Readers in British Columbia may be aware of the current consultations taking place regarding Ministry of Finance staff recommendations for changes to the Society Act – the legal framework for societies in BC. Consultations took place in February in Vancouver (February 13) and Victoria (February 14), and via teleconference (February 16). While the ongoing Government Non Profit Initiative (GNPI) helped convene the sessions, the discussed recommendations were prepared by Ministry of Finance staff.

At the recent session in Vancouver, event conveners were thoroughly impressed with the number of Society Act “geeks” in the room. Though organizers initially expected 20 registrants, the numbers swelled to 100 in just four days of registration; about 150 leaders from across the sector were in attendance.

Many of the recommendations will have a direct impact on the way current nonprofit organizations operate, and will change the way new nonprofits come into existence in BC.

Read the Ministry of Finance discussion paper here.

Once upon a time…

The Society Act, the statute that provides the legal framework for the formation and governance of societies in BC, has not been substantially revised since 1977.

The Ministry of Finance started a review of the Act in 2009 by asking the nonprofit sector to identify obstacles that may be preventing the 26,000 societies in the province from functioning fully and efficiently, as well as to share suggestions for reforms. The Minister received more than 200 responses, some representing the views of hundreds of individuals and organizations. A common refrain was “keep it simple, stupid.” Ministry staff used these submissions, along with input from a report issued by the British Columbia Law Institute, to draft a discussion paper released in December 2011. This paper sets out a possible direction for reforms to the Society Act. At this stage, the government is again looking to the sector as experts to provide feedback that can best help determine this direction.

The current proposals do not represent government policy and are meant instead to stimulate discussion. However, the discussion paper along with written comments submitted to the Ministry of Finance before the April 30, 2012 deadline will inform any resulting legislation.

The discussion paper

The discussion paper proposes two overarching areas of change: the modernization of corporate governance law, and changes to regulatory issues. Rather than throwing out the Act and replacing it with something new, Ministry staff suggest modernization could occur through the retention of many of the provisions currently in the Act, while adopting useful provisions from the 2004 British Columbia Corporations Act (BCA). The view of the Ministry is that the Society Act simply requires the same modernization process that other corporate statutes have undergone in the past decade.

How could the proposed changes impact your organization in BC?

For many organizations busy with fulfilling their missions, spending time reviewing the proposed changes may seem like a luxury. Here are nine ways the proposed amendments may affect you and your organization.

Are you bogged down by Society Act paperwork and record keeping?

Finally, the arrival of the electronic age has been accepted. The discussion paper recommends that systems be put in place to allow the electronic filing of commonly used documents at the Corporate Registry. This would be dependent on the cost of implementing such a system, and would not include rarely used documents (e.g. those concerning the amalgamation of societies) because of the associated costs.

The paper also recommends that one list exists to explain which documents are required to be kept by societies. While this information exists in general throughout the Act, it isn’t laid out in one place as it is for the BCA.

Does your board of directors and members span a large geographical region?

New recommendations adopt provisions from the BCA that would allow annual general meetings to be held virtually (e.g. via telephone or Skype) or even out of the province. Huge cost savings could be found in travel expenses and time.

Does your board of directors include young members?

Currently the Act does not specify age requirements for directors and officers. The discussion paper recommends aligning with the BCA and disqualifying persons under age 18.

Do you want your organization’s mission or a donor’s bequest to be honoured as originally intended in perpetuity?

Proposed amendments attempt to strike a fine balance between respecting the original intent of society founders and others (such as gifts of land), and allowing societies to adapt to changing operating environments so they are not debilitated in unforeseen ways.

The discussion paper recommends removing the option to adopt unalterable provisions. Existing unalterable provisions would still be considered valid, although a court remedy could be provided for relief. As an alternative, in order to allow for stability with respect to core bylaws and actions, societies would have the same ability as corporations to designate certain changes that must be approved by a “supermajority” (perhaps 90%).

Do you want your salary to be public?

While disclosure of certain salary ranges is already currently required for registered charities, the discussion paper recommends requiring certain types of societies (those that receive public funding) to disclose the remuneration of directors and officers. The paper cites concerns “raised about societies that appear to operate more for the benefit of their own insiders than for the public benefit.”

Do you want more flexibility around membership and voting?

The discussion paper recommends removing restrictions on non-voting members. While retaining the “one-member, one-vote” rule this change would allow more flexibility around voting rights and AGM attendance. If your AGMs are lively, exciting, and demonstrate the passion and value of your organization, this change presents an opportunity to bring more people into your mission.

Did your society dissolve, but you want to restore it?

Currently, this requires a court order, or even an Act of the Legislature. Proposed amendments would allow many cases to be dealt with through simpler administrative procedures.

Are you trying to incorporate a new society?

Currently, incorporation takes five people. A provision adopted from the BCA would allow incorporation by one person as a convenience measure to simplify incorporation. However, it is expected that most societies will have more than one member (and in most cases nonprofit organizations would require a minimum of three).

Do you want to turn the sector on its head and allow people to make a limited profit from investing in social innovations such as social housing solutions?

Well, sorry, that doesn’t happen in this process folks. However, the goal for this process is to be consistent with planned Community Interest Companies so that a Society Act consultation process such as the current one doesn’t have to be repeated.

More clarity required: public versus private societies

The discussion papers divides societies into two types: public and private. These designations were the subject of confusion at the recent consultation sessions. The connotations that these words carry go much further than the intended definitions in this paper, and at this time are not clear. Historically any designations were based on long-standing and outdated definitions of charitable purposes.

As currently intended, private societies are those that exist to serve their members (e.g., sports clubs, members-based cultural associations) and receive no public funding.

Public societies serve the public interest for the benefit of society and receive significant public funding (this threshold would be set out in the regulations, after further consultations). Most nonprofit organizations would fit under this classification, though in cases where an insignificant level of public funding is received, the private option could be applicable.

Public societies would be subject to greater public accountability than private societies and this restriction would help protect the public interest by maintaining the “asset lock” for publicly funded societies (i.e., what happens to assets when a society dissolves). The discussion papers goes into great detail as to their rationale for making the classification between private and public (and shifting away from charitable purpose definitions), though an opportunity exists to make this much clearer.

The timeline

The discussion paper is available for public comment until April 30, 2012. A summary of the recommendations is found starting on page 27.

The Ministry will review all submissions and make policy recommendations on a direction for reform — either by amending the existing Act or drafting a new one. Legislation to amend (or replace) the Act is targeted for 2013 at the earliest, but is more likely to be in 2014. Once passed, the Ministry will have to conduct further consultation around regulations, therefore a new Act wouldn’t come into effect for societies until 2015 or 2016.

Take action

Read the documents and submit your comments:

Trina Isakson and Bronwen Barnett help communities engage young people through the consulting, research and training work of 27 Shift. They can be reached at info@27shift.com or @27_Shift.

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Photos (from top) via iStock.com. All photos used with permission.