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9 July 2020
Business Law

Annual general meetings for not-for-profit (and non-profit) organizations during COVID-19

Written by Léa Psenak and Frédéric Letendre

(Updated – August 10th 2020)

The members and directors of a federal not-for-profit organization (a “Federal NPO”) or of a provincial non-profit organization (a “Provincial NPO”) have different rights and duties.

Members have the rights, amongst others, to elect directors, see the annual financial statements and appoint an auditor. Directors must make sure those rights are duly respected. Annually, directors must hold a board meeting during which they approve the annual financial statements of the NPO. Following their approval, they must call the annual general meeting of the members (the “AGM”) , where they will allow members to elect directors, present to such members the financial statements and allow them to appoint an auditor. Finally, directors will hold another board meeting where they will appoint officers of the corporation (i.e. president, VP, treasurer, secretary…).

Normally, the AGM must be held within a certain time frame provided in the law and in the by-laws of a NPO. To this day, some NPOs still need to hold their AGM in person, but in the unprecedented context brought on by the COVID-19 pandemic, this might cause problems.

You will find below some useful information to better understand the directors’ duties regarding the holding of the AGM.

Federal NPO

The AGM of a Federal NPO needs to take place no later than six months following the end of the NPO’s financial year[1].

Section 159 (5) of The Canada Not-for-profit Corporations Act (the “NPO Act”), allows that such AGM be held by electronic means, but only if specifically provided in the NPO’s by-laws.

To verify if the NPO’s by-laws include such disposition, you may look for a section usually entitled Participation in meeting by electronic means. If the by-laws allow it, we strongly recommend you respect the six-months timeframe and hold your meeting virtually. For instance, the application Zoom can be used by organisations to hold AGM; said application has the option to hold votes via secret ballot.

If the NPO’s by-laws do not give the option to hold an electronic meeting and if there is not a large number of members, you could decide to hold a hybrid meeting, i.e. by allowing some members to be physically present and others to be present via electronic means. This kind of meeting is allowed by the NPO Act[2], unless specifically prohibited in the organization’s by-laws.

Also, there is always the option of adopting a resolution in lieu of meeting, signed by all members entitled to vote[3].

In light of the actual context, if the NPO’s general by-laws do not allow a hybrid or electronic meeting to be held, the six months legal deadline (from the end of the NPO’s financial year) to hold the meeting has been extended. Indeed, the Order respecting time limites and other periods established by or under certain acts and regulations for which the Minister of Industry is responsible (COVID-19), which came into force on July 31, 2020, extends the time limit for holding the AGM by an additional six months or until the end of the period ending on December 31, 2020, whichever deadline comes first.

Provincial NPO

The AGM of a Provincial NPO needs to take place at such time determined in the NPO’s by-laws[5].

The Companies Act allows members to participate in a meeting by any means, including by electronic means, unless otherwise indicated in the constituting act or in the by-laws.

To verify if the by-laws provide a restriction to this section, we recommend you verify the section usually entitled “Meetings of the members”. If there is no specific provision preventing it, the meeting can be held by any electronic means.

Even if the by-laws prohibit the holding of a meeting by electronic means, in the context of the pandemic, you could hold it virtually. Indeed, on April 26 , 2020, the Ministère de la Santé et des Services sociaux published the Arrêté numéro 2020-029, stating that any meeting that should be taking place in person, could be held by any means (including any electronic means) permitting every member to communicate immediately with each other. The Arrêté also states that when a secret ballot is required in the meeting, it could be held by any means allowing to collect the votes and to preserve their secrecy. As stated earlier, the application Zoom (or any other with similar features) would allow organisations to respect those provisions.

In any case, there is always the option of obtaining a resolution in writing, signed by all the members entitled to vote. Such resolution is as valid as if it had been passed at a meeting.

Therefore, no matter what the by-laws of the Provincial NPO provide, the meeting can be held by any electronic means.

Other statutory obligations

Federal NPO

Every Federal NPO must file an annual return with Corporations Canada, as stated in section 278 of the NPO Act. Normally, following the constitution of the NPO, the founders receive the information about the time frame in which they need to send the annual return, which is normally a two-month period following the anniversary of the incorporation of the NPO.

In light of the COVID-19 outbreak, Corporations Canada has extended the annual return deadline to September 30, 2020, for every Federal NPO whose anniversary date is between February 1st and July 31[6].

Provincial NPO

Every Provincial NPO must file an annual updating declaration with the Registraire des entreprises. As a relief measure for COVID-19, the Provincial NPOs who file their annual updating declaration together with their tax return and whose filing periods are between March 13, 2020 and August 31, 2020 have seen their filing period extended until September 1st, 2020[7].

Conclusion

Depending on whether you are the director of a Federal NPO or a provincial NPO and depending on the by-laws of such NPO, you have different options regarding the holding of the AGM.

In addition, if you’re the director of a not-for-profit corporation, we also invite you to read our article entitled The Canadian Quarantine Act and its consequences for directors and officers in the COVID-19 era [8] to learn about how to comply with the recent regulations implemented because of the COVID-19 and the possible liability of the directors or Canadian corporations.

 

[1] Canada Not-for-profit Corporations Act, S.C. 2009, ch. 23, section 172.

[2] Ibid., section 159 (4).

[3]Ibid. section 166.

[4] Ibid. section 160 (2).

[5] Companies Act, CQLR, ch. C-38, sections 89.2 and 89.4.

[6] https://corporationscanada.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs08613.html

[7] http://www.registreentreprises.gouv.qc.ca/en/modifier/mettre_a_jour/declaration_annuelle.aspx

[8] https://yulex.ca/en/the-canadian%e2%80%afquarantine-act-and-its-consequences-for-directors-and-officers-in-the-covid-19-era/

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