On November 23, 2015, the British Columbia government released Order 673-2015 to bring BC’s new non-profit governance law, the new Societies Act (“New Act”) into effect in one year’s time, on November 28, 2016, and to enact supporting regulations effective that date.
Order 677-2015, released on the same date, implements some minor transitional interim regulations.
As was previously reported in this blog, the New Act was passed earlier this year but is not yet in force, pending finalization of the supporting regulations and other administrative matters. When brought into force on November 28, 2016, the New Act will repeal and replace the existing Society Act, and provide the ongoing governance framework for non-profit corporate entities in British Columbia.
There was uncertainty whether the government would publish draft regulations and solicit private sector input before finalization of the form of the regulations. The issuance of Order 673-2015 results in a final and fixed set of regulations to support the new regime, although if errors or omissions are found, presumably the government may be open to further modifications to the regulations over the next several months. The Registrar of Companies is in the process of commencing a survey of existing societies to help shape the new electronic filing regime that will be brought into place.
The regulations deal with both substantive and administrative matters in support of the New Act. The regulations can be found here. This post will summarize a few of the more important aspects of the regulations.
Public and government funding
Since the New Act makes a distinction between member-funded and publicly funded societies, the regulations provide detail on how organizations can determine which category applies to them. The regulations do this by establishing a materiality threshold for government and public funding. Over a two year calculation period, an organization receiving in excess of 10% of its gross income (or $ 20,000, whichever is greater) of such funding would be disqualified from claiming status as a member-funded entity.
Also, certain categories of societies are established which are not permitted to claim member-funded status.
The regulations make no specific exemptions at this point, to the wide concept of “government funding” outlined in the New Act.
The New Act requires publicly-funded societies to make certain disclosures in their annual financial statements concerning director compensation and senior staff compensation. The regulations establish reporting thresholds and requirements in this area.
For directors, a list of those who receive compensation must be provided, together with the amount paid to each director (no minimum threshold). Curiously, the regulations indicate the list need only identify title or position, and need not identify the individuals by name; but, it is not clear how this would operate for societies where members of the board do not have separate or specific positions or titles. Disclosure is also required for any additional remuneration received by that person relating to employment or consulting arrangements with the society.
For employees and consultants, those earning over $75,000.00 per annum will be subject to disclosure requirements. Two options are provided for how to effect the disclosure. The first option is for a “bulk” and fully anonymous disclosure, where a statement is simply made of the total number of persons in that category, and a single figure provided for the total amount of remuneration paid by the society to all such persons; this appears similar to public company reporting requirements. The second options results in only “partially” anonymous disclosure, as a list must be provided of relevant persons and amounts, but the disclosure can identify them by position or title only, and not necessarily by name of the individual.
Remuneration of directors
The New Act contemplates that the regulations may impose conditions and limitations on a society’s ability to remunerate its directors. The regulations are currently silent on this issue.
The New Act restricts the ability of a society to make distributions of its property, except for certain prescribed qualifying distributions. The regulations are currently silent on this issue and do not expand the categories of qualifying authorized distributions.
The regulations set out the requirements that proposed society names must meet for use under the New Act. These rules are similar to those currently in place for existing societies and share capital corporations.
Minors as directors
The New Act contemplates that under certain circumstances, individuals who are under the age of majority may serve as directors of a society. The draft regulations outline qualifications and requirements in this area.
Reporting society provisions
The New Act will eliminate the existing concept of “reporting societies”. As a transitional measure, the regulations establish a prescribed legacy set of “reporting society provisions” that will continue to apply to existing reporting societies even as the New Act comes in force. As such, as a society transitions into the new regime, it will be required to adopt these prescribed provisions into the text of its bylaws, but has the option to later eliminate some or all of those legacy provisions by following specified procedures under the New Act.
The regulations set out a form of model or ‘default” bylaws that a society may elect to adopt by reference upon its incorporation; this removes any need to invent and draft bylaws specific to the society, unless other or different governance provisions are desired or appropriate for the organization.