In the Internet era where information is readily available at our fingertips, it may come as a surprise that access to the corporate records on not-for-profit (“NFP”) corporations is subject to considerable regulation.
Historically, the applicable legislation has set out recordkeeping obligations for NFP corporations and basic rights to access corporate records to certain persons with status, such as the directors and members of the corporation. New corporate legislation at the federal and Ontario level, the Canada Not-for-Profit Corporations Act (“CNCA”) and the Ontario Not-for-Profit Corporations Act, 2010 (“ONCA”), (collectively referred to as “NFP Legislation”), have increased the number of recordkeeping requirements and set out in a clearer fashion the rights of access to corporate records for certain persons with status.
Which Act applies, and when
Federal NFP corporations were previously regulated only by Part II of the Canada Corporations Act. Since the CNCA was proclaimed in force on October 17, 2011, existing federal NFP corporations governed by the CCA will now have three years from that date of proclamation to continue under the CNCA. Until then, the CCA will continue to apply to those corporations that have not yet continued under the CNCA.
In Ontario, Bill 65, An Act to revise the law in respect of not-for-profit corporations, 2010, was introduced on May 12, 2010 to replace the Ontario Corporations Act with the ONCA. It received Royal Assent on October 25, 2010. The ONCA is now expected to be proclaimed in force in late 2012. Once the ONCA is proclaimed, existing NFP corporations will have three years to amend their constating documents to conform to the ONCA. At the end of that period of time, any documents that have not been amended will be deemed to be amended to confirm with the ONCA.
New acts require more records
The new NFP Legislation maintains many of the existing requirements, but increases the number of records that must be kept. Under the CNCA, the corporation must now keep the resolutions of members, the directors, or any committee of members or directors and a register of officers. If the corporation issues any debt obligation, then it must also keep register of debt obligations.
Other notable changes under the CNCA that relate to financial records include the requirements to keep adequate accounting records and a copy of the financial statements of each of its subsidiaries and of each body corporate, the accounts of which are consolidated in the financial statements of the corporation. Subject to other federal or provincial legislation that imposes a longer retention period, accounting records must be kept for six years after the end of the financial year to which the accounting records relate. In the case of charities or Registered Canadian Amateur Athletic Associations, the retention periods in the Income Tax Act for accounting and other records would need to be consulted to determine the applicable retention period.
Concerning the ONCA, the recordkeeping requirements for NFP corporations have been significantly expanded relative to those under the OCA. The expanded list of recordkeeping requirements includes the minutes of member meetings and of any committee of members; the resolutions of members, directors and of any committee of members or directors; a register of officers; and a copy of the financial statements of subsidiaries and of each body corporate, the accounts of which are consolidated in the financial statements of the corporation.
One notable addition, which is not replicated in the CNCA, is the requirement in the ONCA that the corporation must keep the consents of directors to act as directors, including the first directors named in the articles.
As well, whereas the OCA required “proper books of account” to be kept, the ONCA specifically requires accounting records that are adequate to enable the directors to ascertain the financial position of the corporation with reasonable accuracy on a quarterly basis. Similar to the CNCA, such accounting records must be kept for six years, subject to any retention record imposed by other legislation.
Who may access records?
Certain individuals with status have certain rights to access the aforementioned records under the NFP legislation. In general, directors of CNCA and ONCA corporations have access to all of the records that must be kept by the corporation. Members have relatively more selective access to records and specifically cannot access “directors’ records,” which include the minutes of director meetings and the resolutions of directors.
To examine the register of members under the CNCA and ONCA, a member would need to make a request to the corporation, provide the corporation with a statutory declaration and pay a fee. It should be noted that creditors of a CNCA corporation may access certain corporate records, such as the constating documents, the registers of directors and officers, and the meeting minutes of members. However, creditors of an ONCA are not given similar access.
It is important for those involved in NFP corporations to familiarize themselves with the expanded recordkeeping requirements and the rights of access for certain individuals to avoid being broadsided by an unanticipated request. Alternatively, members and directors should know what records they are entitled to access in order to protect their interests and execute their role, respectively. For more information, see the full paper Digging for Dirt: Handling Requests for Information, by Terrance S. Carter available online at www.carters.ca.
Terrance Carter is the managing partner with Carters Professional Corporation, and is counsel to Fasken Martineau DuMoulin LLP on charitable matters and editor of charitylaw.ca.