If you work at a non-profit society in British Columbia or sit on a board of directors, there are a few key things you should know about the Societies Act. Here’s a top 10 to keep in mind.
What you should know
Members and the public can access a society’s records
The Societies Act spells out the records a society must keep. These include a register of members, minutes of members’ and directors’ meetings, accounting records, and financial statements.
By default, members are entitled to inspect all records of the society (as are directors). But a society’s bylaws can restrict members’ access to certain records, such as accounting records.
The public is entitled to receive a copy of a society’s financial statements and auditor’s report if requested. A society can choose to grant access to the public to more of its records. The only record that is excluded from public accessibility is the society’s register of members.
|Records a society must keep*||Director access||Member access||Public access|
|Register of members||Yes||Yes, though directors may restrict||No|
|Minutes of members’ meetings and copies of all ordinary and special resolutions||Yes||Yes||Bylaws may permit|
|Minutes of directors’ meetings and copies of all consent resolutions of directors||Yes||Yes, though bylaws may restrict (except relating to conflicts disclosures)||Bylaws may permit|
|Any disclosures by directors or senior managers of a conflict of interest||Yes||Yes||Bylaws may permit|
|Accounting records, including a record of each transaction materially affecting the society’s financial position||Yes||Yes, though bylaws may restrict||Bylaws may permit|
|Financial statements and any auditor’s report on the financial statements||Yes||Yes||Yes|
* This list is not exhaustive.
Remuneration paid to directors and certain employees and contractors must be disclosed
Remuneration is money or other compensation paid for work or services performed. Amounts paid to a director for being a director and for acting in any other capacity must be disclosed separately.
It’s important to note that directors can’t be remunerated at all unless your bylaws allow for it. Check out a set of bylaws you can use for your non-profit here.
Societies must also disclose the remuneration of any employees or contractors making over $75,000. If a society has more than 10 employees or contractors making over that amount, they must disclose the top 10.
Societies typically do this disclosure in a note to their annual financial statements, which are available to society members and to the public.
To counterbalance privacy concerns, the names of the directors, employees and contractors need not be included in the financial statements. The disclosure can be done by position or contract. For example:
Director 1: $X,XXX
Or, a society can pool the information by disclosing the total number of employees and contractors making over $75,000 and the total amount of remuneration paid to them. For example:
Six employees remunerated $X total. Four contractors remunerated $X total.
There is flexibility in conducting members’ meetings
Unless a society’s bylaws provide otherwise, members can participate in meetings by phone or using other technology so long as all the people participating are able to communicate with each other. There are no rules on how these meetings are conducted, so long as they run through the required meeting business in an orderly fashion and votes can be counted.
Also, an annual general meeting can be held entirely in writing. All voting members must consent to a written resolution covering the matters that must be dealt with at the AGM, including the presentation of the financial statements and any auditor’s report.
The voting threshold for a special resolution is 66%+1
In 2018, the Societies Act lowered the voting threshold for approving a special resolution, which are required to make fundamental changes to a society, including changing its name or bylaws.
A special resolution requires 2/3 of the votes cast, but a society can set a higher threshold for special resolutions in its bylaws (up to 100% of voting members). The higher threshold can apply generally or be set for specific special resolutions. For example, the bylaws can require a unanimous vote to change the bylaw that sets out who gets the society’s assets on dissolution, while retaining the default threshold of 2/3 of the votes cast for other bylaw amendments.
If your bylaws impose a higher threshold
If your society’s bylaws currently require that a special resolution be approved by at least 3/4 of votes cast, then that threshold still applies under the new Societies Act. The exception is for a vote to remove a director from office — the new default threshold of 2/3 applies to that situation regardless of what the bylaws say.
Members can bring a member’s proposal
Members of a society may requisition a member’s meeting for a specific purpose, provided that at least 10% of voting members sign the requisition. They can also add specific issues to the agenda of an annual general meeting. A member proposal must be added to the agenda if the proposal is signed by at least 5% of the society’s voting members. The proposal must be received by the society at least seven days before notice of the AGM is sent.
A society’s board of directors have the discretion to reject the proposal if it is substantially similar to an issue that has already been voted on at a member’s meeting in the previous two years.
Members have remedies if the directors or the society behaves badly
Members can apply to court for a remedy if the society’s activities are oppressive or unfairly prejudicial to one or more members. In applying for such an oppression remedy, a member will need to show they had a reasonable expectation to be treated in a certain way. They will also need to show that the society’s conduct was burdensome, harsh and wrongful, or had an unjust and inequitable effect on them.
If a member’s oppression claim succeeds, the court has wide discretion to make things right, including by directing or prohibiting any act, removing or appointing a director, varying a transaction or a resolution, directing compensation, or appointing an investigator.
Members may also bring a derivative action. In such an action, a member can enforce rights of the society when the directors refuse to act.
The Act imposes duties on senior managers
Senior managers are individuals appointed by the board of directors to manage the activities and internal affairs of a society or a principal unit of a society.
A senior manager may be an employee, a contractor, or a volunteer. So long as the individual is appointed by the board and has the requisite authority, they are a senior manager under the Societies Act.
Being deemed a senior manager does not alter a person’s job title, duties, authority, or legal relationship with the society. But the Act imposes duties on all senior managers, including the duty to act “honestly and in good faith with a view to the best interests of the society” and the duty to disclose a conflict of interest (see the next item). The Act also limits the liability of senior managers, inviting a court to relieve the manager from liability for any negligence or breach if the manager “acted honestly and reasonably and ought fairly to be excused.”
There are detailed procedures for managing conflicts of interest
A conflict of interest is a situation in which someone has a duty to act in the best interests of an organization, yet they may have personal interests that conflict with that duty. For example, a board director may work at a law firm the society is considering retaining. Or an executive director may be related to a web designer the society is contemplating hiring.
A director or senior manager is in a conflict of interest when they have a “direct or indirect material interest” in a contract or transaction with the society or a matter for consideration by the board. A “material interest” is an interest that is not insignificant and could reasonably be considered to affect a person’s decision-making.
A director or senior manager who is in a conflict of interest must:
promptly and fully disclose the conflict to the directors
leave the room during any discussion or vote at a board meeting on the conflict matter
refrain from any action intended to influence the discussion or vote
in the case of a director, abstain from voting on the conflict matter
Societies must keep records of any disclosures by directors or senior managers of a conflict of interest.
Directors must be qualified to serve
A director must be at least 18 years old, unless the bylaws expressly allow directors who are age 16 or 17. If the bylaws allow directors who are age 16 or 17, the majority of the society’s directors must be age 18 or over.
Directors must also consent to being a director. The consent can either be by signing a written consent or by being present at a meeting where the appointment or election was made and not refusing to be a director.
As well, a director of a society cannot:
be declared incapable by a court,
be an undischarged bankrupt, or
have been convicted of fraud or certain other criminal offences within last 5 years (unless they received a pardon).
These are ongoing requirements. If a director becomes disqualified, he or she must resign. It is an offence for a non-qualified person to act as director.
Directors can be paid, but only if the bylaws allow for it
A society must not remunerate a director for being a director unless the bylaws expressly permit. Remuneration is money or other compensation paid for work or services performed — in this case, the work of being a director.
Reimbursement of a director for reasonable expenses is permitted, unless the bylaws restrict reimbursement.
Subject to the conflict of interest rules, a director can be paid to be an employee of or contractor to the society. However, at all times a majority of directors must not be getting paid as employees or contractors.
So, for example, if you have a board of five, only two of them can get paid as employees or contractors.