A new Societies Act comes into force on November 28, 2016 in British Columbia. This new legislation brings with it significant changes for societies operating in the province. These changes include: granting societies the capacity, rights, powers and privileges of an individual of full capacity, and limiting the liability of a member for debts or other liabilities of the society.
Societies, similar to business corporations, are incorporated entities but operate as “not-for-profit” organizations. Since the 1920’s, Societies in British Colombia have been legally allowed to incorporate. The first BC Society Act, passed in 1920 and with occasional updates since then, was last amended in 1977. Today, there are roughly 27,000 incorporated societies in BC today.
For some time, the government has considered updating the legislation in an effort to both streamline and modernize the governing statute. Legislation for business corporations was changed in 2004 with the Business Corporations Act. Meanwhile, the Society Act was still modeled on earlier and outdated “for-profit” company legislation.
With the incoming Act, the process for incorporation has been streamlined. Where the current legislation requires five subscribers to form a society, the new Act requires only one subscriber. All filings will now be done electronically via new online filing system. Societies must continue to have three directors, one of whom must ordinarily reside in BC. The issue of transparency has been addressed by requiring a copy of a society’s bylaws to be filed with the provincial registry, which will be entirely searchable and amendable online. In addition, members of the public will be permitted to inspect the financial statements of each registered society.
Also being introduced is a new framework for organizations primarily incorporated for the benefit of their members. These are described as “member-funded societies”, which are meant to include organizations such as a golf or sports club, as these are distinguished from charities and other “non-profit” organizations. For groups that fall within this category, there will be fewer requirements to account and disclose financial information to public.
Due to the public nature of the activities often undertaken by many societies in the province, there was strong pressure leading up to the legislation to include provisions allowing members of the public to bring actions against a society and challenge actions taken by the society. Naturally, such provisions were controversial and after sustained lobbying efforts, the government removed any reference to them from the final legislation.
For existing societies, there are some important takeaways. Each society must transition their corporate structure under the new Societies Act within 2 years of the Act coming into force on November 28, 2016. This will mean most BC societies will need to amend their constitution and bylaws. This will require the filing of a transition application, including a new constitution with only the name and purpose(s) of the society, the consolidated bylaws of the society and a statement listing the current directors and registered office of the society. Importantly, many provisions found in existing constitutions must be migrated to the bylaws, including provisions described as “unalterable”.
Change to the corporate structure of a society may have implications for its tax status, specifically those societies which are also registered as charities under income tax legislation, will likely have to re-file their amended constitution with CRA.
These changes are a reminder that all societies should actively maintain their proper legal structure and status. The arrival of the new Societies Act is a timely reminder and a great opportunity to review existing and perhaps outdated structures.
Tags: Article, James D. Baird, Tax, Society, Charity