With the Ontario government issuing a new emergency order prohibiting gatherings of more than five (5) people[1] and the federal government recently launching a $30-million national ad campaign compelling Canadians to #StayHome, many not-for-profit and charitable organizations (“NFPs and Charities”) are reconsidering when and how to hold their upcoming Annual General Meetings (“AGMs”). This article will provide federal NFPs and Charities incorporated under the Canada Not-For-Profit Corporations Act (the “CNCA”)[2] with a step by step guide to determine whether they can proceed with a virtual AGM during the Coronavirus (COVID-19) Pandemic. For the options available to NFPs and Charities incorporated in Ontario under the Corporations Act,[3] see Ontario Provides Emergency COVID-19 Relief for Not For Profit Governance.
STEP ONE: Confirm Your Governing Legislation
The first step for any organization attempting to navigate these unprecedented challenges is to confirm under which legislation it is governed. The governing legislation of any organization can always be determined by consulting its constating documents (i.e., articles of incorporation or letters patent, etc.) and will guide NPFs and Charities as to the available options and permitted practices when charting a pathway forward.
STEP TWO: Consider Your Organization’s By-Laws
The second step is to review your organization’s by-laws for any requirements or restrictions in connection with holding an AGM— including as it relates to how your members will vote. It’s important to understand the intersection between your organization’s by-laws and the CNCA because this will determine the degree to which your organization may benefit from provisions in the legislationpermitting virtual AGMs.
(a) Virtual Members’ Meetings
Under the CNCA, members’ meetings may be held entirely by means of a telephonic, electronic or other communication facility where that facility permits all participants to communicate adequately with each other during the meeting (a “Virtual Meeting”). However, this option is only available to federally incorporated NFPs and Charities whose by-laws explicitly permit holding Virtual Meetings. Without explicit wording to that effect in the by-laws, an NFP or charity incorporated under the CNCA would likely not be able to take advantage of these provisions.
Where an NFP or Charity’s by-laws do permit a Virtual Meeting, participants can vote digitally so long as:
- voting digitally is not prohibited by the corporation’s by-laws; and
- the digital voting method allows the corporation to gather votes in a way that allows them to be verified, tallied and presented while maintaining vote anonymity.
(b) How to Handle The “Show of Hands” Language
Many organizations’ by-laws provide that voting shall be carried out by a “show of hands.” This language has created another obstacle for corporations attempting to convene Virtual Meetings. Fortunately, however, organizations may be able to rely on technology to successfully navigate this challenge.
There are Virtual Meeting and video conferencing applications which contain a “Raise Hand” feature allowing meeting participants to virtually raise and lower their hands during the meeting. By implementing these applications, and subject to the specific wording of the corporation’s by-laws, NFPs and Charities may be able to take the position that this technology allows for compliance with the “Show of Hands” language while holding a Virtual Meeting. Corporations should ensure that any applications utilized for this purpose don’t inadvertently give non-voting members or guests attending the Virtual Meeting the ability to vote.
(c) Absentee Voting
Ideally, a corporation’s by-laws would provide for voting procedures for those not in attendance in-person (or electronically). This is called absentee voting. Unfortunately, under the CNCA, absentee voting is only permitted where the corporation’s by-laws explicitly provide for absentee voting. However, a corporation may apply to Corporations Canada to permit members to vote as absentees. Another potential mechanism to address this issue is to conduct a Hybrid AGM, which is discussed in more detail below.
STEP THREE: Consider Holding a Hybrid AGM
Under step three, and in line with a set of options released by Corporations Canada for NFPs and Charities to remain compliant during the COVID-19 Pandemic (the “Corporations Canada Options”),[4] organizations may consider holding a hybrid AGM. Such a meeting would mean that some participants (but no more than five if you’re meeting in Ontario and while maintaining a distance of at least 2 metres from others during this period of physical distancing) attend the AGM in person at a physical location, while the other members participate through a digital channel that allows participants to communicate with one another during the meeting. A hybrid AGM may be a viable alternative for NFPs and Charities whose by-laws do not permit a Virtual Meeting and a solution to accessibility obstacles for members who cannot participate due to, among other things, lack of internet connectivity. However, as all levels of government in Canada continue to impose increasingly restrictive physical distancing measures to stop the spread of COVID-19—holding a hybrid meeting at this time may not be in the best interest of the corporation or its members. NFPs and Charities should be sure to consult counsel before implementing such an option.
STEP FOUR: Consider Amending Your Organization’s By-laws
Under step four, and also in line with the Corporations Canada Options, directors of organizations with by-laws that are silent on electronic members’ meetings or prohibit them entirely may consider amending the organization’s by-laws to permit Virtual Meetings. Any changes to the by-laws would remain in effect until the next members’ meeting where they would either be accepted or rejected. For greater clarity, step four is not an option for corporations with by-laws providing that member approval is required before any changes to the by-laws are effective.
STEP FIVE: Consider Applying to Delay the AGM
Under the CNCA, federal organizations can apply to Corporations Canada for an extension to hold an AGM at a later date. In order to pursue this option, NFPs and Charities must apply by e-mail to IC.corporationscanada.IC@Canada.ca at least 30 business days prior to sending the notice calling the meeting. For greater clarity, the purpose of the extension application is to delay an AGM not to exempt a federal corporation from the obligation of calling an annual meeting of members entirely. Applications are reviewed on a case by case basis to ensure, among other things, that members will not be prejudiced by the extension.
This article is intended to provide an overview of issues that may arise for federal corporations in connection with convening an AGM during the COVID-19 pandemic. With the unprecedented degree of uncertainty and fluidity associated with COVID-19, it is important that corporations continue to monitor any further notices or changes which may be released by Corporations Canada. We further recommend, due to the unique nature of every corporation, that legal counsel be consulted to find an approach that works best for your organization.
At Mills & Mills LLP, our lawyers regularly help clients with a wide range of legal matters including business law, family law, real estate law, estate law, employment law, health law, and tax law. For over 130 years, we have earned a reputation amongst our peers and clients for quality of service and breadth of knowledge. Contact us online or at (416) 863-0125.
[1] Office of the Premier of Ontario, “Ontario Prohibits Gatherings of More Than Five People with Strict Exceptions” avail online,: https://news.ontario.ca/opo/en/2020/03/ontario-prohibits-gatherings-of-five-people-or-more-with-strict-exceptions.html.
[2] S.C. 2009, c. 23.
[3] R.S.O. 1990, c. C.38.
[4] Corporations Canada, “Annual meetings of federal corporations during the COVID-19 outbreak” avail online,: https://corporationscanada.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs08611.html.
2 St Clair Ave West
