easier to file annual reports and update information. In addition, many sections provide clarity in key areas. The new Act enhances the level of accountability of societies to their members in terms of keeping and providing access to records, as well as the disclosure of material interests (conflicts) and remuneration to directors, employees and contractors.
Administrative Changes
The Act includes a number of changes to administrative responsibilities and financial management. For instance, a society’s name and purpose will be the only matters allowed in its constitution, so unalterable provisions will have to be removed. This means all non-profits that receive Gaming funds will have to change their constitutions, removing the unalterable provisions and putting these into their bylaws instead.
The new “evergreen” system means that all societies will be able to make administrative changes electronically. Any society that doesn’t currently have electronic versions of their constitution and bylaws will be able to adopt a new Schedule A bylaw set, or create an e-version of their customized bylaws.
Enhanced record-keeping
Although switching to an electronic system is a time-saver, each organization must still identify a ‘registered office,’ and have all records available at that address. These records include:
(a) the society's certificate of incorporation;
(b) each certified copy, furnished to the society by the registrar, of the following records:
(i) the constitution of the society;
(ii) the bylaws of the society;
(iii) the statement of directors and registered office of the society;
(c) Any official documents provided to the organization from the Registrar (approvals, confirmations etc.);
(d) a copy of any legal order from a court or government;
(e) the society's official register of members of the Board of Directors, including contact information provided by each director;
(f) written consent to act as Director and each written resignation of a director (Section 42);
(g) a copy of each record evidencing a conflict of interest disclosure by a director or senior manager;
(h) the society's register of members, organized by different classes of member if different classes exist, including contact information provided by each member;
(i) the minutes of each meeting of members, including the text of each resolution passed at the meeting;
(j) a copy of each ordinary resolution or special resolution, other than a resolution included in the minutes of members, and, in the case of a resolution consented to in writing by the voting members, a copy of each of the consents to that resolution;
(k) financial statements of the society required under section 35 and the auditor's report, if any, on those financial statements.
With the new Act, members of the society also have enhanced rights to review these records, subject to privacy considerations. It is important to note that there are limits to the access members have to the membership register. In particular, society members will not be allowed to copy the personal information of any member that is on the register.
Financial changes/disclosure of salaries
There are a few changes to financial record-keeping requirements. Financial statements will require disclosure of salaries, wages, and any other remuneration that the Society pays out to its directors, employees and contractors above a certain threshold. The threshold will be set by regulation. If more than 10 employees earn more than the set amount, only the top 10 need to be listed. The statements will only need to list the title, not the recipient’s name.
Board of Director changes
New qualifications will be brought into effect to govern who may and may not serve on a board of directors. Board members may not have:
- no undischarged bankruptcies, and
- no fraud conviction within the past 5 years;
Usually directors will be 19 or over, though by-laws can allow 16 and 17 year-olds to serve.
Remuneration of board members will be permitted by the new Act: the amount must be included in the Society’s bylaws.
The bylaws will have to include the terms of office of directors if they are over one year. So, if you have two and three year terms in a Board policy they will have to be added to the bylaws. Finally, decision-making by directors by way of consent resolution has been codified in the new Act.
Membership changes
There are a few changes to the membership provisions. As before, societies can have a mix of both voting and non-voting members. However, members will have enhanced access to both records and a new right to put a proposal to the membership at the AGM.
If a voting member would like to make a proposal at the AGM, they will now be allowed to, so long as they have 5% of the membership (or minimum two voting members) in favour.
The Senior Manager role
The Societies Act creates a new category of person called a Senior Manager. While in many non-profits this could be the executive director or general manager in others, it may be a volunteer or a contractor. Senior Managers will have enhanced liability. They are also included in the list of employees whose salaries must be disclosed in the financial statements (provided they make over the set amount).
Member Funded Societies
If the society is created for the private benefit of its members (such as a golf course), and is entirely funded by members, they may transition as the new Special Society called a member-funded society. They will not have the same accountability of other societies, however, it will be very difficult to transition OUT of the new category. If the society plans to receive grants or funding from the public above the threshold in the regulations, they should not transition under these provisions. This is one of the areas where specialized legal advice is recommended.
Transition applications
Everyone currently registered as a Society will have to submit a transition application to the new Societies Act by 2018. Planning ahead will be crucial to making this a smooth and simple process.
Steps to compliance
- Locate your constitution and bylaws. If you are unsure of where they are and whether they are current request one from the registry.
- Establish your team to lead process (ED? Board committee? Lawyers? Who will take care of this for your organization?).
- Review key areas and identify what you likely need to change.
- Redraft constitution with only name and purposes.
- Draft new bylaws or adopt the Schedule A bylaws. Make sure that anything you took out of the constitution is included in the bylaws.
- Identify any special issues your group has – unalterable provisions you may want to keep, Board member remuneration?
- Plan to put the transition to the AGM in 2017.
- If you are planning to transition to a member-funded society obtain legal advice.
- Ensure organization has new processes in place to deal with record-keeping and board qualifications.
Need help? Visit lawfornonprofits.ca.
