The New Societies Act: What You Can (and Can’t) Change in Your Society’s Bylaws
The new BC Societies Act (the “New Act”) will be coming into force on November 28, 2016, replacing the current Society Act (the “Current Act”) and dramatically changing the law governing societies in British Columbia.
This is the second article in our three-part series on the New Act and what it means for BC societies. Last month, we talked about some preliminary considerations for a society when transitioning under the New Act (if you missed it, you can read it here). In this month's post, we’ll outline some of the major policy changes in the New Act along with possible bylaw amendments a society may want to consider in order to take advantage of these legislative changes.
What You Can Change in Your Society's Bylaws
Threshold for Special Resolution
Under the Current Act, the default threshold for special resolutions is 3/4 of the votes cast. Under the New Act, this number has been lowered to 2/3.
If a society’s current bylaws require a 3/4 vote for special resolutions, they may wish to amend their bylaws and adopt a 2/3 vote for special resolutions passed after November 28, 2016. On the other hand, if a society’s current bylaws are silent with regards to the threshold for special resolutions, any special resolutions passed before November 28, 2016 will require a 3/4 vote while any special resolutions passed after November 28, 2016 will require a 2/3 vote. Some societies may feel that a 2/3 threshold is not sufficient, in which case, they may want to amend their bylaws to increase that number.
Access to Records
Under the New Act, members of the public have the right to inspect society records (with the exception of the member registry), including potentially sensitive minutes from member or director meetings. If a society would prefer to restrict public access to its records, its bylaws need to set out those restrictions.
In addition, the New Act allows members access to all society records. If a society’s current bylaws restrict member access to records, those provisions will simply be of no effect once the New Act comes in. Given this, the society may wish to amend its bylaws to avoid confusion. A society can, however, choose to restrict member access in two areas: its accounting records and its records of directors’ proceedings. If a society wishes to implement this restriction, its bylaws would have to set this out explicitly.
Election of Directors
The New Act sets out certain qualifications that every director must meet. Among other things, directors must have no recent convictions for fraud, must not be bankrupt, and (with some exceptions) must be at least 18 years of age. A director who does not meet these qualifications will be required to resign. The New Act allows societies to set out additional criteria for directors in their bylaws.
The New Act also expressly allows societies to have “ex officio directors”. This refers to a situation where an individual who holds a particular office or position can become a director of a society by virtue of holding that particular office or position.
Removal of Directors
The Current Act only allows for directors to be removed from office by a special resolution of the members. The New Act expands on this to allow directors to be removed in any manner set out in a society’s bylaws. But keep in mind that the ability for members to remove directors by special resolution is preserved regardless of what is provided for in the bylaws.
Terms of Office for Directors
The New Act provides that a director’s term of office goes until the end of the next annual general meeting after his or her election or appointment, unless the bylaws provide otherwise. So, if a society wishes to implement multi-year or staggered terms for its directors, its bylaws would have to explicitly set these out.
The New Act allows for different classes of membership to be created (voting and non-voting). Unlike the Current Act, the New Act does not require that voting members outnumber non-voting members. This allows a society the flexibility to set out different membership classes in its bylaws and allow different rights to be allocated to each class (as long as the bylaws set out the rights and obligations that apply to each class and at least one of those classes consists of voting members).
Electronic Participation at Meetings
The New Act allows members to participate in meetings electronically (for example, by Skype or conference call), although it specifically states that a society is not obligated to provide the means for electronic participation to occur. If a society wishes, its bylaws could restrict or prohibit electronic participation at members’ meetings.
The New Act does not offer any guidance on how financial statements must be prepared. A society may, therefore, wish to set out in its bylaws particular requirements as far as what information should be included in its financial statements.
Investment and Borrowing of Funds
The New Act allows a society to invest its funds in any prudent investment, but this power can be expanded or limited by a society’s bylaws. A society could, therefore, expand the permissible types of investments to include riskier ones, or it could limit the nature and type of investments available.
Similarly, the New Act allows a society to borrow funds, but this power may be limited by a society’s bylaws. If the society wishes to control borrowing by its directors, the society’s bylaws could impose certain conditions, such as requiring an ordinary or special resolution of the members.
The New Act provides that directors and senior managers who are found legally liable (for example, for negligence) can be indemnified by the society in certain situations, but this can be limited by a society’s bylaws. For example, a society’s bylaws could prohibit the payment of indemnity, restrict the circumstances for its payment, or place a maximum threshold on the amounts that may be paid.
What You Can't Change in Your Society's Bylaws
Below are some of the new provisions that cannot be altered by a society’s bylaws. It is important for societies to take note of these provisions because they may need to change some of their procedures in order to comply with these new requirements. The first three provisions will become effective as of November 28, 2016. The last three provisions, however, will not be applicable until November 28, 2018 to allow societies to make the necessary changes in their procedures.
1. Financial statements to set out remuneration: The financial statements of a publicly-funded society must include a note setting out remuneration paid to its directors as well as all employees and contractors whose remuneration was at least $75,000, unless there are more than ten employees and contractors remunerated at over $75,000, in which case the top ten must be included in the list.
2. Financial statements to include financial assistance: A society's financial statements must set out details relating to any financial assistance (for example, loans or guarantees) given outside of the ordinary course of its activities.
3. Disclosure of conflicts of interest: Directors and senior managers will have an obligation to disclose to the directors all material interests in matters that may conflict with their duties to the society.
4. Unaffiliated board members: Publicly-funded societies must ensure that a majority of their directors are not employed by or under contract with the society.
5. Director/senior manager qualifications: Societies must ensure that all of their directors and senior managers meet the required qualifications (discussed above). Although the New Act allows a society's bylaws to impose additional qualifications, the minimum statutory qualifications cannot be changed.
6. Consent to act as director: The society must ensure that all directors have provided written consent (although written consent is not strictly required from directors elected or appointed at a meeting they attend).
You've probably sensed a theme in this article – the New Act sets out some specific corporate governance procedures (similar to those found in the BC ), but also gives societies the flexibility to create bylaws that restrict or expand on a lot of those procedures. This will allow each society to set up procedures that will suit its unique characteristics and meet the needs of its members and the community it serves.
The list we’ve set out in this article is meant to act as a starting point for societies as they consider amending their bylaws under the New Act. In our next article, we’ll discuss a new concept introduced by the New Act: the distinction between member-funded and publicly-funded societies. We’ll talk about how a society goes about getting designated as a member-funded society and the different rules that apply once a society gets this designation.