The Societies Act (British Columbia) (the “new Act”) is new legislation which repeals and replaces the current Society Act (British Columbia) (the “current Act”). Like its predecessor, the new Act provides the rules for the creation and governance of societies in British Columbia. The changes to the new Act are intended to allow societies to operate more effectively and efficiently, while at the same time protecting the public interest in societies. The new Act maintains the basic framework of the current Act: “Societies will continue to have constitutions setting out their purposes, bylaws that are filed at the corporate registry and restrictions on share capital and distribution of assets.” This article summarizes some of the most significant changes of the new Act. It is important to note that the new Act is not expected to come into force until the fall of 2016. Once in force, the new Act also contemplates a two year grace period within which existing societies must transition to the new regime. Please note that the following list of changes is not intended to be exhaustive.
1. Qualifications of Directors
There are various additions to the new Act in relation to directors of societies. Most significantly, the majority of directors must be “unaffiliated” with the society – that is, the directors may not be otherwise employed by or in a service contract with the society. The new Act also requires that directors of societies be at least 18 years of age, unless otherwise provided for in the society’s regulations. In addition, the new Act prohibits payment of a director unless expressly permitted by its bylaws.
2. Member-Funded Societies
The new Act sets out special rules for certain societies based on their sources of funding. Member-funded societies (sometimes called privately funded societies or membership societies) generally exist solely for the benefit of their members and do not receive any significant public funding. As member-funded societies are not funded primarily by public donations or government grants, fewer regulations will apply to them under the new Act. Specifically, member-funded societies are exempted from reporting remuneration of employees; enjoy relaxed standards for financial disclosure; and need only have one director (as opposed to the usual three), who need not ordinarily be a resident in British Columbia. It is important to note that the new Act outlines specific requirements which must be met before a society may qualify as a member-funded society.
3. Senior Managers
The new Act provides for the appointment of senior managers. A senior manager is an individual who runs the society or influences its policy. The new Act allows societies to appoint a contractor, employee, or volunteer as a senior manager. The senior manager may then carry out the directors’ authority in managing the operations of the society as a whole, or a specific unit therein. Senior managers are subject to similar qualifications and duties as directors. The provisions that apply to senior managers under the new Act are based on the rules applicable to officers under the Business Corporations Act (British Columbia). The new Act also extends certain protections to senior managers including rules in relation to indemnification, limitation of liability and insurance.
4. Reporting on Remuneration of Directors, Employees and Contractors
The new Act requires that societies provide information to their members at each annual general meeting (“AGM”) with regard to the remuneration, if any, paid to directors or employees of their society. The requirement applies to all employees of the society who meet the minimum amount set out in the Societies Act Regulations (British Columbia). If there are greater than 10 persons who meet that minimum, then the 10 highest paid persons must be listed.
5. Unalterable Provisions and Special Resolutions
Under the current Act, 75% of member consent is required in order to pass both ordinary and special resolutions. Under the new Act, this threshold has been reduced to 66%. This threshold applies to both ordinary and special resolutions. The new Act also allows a society set a higher threshold for special resolutions, up to unanimous approval. These provisions pertaining to special resolutions may be offset by the fact that under the new Act, there can be no unalterable provisions of a society’s constitution. Upon transitioning a society under the new Act, currently unalterable provisions will become alterable and must be moved from a society’s constitution into its bylaws.
6. Annual General Meetings
In lieu of a traditional AGM, the new Act allows all of the voting members of a society to pass resolutions by consent.
7. Borrowing and Issuance of Securities
Under the current Act, societies are restricted from issuing debentures unless authorized by a special resolution. The new Act permits the issuance of bonds, debentures, notes or other evidences of debt obligations.
8. Electronic Filings
The new Act is expected to include provisions requiring the mandatory filing of all incorporation and maintenance documents with the corporate registry. The new Act has been updated and supplemented with provisions that provide societies with more internal governance options. At the same time, fundamental accountability provisions have been largely maintained for societies that perform a broader social function and rely on public financial support. Societies should take care when adapting to the new legislation to ensure they are operating in accordance with the law. If you have questions about the Societies Act (British Columbia) and how it will affect your organization, please contact any of the following Lindsay Kenney LLP lawyers for questions:
- Joel Hagyard – Partner
- Tim Grier – Partner
- Erin Easingwood – Partner
- Paul Kennedy – Associate Lawyer
- Sukhminder S. Virk – Associate Lawyer
- Mark von Marksfeld – Partner
 Societies Act White Paper: Draft Legislation with Annotations, August 2014, Michael de Jong, Q.C. (Minister of Finance).