How Can Members Remove Directors Under ONCA?

In Ontario, nonprofit organizations are governed by the Ontario Nonprofit Corporations Act (ONCA). Recently, ONCA introduced significant changes to how directors can be removed by members. This shift has important implications for how nonprofits operate in the province. Let’s explore these changes in detail and understand their significance.

The Change: Simpler Majority to Remove Directors

Old Rule: Previously, under ONCA, if members of a nonprofit wanted to remove a sitting director, they often needed a two-thirds majority vote. This high threshold was set by the organization's bylaws or articles of incorporation.
New Rule: Now, under ONCA, members can remove a director with just a simple majority (51 percent) vote during a members’ meeting. This change means that it’s easier for members to hold directors accountable and make changes to the board.

Why This Change Matters

Accountability to Members: Directors of a nonprofit are accountable to the members. They make crucial decisions that affect the direction and success of the organization. By lowering the voting threshold to a simple majority, members now have a stronger voice in who represents them on the board.
Updating Governing Documents: Nonprofits must ensure their governing documents, such as bylaws and articles of incorporation, reflect this change. If these documents still require a two-thirds majority to remove a director, they are outdated and could wrongly prevent members from exercising their rights.
Empowering Stakeholders: This shift empowers stakeholders, giving them more control and ensuring that the board represents the current will of the members. It also encourages directors to remain accountable and responsive to the needs and concerns of the membership.

Steps Nonprofits Should Take

1. Review and Update Governing Documents: Nonprofits should immediately review their bylaws and articles of incorporation. Any provisions requiring more than a simple majority to remove a director should be updated to comply with the new rule under ONCA.

2. Educate Members: It’s essential to inform members about their rights and the new process for removing directors. Clear communication ensures that all members understand how they can participate in governance.

3. Regularly Schedule Member Meetings: Frequent and regular member meetings provide opportunities for members to discuss and vote on important issues, including the removal of directors if necessary.

4. Encourage Active Participation: Nonprofits should encourage active participation from their members. When members are engaged and informed, they can better exercise their rights and contribute to the organization’s success.‍

The ability to remove directors with a 51 percent vote is a significant change in nonprofit governance under ONCA. It simplifies the process, enhances accountability, and ensures that the board remains responsive to the members' needs. Nonprofits must update their governing documents and educate their members to align with this new rule. By doing so, they can strengthen their governance practices and ensure that their organization operates effectively and democratically.

Legal Framework for Member Removal of Directors Under ONCA

ONCA sets specific rules for how members can remove directors from nonprofit boards. The Act creates different requirements for various types of organizations and defines clear roles for members, directors, and officers in the process.

Overview of the Ontario Not-for-Profit Corporations Act

ONCA replaced the previous Corporations Act in Ontario. It provides clear rules for how nonprofits must operate.

The Act applies to all not-for-profit corporations in Ontario, including charities and other nonprofit organizations. Members have specific rights to remove directors, and the Act sets minimum standards organizations must follow.

Key ONCA provisions include:

• Simple majority voting for director removal
• Mandatory member meeting procedures
• Protection for certain types of directors
• Requirements for proper notice

Organizations cannot create bylaws that make director removal harder than ONCA requires. They can, however, add extra protections for members during the process.

ONCA also sets different rules for ex officio directors. These directors often cannot be removed through the standard member vote process.

Key Definitions: Members, Directors, and Officers

Members are individuals with voting rights in the organization. They elect directors and can vote on important matters like director removal.

Only voting members can participate in director removal votes. Non-voting members cannot cast ballots in these decisions.

Directors serve on the board and make governance decisions. Members elect them, and directors are accountable to the members.

ONCA distinguishes between regular directors and ex officio directors. Ex officio directors hold their position because of another role they have.

Officers are appointed by directors to handle specific duties. Common officer positions include president, secretary, and treasurer.

‍

Differences Between Nonprofit and Charity Requirements

All organizations under ONCA follow the same basic director removal rules. Both charities and other nonprofits must allow simple majority voting.

Charities have additional considerations:

• Must maintain charitable purposes
• Subject to Canada Revenue Agency oversight
• May have specific director qualifications

Some charities receive extra government funding and might have additional accountability requirements in their funding agreements.

Registered charities must also follow federal charity law. This can create extra steps when removing directors who have signing authority with CRA.

Both charity and nonprofit bylaws must align with ONCA requirements. Organizations cannot create bylaws that prevent members from exercising their removal rights.

The voting threshold remains the same regardless of organization type. Members need 50% plus one vote to remove a director at a properly called meeting.

Membership Rights and the Role in Director Removal

Under ONCA, different member classes hold specific voting rights that directly affect director removal procedures. The membership structure and quorum requirements determine how effectively members can exercise their removal powers.

Member Classes and Voting Rights

Only voting members can participate in director removal under ONCA. Non-voting members cannot vote on these matters, even if they attend meetings.

Different membership classes may have specific rights to elect certain directors. Only that class can remove the directors they elected.

For example, if Class A members elect three directors, only Class A members can vote to remove those specific directors. Class B members cannot participate in removing Class A's elected directors.

Ex officio directors are exempt from member removal procedures. These directors serve because of their position or role, not through member election.

The bylaws must clearly define which member classes exist and their specific voting rights. This prevents confusion during removal procedures.

Quorum and Voting Requirements

Members need a simple majority vote (51%) to remove a director at a properly called meeting. This is called an ordinary resolution under ONCA.

A valid quorum must be present before any voting can occur. The bylaws typically set the quorum requirements for member meetings.

Members must convene a special meeting specifically for director removal. Regular annual meetings can also address removal if properly noticed.

The meeting notice must clearly state that director removal will be discussed. Members need adequate time to prepare and attend.

Voting can happen in person, by proxy, or through other methods allowed in the bylaws.

How Membership Structure Impacts Removal Procedures

Large membership organizations face different challenges than smaller ones. Getting enough members to attend and reach quorum becomes more difficult as organizations grow.

Organizations with multiple member classes must track which members can vote on specific director removals. This requires clear record-keeping and proper meeting procedures.

Single-class membership structures simplify the removal process. All voting members participate equally in director removal decisions.

The geographic spread of members affects meeting logistics. Organizations may need to use electronic voting or proxy arrangements.

Membership fees and engagement levels influence participation rates. Active, engaged members are more likely to participate in governance decisions like director removal.

Procedural Steps for Removing Directors Under ONCA

The removal process requires careful attention to bylaw requirements and proper notice procedures. Members must follow specific steps to ensure the removal vote is valid and legally binding.

Reviewing and Applying Bylaw Provisions

We must first examine our organization's bylaws to understand the specific procedures for director removal. Under ONCA, members can remove directors with a simple majority vote through an ordinary resolution.

Our bylaws may contain additional requirements beyond ONCA's basic rules. These could include specific notice periods or meeting procedures we need to follow.

If our bylaws still require a two-thirds majority for removal, they conflict with ONCA's current provisions. We should update these outdated clauses to reflect the new simple majority standard.

Key bylaw elements to review:

• Notice requirements for special meetings
• Quorum requirements for member votes
• Voting procedures and eligibility rules
• Any specific removal provisions

Tools like CLEO's Bylaw Builder can help us create compliant bylaws that align with ONCA requirements.

Initiating a Removal Process

We can start the removal process through a member proposal or by calling a special meeting. Any voting member typically has the right to propose director removal.

The proposal must clearly identify which director we want to remove. We cannot remove ex officio directors through this process since their positions depend on holding other offices.

Only members from classes that elected specific directors can vote to remove those directors. This rule protects the voting rights of different member groups.

We should document our reasons for removal, though ONCA doesn't require us to prove cause. The simple majority vote is enough for removal.

Notice of Meeting and Proposal Requirements

We must provide proper written notice to all voting members before the meeting. The notice period depends on our bylaws but typically ranges from 10 to 21 days.

The notice must include:

• Meeting date, time, and location
• Clear statement about the director removal proposal
• Name of the director facing removal
• How members can participate or vote

We should send notices by methods specified in our bylaws, such as mail, email, or posting on our website.

The notice gives members time to consider the proposal and attend the meeting. Proper notice protects the democratic process and ensures validity.

Conducting the Member Vote for Removal

We must ensure quorum is present before conducting the removal vote. Our bylaws specify the minimum number of members needed for valid decisions.

The vote requires a simple majority of voting members present. We can conduct voting by show of hands, written ballot, or electronic means as permitted by our bylaws.

We should record the vote results in our meeting minutes. This creates an official record of the decision and the voting outcome.

After a successful removal vote, we must file updated director information with the Ontario Business Registry within 60 days. We also need to update our internal corporate records immediately.

The removed director's term ends immediately after the successful vote. We can then appoint or elect a replacement director according to our bylaws.

Special Considerations for Charities and Public Benefit Corporations

Registered charities and public benefit corporations face additional rules when removing directors. These organizations must follow extra steps and may need approval from government bodies.

Unique Rules for Registered Charities

Registered charities must notify the Canada Revenue Agency (CRA) when directors change. We need to update our charity information return within six months of any director removal.

The CRA requires that charity directors meet specific qualifications. All directors must be eligible under the Income Tax Act.

• Under 18 years old
• Convicted of certain criminal offences
• Previously involved with charities that lost their status

We must also ensure our charity maintains the minimum number of directors required by our governing documents. Most charities need at least three directors to operate legally.

Important: If we remove too many directors at once, our charity might not have enough people to make decisions. This could harm our charitable status with the CRA.

Employee Directors and Public Benefit Corporation Limits

Public benefit corporations have strict rules about employee directors. No more than one-third of our directors can be employees of the corporation.

This rule affects director removal in important ways:

• We cannot remove non-employee directors if it would make employee directors exceed the one-third limit
• We might need to remove employee directors first before removing other directors
• We must plan director changes carefully to stay within the legal limits

Employee directors include anyone who receives regular pay from our organization. This covers full-time staff, part-time workers, and contractors with ongoing relationships.

Engaging with the Public Guardian and Trustee

Some charities must involve the Public Guardian and Trustee (PGT) when removing directors. This applies mainly to charities that receive government funding or hold public trust property.

We must notify the PGT before removing directors if:

• Our charity manages funds for vulnerable people
• We hold property in trust for the public
• Our governing documents require PGT approval

The PGT may review our reasons for director removal. They want to ensure we protect charitable assets and serve the public interest properly.

Timeline matters: PGT reviews can take several weeks. We should contact them early in the removal process to avoid delays.

Corporate Governance and Director Removal Best Practices

When removing directors under ONCA, organizations must address conflicts of interest, maintain proper documentation, and complete required government filings. These practices protect the organization and ensure compliance with Ontario regulations.

Conflicts of Interest and Compliance Obligations

Directors facing removal cannot vote on their own removal. This creates an automatic conflict of interest under ONCA governance rules.

We must ensure the director steps away from all board discussions about their removal. They cannot participate in any votes or decisions related to the removal process.

Officers who are also directors face additional considerations. If we remove a director who holds an officer position, we need to address both roles separately.

The organization must follow its conflict of interest policy during removal proceedings. We should document that proper conflict procedures were followed.

Board members must act in good faith when considering director removal. Personal disputes cannot be the primary reason for removal under corporate governance standards.

We need to review our bylaws for specific conflict requirements. Some organizations have stricter rules than the basic ONCA requirements.

Documenting and Reporting Director Removal

Meeting minutes must record the removal resolution clearly. We need to include the exact vote count and the specific reasons for removal.

The minutes should show that proper notice was given to members. We must document that the meeting followed ONCA procedures.

We need to record which members voted and verify their voting rights. Not all members may have the right to remove specific directors.

The organization should keep copies of all removal notices and communications. This documentation protects us if someone later challenges the removal.

Financial records may need updates if the removed director had signing authority. We must change bank signatures and other financial controls immediately.

Board resolutions should formally accept the director's removal. This creates a clear corporate record of the governance change.

Government Filings and Registry Updates

We must file director changes with the Ontario government within 15 days of the removal. The corporate registry needs current director information.

Form 1 (Initial Return/Notice of Change) reports director changes to Corporations Canada. We need to submit this form with the required fees.

The organization's registered office must update its records. Corporate books need to reflect the new board composition accurately.

We should update all public directories and websites that list directors. This includes charity databases and professional associations.

Banking relationships require immediate attention. Financial institutions need updated director information and new signing authorities.

Professional advisors like lawyers and accountants should receive notice of director changes. This ensures they communicate with the correct board members going forward.

After Removal: Board Reconstitution and Membership Impacts

When members remove directors under ONCA, organizations must address immediate vacancy concerns. The removal may also affect board composition and member relationships.

Vacancy and Appointment of New Directors

The removal of a director creates an immediate vacancy on the board. Organizations must first determine if the remaining directors still meet quorum requirements.

Quorum Assessment

Most governing documents specify the minimum number of directors needed for a quorum. If the removal drops the board below this threshold, normal board operations cannot continue.

When quorum is lost, the organization must call a members' meeting. This meeting serves to elect new directors and restore proper board function.

Appointment Process

Organizations have several options for filling vacancies:

• Members' meeting election - The most common approach
• Board appointment - If permitted by bylaws and quorum exists
• Emergency provisions - Some bylaws allow temporary appointments

The bylaws typically outline procedures for each method. Organizations should review these requirements before filling vacancies.

Timeline Considerations

We recommend acting quickly to fill vacancies. Long periods without proper board composition can affect decision-making and compliance.

• Decision-making authority
• Legal compliance obligations
• Operational continuity

Effect on Board of Directors and Membership

Director removal impacts both board dynamics and member relationships. These changes require careful management to maintain stability.

Board Composition Changes

Removing directors can shift the balance of expertise and perspectives on the board. Organizations may lose valuable skills or institutional knowledge.

The remaining directors might need to redistribute responsibilities. Committee assignments and leadership roles may require adjustment.

Member Relations

The removal process can create divisions within the membership. Some members may support the decision while others oppose it.

Organizations should focus on rebuilding unity after contentious removals. Clear communication about reasons for removal helps maintain member confidence.

Governance Continuity

New directors require orientation and training. They need to understand:

• Organizational history and culture
• Current strategic priorities
• Legal and fiduciary responsibilities
• Board policies and procedures

Considerations in Case of Dissolution

Although not directly caused by director removal, organizations facing governance challenges may consider dissolution.

Dissolution Triggers

Several factors might lead to dissolution discussions:

• Inability to maintain minimum director requirements
• Loss of member confidence in governance
• Ongoing conflicts that prevent effective operations

Legal Requirements

ONCA sets specific requirements for dissolution. Members must pass a special resolution with detailed procedures for:

• Asset distribution
• Creditor notification
• Regulatory compliance

Alternative Solutions

Before considering dissolution, organizations can explore other options:

• Restructuring board composition
• Revising governance documents
• Implementing conflict resolution processes
• Seeking external mediation

These alternatives may address underlying issues without ending the organization.

Transitioning and Updating Bylaws for ONCA Compliance

Nonprofits must review their current governing documents and update them to meet ONCA's new requirements. The new rules include the simple majority rule for director removal.

Organizations can use CLEO's Bylaw Builder to make these changes. Nonprofits must complete their transition within the required timeline.

Reviewing Existing Governing Documents

We need to examine our current bylaws and articles of incorporation to find sections that conflict with ONCA. Many older documents require a two-thirds majority vote to remove directors. Under ONCA, this must change to a simple majority.

Our bylaws cannot override ONCA's requirement for a 50% + 1 vote. Any provision stating a higher threshold is invalid and must be updated.

We should also check for other outdated sections. These might include membership definitions, meeting procedures, and director appointment processes.

Key areas to review:

• Director removal procedures
• Voting thresholds for member decisions
• Membership class definitions
• Meeting notice requirements
• Officer appointment rules

Document all needed changes before starting the amendment process. This helps us avoid multiple rounds of government filings.

Making Amendments and Using CLEO's Bylaw Builder

CLEO's Bylaw Builder provides templates and guidance for ONCA-compliant bylaws. This free online tool helps us draft proper language that meets legal requirements.

We can use the Bylaw Builder to create new bylaws or modify existing ones. The tool includes standard clauses for director removal that comply with ONCA's simple majority rule.

Steps for using the Bylaw Builder:

1. Access the tool through CLEO's website
2. Select our organization type
3. Complete each section with our information
4. Review the generated bylaws carefully
5. Make any necessary customizations

Once we approve new bylaws, our board of directors must pass a resolution adopting them. The bylaws take effect immediately upon this board vote.

We must then present the new bylaws to our members at the next meeting for confirmation.

Timeline for Compliance with ONCA

Existing nonprofits have specific deadlines for ONCA compliance based on when they were incorporated. Organizations incorporated before October 2021 typically have until October 2024 to transition.

We must file our updated articles or letters patent with the government before our deadline. Late compliance can result in dissolution of our organization.

Timeline requirements:

• File updated governing documents before deadline
• Hold member meetings to confirm bylaw changes
• Update corporate records with new information
• Ensure all government filings are complete

Bylaw amendments become effective when our directors approve them. However, members can reject these changes at the next meeting if they disagree.

We should start the transition process early to avoid rushing important decisions. This gives us time to educate our members about the changes and address any concerns.

Conclusion

ONCA's new director removal rules give nonprofit members real power to hold boards accountable. The simple majority vote requirement makes it easier for members to take action when needed.

Organizations must update their bylaws to reflect these changes. Members can now remove directors with just 51% support at a special meeting. This creates stronger democratic governance for Ontario nonprofits.

Ready to ensure your nonprofit complies with ONCA? Contact B.I.G. Charity Law Group today for expert guidance on updating your governing documents. We help Ontario nonprofits navigate these important legal changes with confidence.

Get started now:

• Email us at dov.goldberg@charitylawgroup.ca
• Call (416) 488-5888
• Visit CharityLawGroup.ca
• Schedule a FREE consultation

Frequently Asked Questions

Under ONCA, members can remove directors with a simple majority vote at a special meeting. The process requires proper notice and follows specific rules that nonprofits must understand.

How can members remove a director?

Members can remove directors by passing an ordinary resolution at a special meeting. This requires a simple majority vote of 50% plus one.

Only voting members can participate in director removal. The bylaws cannot change this voting percentage requirement.

Ex officio directors cannot be removed through this process. Their positions are not subject to member removal under ONCA rules.

What are the grounds for the removal of a director?

ONCA does not specify particular grounds for removing a director. Members can vote to remove any director for any reason they see fit.

The decision belongs entirely to the voting members. They do not need to prove wrongdoing or provide specific justification.

This gives members broad power to ensure directors remain accountable. It allows them to make changes when they feel it serves the organization's best interests.

How do you remove a director under the Corporation Act?

Under ONCA, members must call a special meeting for the purpose of removing a director. Proper notice must be given to all voting members.

The meeting notice should clearly state the intention to remove the specific director. This ensures members understand the meeting's purpose.

During the meeting, members vote on an ordinary resolution to remove the director. The resolution passes with a simple majority of votes cast.

What is the procedure for removing a director?

First, identify which members have the right to vote on director removal. Only members who can elect specific directors can remove those same directors.

Next, call a special meeting according to your organization's bylaws. Provide proper notice that includes the removal resolution.

Hold the meeting and vote on the ordinary resolution. Count the votes and announce the result based on a simple majority.

How can directors be removed from their positions?

Members can remove directors by voting at special meetings. This is the main method under ONCA for member-driven removal.

Directors can also resign by giving written notice. Some organizations allow removal through other rules in their governing documents.

The board or members choose when to fill the vacancy after removal. This timing depends on the organization's needs and bylaws.

What is the step to remove a director?

The key step is to convene a special meeting of voting members.

This meeting must follow the notice requirements in your bylaws.

Members vote on an ordinary resolution to remove the director.

The resolution needs support from more than half of the votes cast.

After the vote, update your corporate records to show the director's removal.

Notify relevant parties and start the process of filling the vacancy if needed.