Not-for-Profit Corporations Act Webinar Presentation to Canoe Kayak Canada February 2013

Sport Law & Strategy Group Providing strategic insight to the Canadian sport community through professional services in these areas: Legal Solutions Planning & Governance Strategic Communications

“The Perfect Storm” of 2011 Canada Not-for-Profit Corporations Act – affects all NSOs and MSOs Sport Canada’s Governance Principles - will affect future funding Amendments to the Income Tax Act – affects all RCAAAs Overall trends to improve Canadian sport governance

“Arguably, organization and system mismanagement costs us more medals and more lifelong participants [in sport] than the culprits we prefer to blame, such as limited facilities and funding, or insufficient school sport and activity programs” -

Efficiency Features NFP Act contains mandatory rules, default rules and alternate rules Bylaws can be slim as the rules are in the Act Directors may change bylaws without approval of members, except for ‘fundamental’ changes Industry Canada will be a storehouse, not a clearing house, for bylaws Changes to bylaws will take immediate effect

Rationale for New Legislation Strengthen member rights Increase accountability Increase transparency Improve efficiency Embrace new technologies Other provinces will follow (Ontario, B.C.)

Possible Approaches Avoidance approach – do the minimum to comply with the letter of the law Compliance approach – do more to comply with both the letter and the spirit of the law Strategic approach – leverage opportunity to review governance model and improve effectiveness … this opportunity will not present itself again in our lifetimes …

Impact #1 - Member Rights Members may pursue more ‘judicial’ remedies Easier for members to ‘requisition’ a meeting Members elect directors Members may remove any, some or all directors by ordinary resolution Members without voting rights may vote on certain ‘fundamental changes’ In some instances, member classes may vote separately

Impact #2 - Board Structure The Act requires that members will elect directors … therefore: ‘Ex-officio’ directors are prohibited Appointed directors are restricted

Therefore …. You need to Simplify and streamline membership classes Move to an elected Board structure “Organizations may wish to collapse voting member classes into one category, and eliminate non-voting members” - Carters Professional Corporation

CKC Current Reality Membership 8 classes of members 3 autonomous councils, each with power to define their membership 4 AGMs each year! Board 9 directors 6 directors are appointed (2 from each council) 1 director is ex-officio Only 2 are elected! Objects/Purposes Not looked at since 1990 Should be updated to comply with new requirements for RCAAAs Name Current name is Canadian Canoe Association Should be updated!

What Other Sports Are Doing Creating simpler membership structures Eliminating non-voting individual members, creating ‘registrants’ and ‘honorary officers’ Choosing smaller, policy-based boards Creating ‘Provincial Councils’ with defined powers Rethinking committees – ‘standing’ report to Board/’operating’ report to staff Embracing nomination systems to recruit skilled/competent directors

Challenges Emerging Importance of the transition two-step! Timing of year-end and annual meeting/ conference Meeting CRA’s new requirements of ‘exclusive purpose and function’ Maintaining jurisdiction over individuals/athletes

Some Things to Watch For Maintaining an effective athlete voice Failure to consult with stakeholders, or Stakeholders not engaging in consultation efforts Evolution to more modern and corporate structures may backfire! High demand for HQPs

Documents You Must File Articles of Continuance must contain name, location, # of directors, statement of purpose, classes of members, restrictions on activities, distribution of assets after dissolution Bylaws must contain conditions of membership, method of giving notice for meetings If an RCAAA, Canada Revenue Agency has to approve the Articles of Incorporation

Timing Work backwards from October 2014 Member voting at AGMs, SAGMs, Special Meetings, telephone meetings? Communication with members, trust issues Two-step transition needed in most cases Make a plan - and make a back-up plan

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