COURSE OVERVIEW:

I.       Organization & Start-Up

         1.    First Directors Meeting

         2.    First Members Meeting

II.      The Board of Directors

         1.    General Duties of the Board of Directors

         2.    Number of Directors

         3.    Electing the Directors

         4.    Qualifications to be a Director

         5.    Director Terms and Vacancies

        6.    Directors’ Meetings

         7.    Appointing Officers

         8.    Responsibilities and Liabilities of Directors and Officers

                     a.   Standard of Care

                     b.   Duty to Comply

                     c.   Liability

                     d.   Conflicts of Interest

                     e.   Indemnification by the Corporation

          9.    Remuneration of Directors, Officers and Members

III.       The Members

           1.    Membership

                     a.    Condition of Membership

                     b.    Classes of Membership

                     c.    Becoming and Ceasing to be a Member

                     d.    Disciplining a Member

           2.    Rights and Responsibilities of Members

                     a.    Right to Vote

                     b.    Notice of Meetings of Members

                     c.    Member Proposals

                     d.    Requisition of Meeting

                     e.    Election and Dismissal of Directors

                     f.     Approval or Confirmation of By-laws

                     g.    Access to Corporate Records

                     h.    Receive Corporation’s Financial Statements

                      i.      Approve Major or Fundamental Changes

                      j.      Immunity of Members from Liability

            3.    Members Meetings

                      a.    When to Hold Meetings and Resolutions in Writing

                      b.    Notice Requirements

                       c.    Agenda for an Annual Meeting

                      d.    Location of Annual Meeting

                      e.    Electronic Meetings and Electronic Voting

                       f.     Absentee Voting

                      g.    Quorum

                      h.    Minutes

                      i.      Special Meetings

            4.    Members Resolutions

            5.    Member Agreements

            6.    Member Remedies

            7.    Dispute Resolution

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IV.       Corporate Records and Filing Obligations

            1.    Corporate Records

            2.    Accounting Records

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I. Organization and Start Up

Once your Not-for-Profit has incorporated under the Not-for-profit Corporations Act (NFP Act), you need to establish the internal organization of the corporation.

It is advisable to retain the services of a lawyer who specializes in corporation law to ensure the corporation is properly organized and the directors understand their responsibilities. By having the corporation properly organized, you should eliminate a number of potentially serious problems in the future.

1. First Directors Meeting

After incorporation, the first directors are required to call an "organizational meeting" of the directors. The purpose of this first meeting is to organize the corporation by adopting a number of resolutions that will allow the corporation to conduct its activities and the directors to properly administer the affairs of the corporation.

Notice of Meeting:

• A minimum of five days' notice must be given to each director listed inForm 4002 – Initial Registered Office Address and First Board of Directors.
• The notice must indicate the date, time and place of the meeting.
• Directors can waive notice of the meeting.

The directors need to consider the following essential actions at their first meeting:

• make by-laws
• maintain corporate records and issuing debt obligation certificates
• authorize the issuance of debt obligations
• appoint officers
• appoint an interim public accountans
• issue memberships
• make banking arrangements
• transact any other business.

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Alternatively, the directors can sign organizing resolutions to deal with all of the above matters. This is especially suitable if the number of directors is small. If all directors sign a written record of resolutions on the above matters, then a meeting of the first directors is not necessary. A copy of the resolutions must be kept with the minutes of the meetings of directors (see Organizing Resolutions of Directors).

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a. Make By-Laws

Soon after incorporation, the corporation will need to adopt a set of rules concerning the governance and operations of a corporation. These rules are set out in the by-laws of the corporation. The first directors will need to adopt "general by-laws" at the first meeting of the directors.

This process can be simplified by referring to the Model By-laws, which have been written to apply to a typical not-for-profit corporation. Corporations Canada has also developed an online interactive tool called a By-law Builder that allows you to generate the by-laws you want by choosingprovisions that meet the specific needs of your corporation from a number ofavailable options. By-laws can be modified at a later date as the needs of the corporation change.

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Here is a list of the major items that typically appears in bylaws:

• who can be a member of your organization and under what conditions, how you become a member, what conditions are associated with membership, termination;
• how many directors can be on your board and how they will be chosen;
• what officers your organization will have and how they are chosen (election, term, duties, resignation, and removal);
• how your organization will call meetings;
• how many people must be present at meetings to do business (quorum);
• voting rights of members;
• who will have custody of the corporate seal and who is allowed to use it to certify your organization’s documents;
• how bylaws can be changed
• whether certain kinds of decisions require special levels of approval or consent
• providing an indemnity for the directors  

General by-laws adopted at the first meeting of the directors take effect immediately, although they are subject to confirmation at the first meeting of the members. After confirmation by the members, a copy of the by-laws must be filed with Corporations Canada within 12 months.

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b. Maintain Corporate Records and Issuing Debt Obligation Certificates

The list of corporate records that are required to be kept includes registers of members, directors and officers and minutes of member and director meetings. Although there is a general requirement for the corporation to keep certain records at its registered office, it is also permissible to keep these records at another location, provided that the requirements of the NFP Act are met. At the first meeting of the directors, they will need to decide how these records are to be maintained and what rules, if any, will govern their maintenance.

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c. Authorize the Issuance of Debt Obligations

If a corporation intends to issue debt obligations after incorporation (for ex., bonds, debentures, notes or other evidences of indebtedness or guarantees of a corporation), this will have to be authorized by the directors at their first meeting. Future debt obligations will also have to be authorized by the directors at future meetings.

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d. Appoint officers

Officers are appointed by the directors to assist the directors and to carry out functions delegated to them. Officers should be appointed at the first meeting of the directors. Officers can be replaced at the discretion of the directors at any point in the future.

e. Appoint an Interim Public Accountant

The NFP Act contains a general requirement that the members of a corporation incorporated under the NFP Act must appoint a public accountant by ordinary resolution (that is, a simple majority of the votes cast) at each annual meeting. The NFP Act also contains rules regarding who can be appointed, and the circumstances in which such an appointment is not required. Since the power to appoint a public accountant is vested with the members, the first directors can appoint aninterim public accountant who holds office until the first meeting of the members (see Qualifications of Public Accountant).

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f. Issue Memberships

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One of a corporation's first activities following incorporation is to issue memberships. A person becomes a member when a corporation admits that person as a member of the corporation and "issues" a membership in that person's name. At the first meeting of the directors, memberships will need to be issued to qualified persons who meet the membership conditions contained in the by-laws. If the articles of incorporation provide for two or more classes or groups of members, memberships can be issued to different classes of members who meet the requirements set out in the by-laws. Additional memberships can be issued in the future.

g. Make Banking Arrangements

Once the corporation has been incorporated, it will need to choose a financial institution to meet its corporate banking needs. At their first meeting, the directors should adopt the banking resolutions that are required by the financial institution chosen; designate the signing officers for cheques; and determine the processes for conducting other banking business and authorizing signing officers.

h. Transact Other Business

Depending on the operations of the corporation, other business decisions might also have to be made at the first meeting of directors. Such decisions could include those that deal with:

• adopting corporate policies
• employing staff
• purchasing insurance coverage
• leasing premises
• purchasing real property
• adopting pre-incorporation contracts.

Depending on the nature of these decisions, some might require member approval and others might not.

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2. First Members Meeting

After the organizational meeting of the first directors, an organizational meeting of the members is required. Although most of the corporation's initial organizing business can be dealt with by the directors at their first meeting, certain matters might not be decided by the directors or might have to be confirmed by the members.

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With this in mind, the first directors of a corporation must call the first members' meeting within 18 months of the date of incorporation, that is, the effective date on the Certificate of Incorporation. This meeting is usually held immediately after the first organizational meeting of the directors.

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At this meeting, the members:

• elect directors
• confirm, modify or reject the general by-laws established by the firstdirectors
• appoint a public accountant, who can be the same one appointed by thefirst directors or a different one
• adopt special by-laws, if any
• transact other business.

Similar to the first meeting of the directors, the members can also adopt these initial organizing resolutions in writing, instead of holding a members' meeting, provided that the written resolutions are signed by all members. (See Organizing Resolutions of Members).

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II. The Board of Directors

The Not-for-Profit Corporation is governed by a board of directors. The size of the board is defined in the by-laws of the corporation, within parameters established in its Articles of Incorporation.

1. General Duties of the Board of Directors

The board of directors is accountable to the members. It is responsible for managing and supervising the activities and affairs of the corporation. Generally, the directors are elected by the members, and the members are admitted by the board (in accordance with the articles and conditions set out in the by-laws).

The board can appoint one of its members to act as a managing director or a number of directors to act as acommittee of directors. It can then delegate to the managing director or the committee any of the powers of the directors (refer to section 138 of the Canada Not-for-profit Corporations Act (NFP Act)).

2. Number of Directors

Under the NFP Act, a corporation is required to specify in its articles either a fixed number of directors or a minimum and maximum number of directors (refer to subsection 7(1) of the NFP Act). When a minimum and maximum number of directors is chosen, the precise number of directors to be elected can be established from time to time by ordinary resolution of the members. The members can also delegate this power to the directors. Generally, a corporation must have at least one director. However, a soliciting corporation must have a minimum of three directors, at least two of whom must not be officers or employees of the corporation or its affiliates (refer to section 125 of the NFP Act).

If the members decide to change the number of directors within the number permitted by the articles, the members must pass an ordinary resolution and elect the required number of directors. It is then necessary to notify Corporations Canada of the change in directors by filing Form 4006 – Changes Regarding Directors (see Federal Corporation Forms) within 15 days following the change. If the members want to increase or decrease the number of directors specified in the articles or the minimum or maximum number of directors, the articles must be amended by filing Form 4004 – Articles of Amendment (see Federal Corporation Forms) and paying the fee (see Services, Fees and Processing Times – NFP Act).

3. Electing the Directors

The general rule in the NFP Act is that directors are elected by a majority of the votes cast at an annual meeting of the members, for a term that cannot exceed four years (refer to subsection 128(3) of the NFP Act and subsection 28(1) of the Canada Not-for-profit Corporations Regulations (NFP Regulations)).

There are only two exceptions to the general rule that the members must elect the directors of the corporation.

1. First, the articles can permit the directors to appoint additional directors between annual meetings to hold office for a term that must expire on or before the next annual meeting of members. This is permitted as long as the total number of appointed directors is not more than one-third of the number of directors elected at the previous annual meeting (refer to subsection 128(8) ofthe NFP Act). If the articles do not permit the directors to appoint additional directors, the articles must be amended by filing Form 4004 – Articles of Amendment (see Federal Corporation Forms) and paying the fee (see Services, Fees and Processing Times – NFP Act). For more information, refer to subsection 132(1) ofthe NFP Act.
2. The second exception allows a vacancy on the board to be filled by thedirectors, as long as there is a quorum on the board to participate in filling the vacancy (refer to section 132 of the NFP Act).

The general rule that the members must elect the directors means that it is not permissible to have exofficio directors (that is, persons who hold office "ex-officio" or "as of right", without the need to be elected by members).

A person must consent to be a director of a corporation. Persons who have been elected or appointed as directors and are present at the meeting when the election or appointment took place, are deemed to have consented to serve as directors, unless they refuse. However, if they are not present at that meeting, they must either (a) consent to their election, in writing, before that meeting or within 10 days after that meeting or (b) act as a director after the election or appointment (refer to subsection 128(9) of the NFP Act and subsection 28(2) of the NFP Regulations).

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4. Qualifications to be a Director

A director must meet all of the following qualifications (refer to subsection 126(1) of the NFP Act):

• be at least 18 years old
• not have been declared incapable under the laws of a Canadian province or territory, or by a court in a jurisdiction outside Canada
• be an individual (that is, a corporation cannot be a director)
• not be in bankrupt status.

The NFP Act contains several other provisions that deal with directors' qualifications. For example, although the NFP Act does not require a director to be a member of the corporation, it allows the by-laws to provide otherwise (refer to subsection 126(2) of the NFP Act).

In the case of a soliciting corporation, the NFP Act provides that at least two directors must not be officers or employees of the corporation or its affiliates (refer to section 125 of the NFP Act).

Another provision of the NFP Act states that, if a corporation's by-laws contain additional qualification requirements for directors (for ex., that each director must be a member of the corporation), these requirements must be met.

5. Directors Terms and Vacancies on the Board of Directors

The general rule in the NFP Act is that directors are elected by a majority of the votes cast at each annual meeting of members for a term that cannot exceed four years (refer to subsection 128(3) of the NFP Act and subsection 28(1) of the NFP Regulations).Therefore, the by-laws can provide a defined term of office for directors, as long as it is four years or less. The by-laws can also permit directors to hold staggered terms of office, that is, all directors elected at a meeting of members need not hold office for the same term (refer to subsection 128(4) of the NFP Act).

If a director is not elected for a stated term, that director ceases to hold office at the end of the next annual meeting of members. Furthermore, if directors are not elected at a meeting of members, the incumbent directors continue in office until their successors are elected (refer to subsections 128(5) and (6) of the NFP Act). A director whose term has expired can be re-elected as a director, as long as the by-laws do not provide otherwise.

A director's term ends when he or she:

• dies
• resigns
• is removed from office
• is declared to be incapable by a court
• becomes a bankrupt, or
• has his or her term of office expire (refer to subsections 126(1) and 129(1), and section 130 of the NFP Act).

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a. Removing a Director

From time to time and for a variety of reasons, members can decide to remove a director they had previously elected. Removing a director generally requires the approval of a majority of members who cast their votes at a meeting of members called for the purpose of removing the director. At that meeting, the members can elect another director to fill the vacancy created by the removal (refer to subsections 130(1), (2) and (3) of the NFP Act). However, where a director was elected by a class or group of members that had an exclusive right to elect him or her, the director can be removed only by an ordinary resolution of that class or group of members (refer to subsection 130(2) of the NFP Act).

If a meeting is called to remove or replace a director, that director can submit to the corporation a written statement giving reasons for opposing his or her removal or replacement as a director. The corporation will need to give notice of this statement to the members and must also file a copy of the statement with Corporations Canada (refer to section 131 of the NFP Act).

If a vacancy occurs on the board of directors, the remaining directors can continue to exercise all the powers of directors as long as the number of remaining elected directors constitutes a quorum, that is, a majority of the directors, or the minimum number of directors required at a meeting, unless otherwise specified in your corporation's by-laws (refer to subsection 136(2) of the NFP Act).

A vacancy on the board can arise for a variety of reasons (refer to subsection 128(7) of the NFP Act), including:

• a resignation
• the removal of a director by the members
• an increase in the number, or in the minimum or maximum number, of directors provided for in the articles or
• members not electing, from among the candidates, the number of directors or the minimum of directors required by the articles, because a candidate did not consent to act as a director, did not meet the qualifications, was incapable of serving as a director, or died.

Depending on how the vacancy was created, the method of filling the vacancy can vary. Specifically:

• If a vacancy is created as a result of a director being removed from office at a meeting of the members, the members can elect another person to act as director (refer to subsection 130(3) of the NFP Act). If such a vacancy is not filled by the members at that meeting, a quorum of the directors can fill the vacancy after that meeting by appointing another person to be a director (refer to subsection 132(1) of the NFP Act).

• If there is not a quorum of the directors or if a vacancy is created as a result of an increase in the number or the minimum or maximum number of directors provided for in the articles, or a failure to elect the number or minimum number of directors provided for in the articles, the directors then in office must call a special meeting of members to fill the vacancy (refer to subsections 132(1) and (2) of the NFP Act).

• If a particular class or group of members has an exclusive right to elect one or more directors, and a vacancy occurs among those directors, it can be filled only by the remaining directors elected by that class or group (except where the vacancy resulted from an increase in the number or the minimum or maximum number of directors provided for in the articles for that class or group, or from a failure to elect the number or minimum number of directors provided for in the articles for the class or group). However, if there are no remaining directors elected by that class or group, any member of that class or group can call a meeting of the members of that class or group tofill the vacancy (refer to subsection 132(4) of the NFP Act).

• However, it is possible for the by-laws to prohibit the vacancy being filled by the directors, and to require instead that the vacancy be filled by a vote of the members, or by a vote of the members of any class or group having an exclusive right to elect one or more directors, where the vacancy occurs among the directors elected by that class or group (refer to subsection 132(5) of the NFP Act).

• If all of the directors have resigned or been removed and no replacement directors are elected, then a person who manages or supervises the activities or affairs of the corporation is deemed to be a director for the purposes of the NFP Act. However, this default rule does not apply to certain individuals, such as the corporation's lawyer, accountant, trustee in bankruptcy, or an officer who manages the corporation under the direction or control of a member or other person (refer to subsections 130(4) and (5) of the NFP Act). If a corporation does not have any directors or members, the court can appoint the required minimum of directors provided for in the articles (refer to subsection 132(3) of the NFP Act).

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Note that when there is a change of directors, the corporation must file Form 4006 – Changes Regarding Directors (see Federal Corporation Forms) with Corporations Canada within 15 days of thechange.

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6. Directors' Meetings

Most boards of directors meet on a regular basis to oversee the management andoperations of the corporation. The frequency of regular board meetings varies, depending on the needs of the corporation. Directors might also need to meet occasionally to conduct special business.

Meetings of the board can be held whenever and wherever the board wishes, unless the corporation's by-laws or articles provide otherwise (refer to subsection 136(1) of the NFP Act).

In all cases, a quorum of directors must be present at directors' meetings. The quorum can be set out in the articles or by-laws. If the by-laws do not specify the required quorum, a majority of the number of directors or minimum number of directors required by the articles constitutes a quorum. Despite any vacancy among the directors, a quorum of directors can exercise all of the powers of the directors (refer to subsection 136(2) of the NFP Act). If a corporation has only one director, that director can constitute a meeting (refer to subsection 136(6) of the NFP Act).

If a director is absent from a board meeting, it is not permissible for another person to act in his or her stead at the meeting. In other words, an absentee director cannot appoint a proxy or nominee to attend the board meeting (refer to subsection 126(3) of the NFP Act). This should not be confused with the ability of members to appoint proxy holders to attend members' meetings, if proxy voting is permitted under the by-laws.

Notice of board meetings must be provided to the directors according to the by-laws. However, the notice need not specify the purpose of or the business to be transacted at the meeting unless the meeting:

• involves a matter that requires member approval
• fills the vacancy of a director or public accountant
• appoints additional directors
• issues debt obligations
• approves financial statements
• adopts, amends or repeals by-laws, or
• establishes members' contributions or dues (refer to subsections 136(1), 136(3) and 138(2) of the NFP Act).

Directors can conduct business through signed resolutions instead of holding meetings,provided that the resolutions are signed by all directors. These signed resolutions have the same effect as they would have if they were adopted at a meeting of the board of directors (refer to subsection 140(1) of the NFP Act; there are currently no regulations). This way of conducting the business of the corporation can be very useful for small corporations with only one or a few directors.

It is also possible for one or more directors to participate in a meeting by telephone or electronically, as long as the corporation's by-laws permit it and all participants in the meeting can communicate fully. The method of holding these meetings would also have to comply with any detailed requirements set out in the NFP Regulations (refer to subsection 136(7) of the NFP Act). At this time, no regulations dealing with such requirements have been made.

It is possible for the by-laws to include a provision allowing the directors to make decisions by consensus, even when the NFP Act otherwise requires a vote. Such by-laws must not only provide a clear definition of what is meant by "consensus", but they must also explain how to determine when a consensus cannot be reached. A decision made by consensus is deemed to satisfy any requirement under the NFP Act for the taking of a vote. However, if the board cannot reach a consensus, the by-laws must contain a process for referring such matters to a vote (refer to section 137 of the NFP Act).

7. Appointing Officers

Officers are appointed by the directors to assist the directors and to carry out certain specified functions. Officers can occupy any position that the board wants them to fill (for ex., president, secretary or any other position). It is important to note that the NFP Act defines "officer" to include any individual so appointed by the board, as well as the following persons: the chairperson of the board of directors; the president; a vice-president; the secretary; the treasurer; the comptroller; the general counsel; the general manager; a managing director; or any other individual who performs functions for a corporation similar to those normally performed by an individual occupying any of those offices (refer tosubsection 2(1) of the NFP Act).

Not only can the board appoint any director or member to be an officer, but the board can also appointa person who is not a member or director of the corporation to be an officer. Two or more offices can be held by the same person (refer to section 142 of the NFP Act).

8. Responsibilities and Liabilities of Directors and Officers

The law imposes a wide range of duties and liabilities on directors and officers because the scope of authority of the corporation's management is very broad. In general, these duties and liabilities reflect the position of trust that directors and officers hold in relation to the corporation and its members. While many of the duties and liabilities of directors and officers are prescribed under the NFP Act, others are set out in other federal, provincialand territorial statutes.

For example, under the Income Tax Act, directors are jointly and severally liable to pay employee income tax deductions that the corporation fails to remit for two years following ceasing to be a director. In another example, under the Canadian Environmental Protection Act, 1999 (CEPA), directors are required to take reasonable care to ensure that the corporation complies with the provisions of the CEPA dealing with air and water pollution, as well as with those involving proper storage and disposal of toxic substances.

a. Standard of Care

Directors and officers are required to exercise at least the level of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. They are also required to act honestly, in good faith and in the best interests of the corporation, rather than in their own personal interest.

This is known as an objective standard of care. In other words, when a court must determine whether adirector or officer has breached his or her duty to the corporation, it will test the person's actions against those of a reasonably prudent person.

This is a lower standard than the common law subjective standard of care, which tests a person's actions against what can reasonably be expected from a person of his or her knowledge and experience that applies under the Canada Corporations Act.

In meeting an objective standard of care, directors and officers can rely in good faith on reports prepared by professionals. Directors (but not officers) can also rely on the corporation's financial statements prepared by the corporation's public accountant (refer to subsections 148(1), 149(1) and (2), and 150(1) and (2) of the NFP Act).

b. Duty to Comply

Directors and officers are required to comply with the NFP Act and its regulations, the articles, the by-laws and any unanimous member agreement (refer to subsection 148(2) of the NFP Act). Directors are also subject to additional duties under the NFP Act. For example, directors are required to remain informed about the corporation's activities and to ensure the lawfulness of the articles and the purpose of the corporation (refer to subsection 148(3) of the NFP Act).

c. Liability

As part of the role they play in the corporation,directors bear a degree of financial responsibility for their decisions andactions. For example, a director who votes for or consents to a resolutionauthorizing any of the following is liable to repay the corporation any moneyor other property so paid or distributed:

• a payment or distribution to a member, a director or an officer contrary to the NFP Act, or
• a payment of an indemnity, that is, an obligation to pay for any loss or damage that has been or might be incurred by another individual, contrary to the NFP Act (refer to section 145 of the NFP Act).

In addition, where a corporation encounters financial difficulties, its directors are liable to the employees for up to six months of unpaid wages while they are directors and for the two years after their directorships end (refer to section 146 of the NFP Act).

d. Conflicts of Interest

One of the basic aims of the NFP Act is to prevent conflicts between the interests of the corporation and those of the directors or officers. For example, directors and officers must disclose in writing any personal interest they might have in a material contract with the corporation. If a director or officer fails to make such a disclosure, the corporation or a member can apply to a court to request that the contract be set aside and that the director or the officer repay any profits or gains realized from the contract (refer to section 141 of the NFP Act).

e. Indemnification by the Corporation

A corporation might want to consider putting in place some of the following methods to protect (indemnify) directors and officers of corporations from certain liabilities that could be imposed upon them. For example, a corporation could:

• purchase insurance to protect directors and officers against liabilities incurred in the exercise of their duties (often called D&O Insurance)
• agree to compensate directors and officers for losses they might suffer or costs they might incur while carrying out their duties, except if the director or officer has failed to act honestly and, in the corporation’s, best interests, or
• advance funds to directors and officers to help them pay the costs of defending themselves in legal actions brought against them (refer to section 151 of the NFP Act).

It is not permissible for a contract, the articles, by-laws or a resolution to relieve a director or officer from the duty to act in accordance with the NFP Act or the regulations, or to relieve them from liability for a breach of the NFP Act or the regulations (refer to subsection 148(4) of the NFP Act).

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However, members of a non-soliciting corporation can enter into a unanimous member agreement to transfer some or all of a specific director's responsibilities and powers to one or more members. In such a case, since the director's power or powers have been transferred away, he or she would not be held responsible for not exercising that power (refer to subsection 170(5) of the NFP Act).

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9. Remuneration of Directors, Officers and Members

The directors of a corporation are entitled to fix reasonable levels of remuneration for the directors, officers and employees of a corporation, unless the corporation's articles or by-laws provide for a different arrangement. The NFP Act also specifically permits a director, officer or member to receive reasonable remuneration and expenses for any services to the corporation that are performed in any other capacity (for ex., in the capacity of a consultant to the corporation).

In the case of a corporation that is a registered charity under the Income Tax Act, it is important to be aware that certain provinces prohibit the payment of remuneration to directors, whether as a director or in any other capacity. This is because of an inherent conflict of interest between the interests of the director and the interests of the corporation. If the corporation is a registered charity, it is important to look into the laws of the province or territory in which the charity operates to determine if such a restriction applies.

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III. The Members

A member of a corporation is a person who has been admitted into membership in the corporation and who has a number of rights by virtue of membership in the corporation.

1. Membership

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People who become members of a corporation are collectively referred to as the membership of the corporation. A corporation's articles establish the classes of membership, while the corporation's by-laws establish the conditions for the classes of membership.

a. Conditions of Membership

The articles are required to set out the classes, or regional or other groups, of members that the corporation is authorized to have. In addition, if there are two or more classes of membership, the voting rights attached to each of the classes must also be explained.

The by-laws must set out the conditions required for being a member of the classes described in the articles. Note that this information can instead be in the articles. Conditions of membership express the corporation's requirements for issuing a membership in a particular class (that is, admitting someone as a member of the corporation). Membership conditions can be broad in nature, such as having a class of members open to all persons who have donated to the corporation. Conditions can also be restrictive in nature, such as having a class of members who are limited to the board of directors of the corporation, the board of directors of another corporation, or even one named person or corporation. The conditions of membership should establish whether or not a body corporate can be a member.

b. Classes of Membership and How to Change Classes and Members' Rights

The articles set out the classes or groups of members and their voting rights. A corporation can have only one class of members, in which case, all members are voting members. Alternatively, a corporation can have two or more classes of members, as long as the articles give the right to vote to at least one class.

If the directors wish to change the classes described in the articles, or the voting rights attached to a class of members, an amendment to the articles of the corporation and, in some cases, to the by-laws of the corporation will be required. In either situation, a special resolution of the members is needed. It should be noted that, in certain circumstances involving changes to membership classes and voting privileges, the members of a class or group of members can be entitled to vote separately as a class or group.

c. Becoming and Ceasing to be a Member

Membership in a corporation is issued in accordance with the requirements of the articles and by-laws. The first members of a corporation are usually approved by resolution passed by the directors at their first meeting. Initial members will be admitted at that meeting, and new members can then be admitted afterwards, from time to time. It is also possible for the directors to delegate the authority for issuing memberships to a committee or officer of the corporation.

Unless the by-laws or articles say otherwise, a member will cease to hold a membership in a corporation if:

• the member dies
• the member resigns
• the member is expelled or their membership is terminated in accordancewith the articles or by-laws
• the member's term of membership expires, or
• the corporation is liquidated and dissolved under the CanadaNot-for-profit Corporations Act (NFP Act).

d. Disciplining a Member

The NFP Act specifically allows the articles or by-laws of a corporation to give the power to discipline a member or to terminate their membership to the directors, the members, or any committee of directors or members. However, if the articles or by-laws provide for this power, they must also set out the circumstances and the manner in which the power can be exercised. This means that either the articles or the by-laws must prescribe the process to be followed to terminate a membership or discipline amember, including matters such as:

• notice to the member
• whether the member will be given the right to be heard or provide submissions
• how the decision to terminate or discipline is to be made by the corporation
• whether the decision is final and binding on the member or is subject to appeal.

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2. Rights and Responsibilities of Members

The members of a corporation have certain rights and responsibilities under the NFP Act.

a. Right to Vote, and Class or other Group Votes

The classes of membership described in the articles can be voting or non-voting. If the articles provide for two or more classes of members, the articles must provide the members of at least one class with the right to vote at a meeting of members. In other words, it is not permissible for a corporation to have no voting members.

Unless the articles provide otherwise, each member is entitled to one vote at a meeting of members. The members of a corporation that has only one class of members have the right to vote at any meeting of the members.

If a corporation has more than one class of members, the members of each class will have certain built-in protections. The NFP Act provides that the members of a class are entitled to vote separately as a class on a proposal to make certain amendments to the articles and by-laws of a corporation (refer to subsection 199(1) of the NFP Act). These amendments are those that:

a)    exchange, reclassify or cancel all or part of the memberships of a particular class

b)    add, change or remove rights or conditions attaching to memberships of a particular class (including reductionor removal of a liquidation preference) or add, remove or change prejudicially voting or transfer rights of a particular class

c)    increase the rights of any other class having equal or superior rights to those of a particular class

d)    increase the rights of a class of members having rights inferior to those of a particular class to make the inferior class equal to or superior to the particular class

e)    create a new class having rights equal to or superior to those of a particular class

f)     exchange or create a right of exchange of all or part of the memberships of another class into memberships of a particular class.

Sections (a) and (e) are optional and the articles can provide that these rights do not apply to certain membership classes of acorporation. If this option is chosen, it means that, for example, undersection (a) other classes of members could cancel a particular class of members without the approval of the class of members being cancelled. Under section(e), it means that new classes of members with equal or superior rights to anaffected class can be added to the articles without the approval of the affected class.

All of the other changes referred to above in sections (b), (c), (d) and (f) provide specific class protections (which cannot be removed in the articles) that allow each class to vote separately as a class concerning the matters referred to in those sections. This right to have a separate class vote applies even where a particular class does not otherwise carry a right to vote in the articles.

Separate class votes are also provided in the NFP Act with respect to the approval of fundamental changes, such as amalgamation or continuance.

b. Notice of Meetings of Members

Notices of meetings of members must be provided inaccordance with the by-laws to the following persons:

• each member entitled to vote
• each director
• the public accountant of the corporation.

Members who are entitled to receive notice are those who appear in the members register on a certain date called the "record date." The directors can fix, by resolution, a record date that is not more than 60 days and not less than 21 days before the meeting. If the directors do not take this action, then the NFP Act provides that the record date is the close of business on the day immediately preceding the day on which notice is given or, if no notice is given, the day on which the meeting is (refer to section 161 of the NFP Act).

The provisions of the by-laws that deal with the giving of notice must comply with the Canada Not-for-Profit Corporation Regulations (NFP Regulations). The NFP Regulations provide minimum and maximum notice periods for meetings and require that the by-laws specify one or more of the following means of giving notice:

• by mail, courier or personal delivery to each member entitled to vote at the meeting during a period of 21 to 60 days before the meeting

• by telephonic, electronic or other communication facility to each member entitled to vote at the meeting during a period of 21 to 35 days before the meeting

• by affixing the notice, no later than 30 days before the meeting, to a notice board where information about the corporation's activities is regularly posted in a location that is frequented by the members

• if the corporation has more than 250 members, by publication using one of the following two means: (a) at least once in each of the three weeks immediately before the meeting is to be held in one or more newspapers circulated in the municipalities in which the majority of the members reside as shown by their addresses in the register of members, or (b) at least once in a publication of the corporation that is sent to all its members, during the period of 21 to 60 days before the day on which the meeting is to be held.

If the provisions of the by-laws do not comply with the above requirements, or if no method is provided for in the by-laws, the notice must be mailed or personally delivered to the members 21 to 60 days before the day on which the meeting is to be (refer to subsections 162(2) and 272(1) of the NFP Act).

c. Member Proposals

Generally, the directors are responsible for setting the agenda of members meetings. However, members have a right to add items to the agenda by submitting a notice – known as a "proposal" – to the corporation 90 to 150 days before the anniversary of the previous annual meeting of members. In this regard, any member entitled to vote at an annual meeting of members can submit a proposal to the corporation about any matter that the member wishes to raise at the meeting of members (refer to subsection 163(1) of the NFP Act). This includes the right of a voting member to submit a proposal to make, amend or repeal by-laws.

If a proposal includes nominations for the election of directors, the NFP Act states that the proposal must be signed by at least 5% of the members entitled to vote at the annual meeting. However, the NFP Act also permits the corporation to use its by-laws to lower this percentage (for ex., at least 2%), but not to raise it.

With few exceptions, the corporation is required to include the proposal in the notice of meeting that is sent to the members (refer to subsection 163(6) of the NFP Act). If requested by the member who submits a proposal, the corporation is required to include in the notice of meeting a statement by the member in support of the proposal and the name and address of the member. The NFP Regulations provide that the statement and proposal shall not exceed 500 words in total.

The member who submitted the proposal is required to pay any cost of including the proposal and statement in the notice of meeting unless it is otherwise provided in the by-laws or in an ordinary resolution of the members present at the meeting.

It should be noted that directors are not obliged to include the proposal if:

(a) the submission of the proposal does not meet the requirements above or

(b) the proposal is improper, in that:

• it is intended to enforce a personal claim or redress a personal grievance against the corporation, or its directors, officers, members or debt obligation holders
• it does not relate in a significant way to the activities or affairs of the corporation
• the member failed, not more than two years before the receipt of the proposal, to raise the matter covered by the proposal at a meeting of members
• it is substantially the same as a proposal previously submitted to members less than five years ago and it did not receive the minimum required support (refer to the paragraph below) at that meeting, or
• the rights to submit proposals are being abused to secure publicity.

Section 68 of the NFP Regulations provides that the prescribed minimum amount of support is:

• 3% of the total number of memberships voted, if the proposal was raised at one annual meeting of members

• 6% of the total number of memberships voted at its last submission to members, if the proposal was raised at two annual meetings of members

• 10% of the total number of memberships voted at its last submission to members, if the proposal was raised at three or more annual meetings of members.

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d. Requisition of Meeting

The directors are responsible for calling annual and special meetings of members, but members who hold at least 5% of the voting rights can require the directors to call a meeting of members (subsection 167(1) of the NFP Act allows the by-laws to stipulate a lower percentage of voting members).

This is called a "requisition." The requisition (which can consist of several documents, each signed by one or more members) must state the business to be transacted at the meeting and must be sent to each director and to the registered office of the corporation.

If the directors fail to call a meeting within 21 days of receiving the requisition, any member who signed the requisition can call a meeting and the corporation must reimburse the member for the cost of doing so.

It should be noted that directors are not obliged to call a meeting if:

(a) the directors have already established a record date for determining members entitled to receive notice of a meeting of members (that is, the directors have already started the process to call a members meeting)

(b) the directors have already called a meeting, or

(c) the business stated in the requisition is improper in that:

• it is intended to enforce a personal claim or redress a personal grievance against the corporation, or its directors, officers, members or debt obligation holders
• it does not relate in a significant way to the activities or affairs of the corporation
• the member failed, not more than two years before the receipt of the proposal, to raise the matter covered by the proposal at a meeting of members
• it is substantially the same as a proposal previously submitted to members less than five years ago and it did not receive the minimum required support (refer to the paragraph below) at that meeting, or
• the rights to submit proposals are being abused to secure publicity.

Section 68 of the NFP Regulations provides that the prescribed minimum amount of support is:

• 3% of the total number of memberships voted, if the proposal was raised at one annual meeting of members

• 6% of the total number of memberships voted at its last submission to members, if the proposal was raised at two annual meetings of members

• 10% of the total number of memberships voted at its last submission to members, if the proposal was raised at three or more annual meetings of members.

e. Election and Dismissal of Directors

The first directors listed in the notice of directors filed with the articles of incorporation hold office until the first meeting of members, which must be held within 18 months of incorporation.

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At the first meeting of members, and at each subsequent annual meeting where an election of directors is required under the by-laws, the members must elect directors. Election of directors is by ordinary resolution, unless the articles require otherwise (refer to subsection 7(4) of the NFP Act).

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Members can also remove directors and fill vacancies on the board.

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f. Approval or Confirmation of By-laws and By-law Amendments

Generally, the NFP Act requires that by-law amendments be made by the directors, subject to later confirmation by ordinary resolution of the members. By-laws and their amendments are generally effective immediately upon board approval but cease to be effective if not confirmed by the members at their next meeting (refer to section 152 of the NFP Act).

Certain "special by-laws" require a special resolution of members. These by-law amendments are effective immediately upon passage of the special resolution of members. If the subject matter of the by-law amendments addresses the matters referred to in Right to vote, and classor other group votes, approval of these special by-law amendments will require a separate class vote (refer to subsection 199(1) of the NFP Act). Where a separate class vote is required, members of a class who do not otherwise have the right to vote are also permitted to vote separately as a class.

g. Access to Corporate Records

A corporation is obliged to keep certain corporate records at its registered office or at some other location in Canada established by the board of directors (refer to subsection 21(1) of the NFP Act).

A member, a member's personal representative, and any creditor of a corporation can examine and take extracts from these records, with the exception of the register of members. Any such person who wishes to examine the debt obligation register of a corporation must first make a request to the corporation, its agent or other designated representative accompanied by a statutory declaration (see the paragraph below). If the member wishes to examine a corporation's register of members or obtain a list of members, additional requirements must be met.

Subsection 22(5) of the NFP Act requires the statutory declaration to state the name and address of the applicant and, if the applicant is a corporation, its address for service. It must also state that the list of debt obligation holders or the information contained in the debt obligation register will not be used except as required by subsection (7) inconnection with: (a) an effort to influence the voting of debt obligation holders of the corporation; (b) an offer to acquire debt obligations of the corporation; or (c) any other matter relating to the debt obligations or affairs of the corporation.

A reasonable fee can be charged by the corporation for extracts except that a member is entitled, on request and without charge, to one copy of the articles and by-laws, any amendments to them, and any unanimous member agreement. Any examination of corporate records must take place during the corporation's regular business hours.

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h. Receive Corporation's Financial Statements and Public Accountant's Report

Directors are required to provide the members with the corporation's financial statements, including the public accountant's report, before every annual meeting. The comparative financial statements must be prepared in accordance with the generally accepted accounting principles set out in the CPA Canada Handbook – Accounting or the CPA Canada Public Sector Accounting Handbook. Furthermore, the financial statements must consist of the following statements:

• a statement of financial position or a balance sheet
• a statement of comprehensive income or a statement of retained earnings
• a statement of changes in equity or an income statement
• a statement of cash flows or a statement of changes in financial position (refer to section 172 of the NFP Act, and sections 75 and 79 of the NFP Regulations).

It is possible for a corporation to apply to Corporations Canada for relief from these requirements in certain circumstances.

A corporation is required to send a copy or a summary of the financial statements or a copy of a publication of the corporation containing the financial information or a summary of such information to each member not less than 21 days but not more than 60 days before the annual meeting of members or before the day on which a resolution in writing is signed by the members. If a summary of the information is provided to the members, the corporation must tell the members how to access a full copy of the documents free of charge (refer to subsection 175(1) of the NFP Act).

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If the by-laws specifically permit, instead of sending the financial statements to each member, the corporation can provide notice to the members that the financial statements are available at the registered office of the corporation and that any member can obtain a free copy in person or by pre-paid mail (refer to subsection 175(2) of the NFP Act). If the members consent in writing, the corporation can post the information on its website and notify the members in writing of the availability of the documents on its website (refer to subsections 266(1) and (2) of the NFP Act, and section 10 ofthe NFP Regulations).

i. Approve Major or Fundamental Changes

In most cases, fundamental changes (for ex., continuance, amalgamation, amendments to articles) require approval by special resolution of the members and sometimes by separate class votes. Information on amendments to articles is provided in Right to Vote, and Class or Other Group Votes.

j. Immunity of Members from Liability

Members of a corporation are not liable for anyliability (for ex., debts) of the corporation caused by any act or default of the corporation (refer to subsection 36(1) of the NFP Act). However, if a member is also involved in the corporation in a different capacity, for example as a director, officer or employee, the member would not be immune from aliability that might arise from those capacities.

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3. Members Meetings

Annual meetings include the following items of business: considerations of the financial statements, receipt of report from the public accountant, the appointment of a public accountant and election of directors. Special meetings include other items of business than those found in annual members meetings.

a. When to Hold Meetings and Resolutions in Writing

A corporation is required to hold a members’ meeting within 18 months of the date on which the corporation comes into existence (refer to section 160 of the NFP Act). After that, annual meetings must be held no later than 15 months from the last preceding annual meeting and in any event not later than 6 months after its preceding financial year end.

Alternatively, the members can sign a resolution in writing instead of holding a meeting. A properly signed resolution in writing is just as valid as if it had been passed at a meeting of members (refer to section 166 of the NFP Act). A resolution in writing must be signed by all members who would have been entitled to vote at the annual meeting and must be retained in the corporation's records.

It should be noted that the members cannot sign a resolution in writing instead of holding a meeting if a meeting has been called to replace:

• a director and the director has provided a written statement (refer to subsection 133(1) of the NFP Act) explaining his/her resignation or opposition to being removed, or

• the public accountant and the public accountant has provided a written statement (refer to subsection 187(4) of the NFP Act) explaining his/her resignation or opposition to being removed.

A resolution in writing is particularly useful for small membership corporations. The date of the meeting or the resolution in writing (if a meeting is not held) must be indicated on the corporation's annual return.

b. Notice Requirements

A corporation is required to provide notice to the members of the time, date and place of an annual meeting in accordance with its by-laws (refer to subsection 162(1) of the NFP Act). The provisions of theby-laws relating to notice must comply with the NFP Act and the NFP Regulations (that is, they must set out one or more of the notice options that are in the NFP Regulations). The options for giving notice are: 

• by mail, courier or personal delivery to each member entitled to vote at the meeting during a period of 21 to 60 days before the meeting

• by telephonic, electronic or other communication facility to each member entitled to vote at the meeting during a period of 21 to 35 days before the meeting

• by affixing the notice, no later than 30 days before the meeting, to a notice board where information about the corporation's activities is regularly posted in a location that is frequented by the members

• if the corporation has more than 250 members, by publication using one of the following two means: (a) at least once in each of the three weeks immediately before the meeting is to be held in one or more newspapers circulated in the municipalities in which the majority of the members reside as shown by their addresses in the register of members, or (b) at least once in a publication of the corporation that is sent to all its members, during the period of 21 to 60 days before the day on which the meeting is to be held.

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If the provisions of the by-laws do not comply with the above requirements, or if no method is provided for in the by-laws, the notice must be mailed or personally delivered to the members 21 to 60 days before the day on which the meeting is to be held (refer to subsection 162(2) and 272(1) of the NFP Act).

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If the by-laws provide for an electronic means of giving notice, they must also provide for a non-electronic alternative means of giving notice to ensure that everyone who is entitled to vote can receive notice of the meeting.

c. Agenda for an Annual Meeting

The agenda for an annual meeting, which should be included with the notice of meeting sent to members, should include thefollowing items:

• consideration of the financial statements
• receipt of report from the public accountant
• appointment of a public accountant (or, in the case of a designated corporation, a resolution of the members to dispense with the appointment of a public accountant)
• election of directors.

The directors can also include other items of business on the agenda. Examples of other items of business include such matters as general by-law amendments that require confirmation by the members; articles of amendment; or other similar changes.

d. Location of Annual Meeting

The annual meeting of members must be held in Canada at a place specified in the by-laws or, if the by-laws do not contain such a provision, at a place that the directors determine. An annual meeting can be held outside of Canada only if permitted by the corporation's articles or if all of the members entitled to vote at the meeting agree (refer to subsections 159(1), (2) and (3) of the NFP Act).

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e. Electronic Meetings and Electronic Voting

Unless otherwise provided by the by-laws, any person entitled to attend a meeting of members can attend the meeting by using a telephonic, electronic or other communication facility. The communications system used must permit all participants to communicate adequately with each other during the meeting. In such a case, the corporation must make these facilities available (refer to subsections 159(4) and (5) of the NFP Act).

If the directors or members intend to call a meeting under the NFP Act, they can decide that the meeting should be held entirely by using a telephonic, electronic or other communication facility, as long as the by-laws specifically allow the use of such communications systems. The communications system used must permit all participants to communicate adequately with each other during the meeting.

f. Absentee Voting

The by-laws can allow members to vote at meetings of members, even when they are not physically present at the meeting. This is known as "absentee voting" (refer to subsection 171(1) of the NFP Act). If a corporation wishes to permit its members to vote by absentee voting, its by-laws must include an option or options allowing members to vote selected from those permitted under the NFP Act. The types of absentee voting permitted under the NFP Act are:

• voting by proxy
• voting by mailed-in ballots
• voting by means of a telephonic, electronic or other communicationfacility.

 If the by-laws include one of the above methods of absentee voting, they must also set out the procedures for collecting, counting and reporting the results of any vote.

g. Quorum

A quorum of members must be present in order to make decisions at annual or special meetings of members (refer to subsections 159(4) and (5) of the NFP Act). Without a quorum, any business carried out at ameeting is not binding on the corporation. The by-laws of a corporation usually contain the quorum requirement which must be a fixed number of members, a percentage of members, or a percentage of members that is determinable by a formula. If the by-laws are silent on the subject, then a quorum is a majority of the members entitled to vote at the meeting (refer to section 164 of the NFP Act and section 70 of the NFP Regulations).

h. Minutes

The corporation must keep a written record of each meeting of members and any committee of members. This written record is referred to as the "minutes" of the meeting. The minutes of meetings should be kept in the corporation's minute book (that is, a book or other device where the minutes and resolutions of the corporation are recorded). Minutes of meetings usually include the following information (refer to section 21 of the NFP Act):

• where and when the meeting was held
• who attended
• the results of any voting in the form of resolutions.

In addition, the corporation must keep any resolutions of members and of any committee of members in the corporation's minute book.

i. Special Meetings

Special meetings of members can also be called by the directors to make decisions concerning special business. Special business is generally considered to be any business other than the annual business to be transacted at an annual meeting of members. For example, special business can include the approval of a fundamental change such as amalgamation. If an annual meeting includes special business, it is called an "annual and special meeting of members".

Whenever special business is included on the agenda of a meeting, the notice of the meeting must state the nature of that business in sufficient detail to permit a member to form a reasoned judgment on the business, and also state the text of any special resolution to be submitted to the meeting.

4. Members Resolutions

Members make decisions by voting on resolutions, which can either be passed at members' meetings or adopted by signing written resolutions instead of holding meetings. Decisions can be made by ordinary, special or unanimous resolutions or by consensus decision-making. The articles can also require a greater number of members' votes to make a decision than are required by the NFP Act (refer to subsection 7(4) of the NFP Act).

Ordinary resolutions require a simple majority of votes cast by the member sentitled to vote and who are in attendance at a meeting to be adopted. For example, the election of directors is a decision that is usually made by ordinary resolution.

Special resolutions require the approval of two-thirds (2/3) of the votes cast by the members entitled to vote and who are in attendance at a meeting to be adopted. For example, fundamental changes such as a malgamation and continuance require special resolutions.

Unanimous resolutions require the approval of all the votes cast by members entitled to vote to be adopted. For example, the members of a designated corporation can pass a resolution to dispense with the appointment of a public accountant as long as the resolution is consented to by all of the members thatare entitled to vote at the annual meeting.

If there are two or more classes or groups of members, the members of each class can be entitled to vote separately as a class to pass ordinary or special resolutions to approve certain matters that specifically affect that class or group.

It is possible for the by-laws to include a provision allowing the members to make decisions by consensus, even in cases where the NFP Act requires a vote. This does not apply, however, to a vote by members of a designated corporation not to appointa public accountant, or to situations where a special resolution is required. It is important for such by-laws to clearly define what is meant by "consensus", and how to determine when a consensus cannot be reached. A decision made by consensus is deemed to satisfy any requirement under the NFP Act for the taking of a vote. However, if the members cannot reach a consensus, the by-laws must establish a process for referring such matters to a vote (refer to section 137 of the NFP Act).

In most cases, a resolution in writing signed by the members entitled to vote on that resolution at ameeting of members is as valid as if it had been passed at a meeting of members. A resolution in writing requires the signatures of all of the voting members of the corporation (refer to section 166 of the NFP Act).

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5. Member Agreements

Voting members of a corporation might wish to enter into an agreement on how they will vote on certain issues. For example, if there are three individuals who are the voting members, they could agree to vote so that all three are elected as directors.

Voting members of acorporation can also enter into a unanimous member agreement that permits decision-making power to be transferred from the directors to the members, as long as the corporation is not a soliciting corporation under the NFP Act (refer to section 170 of the NFP Act). A unanimous member agreement is most useful when a corporation has few members, since it can serve to dispense with the formal division of powers between directors and members by moving all decision-making to the membership level.

If a non-soliciting corporation has only one member, a written declaration of the sole member transferring the powers of the directors to that member is valid under the NFP Act.

6. Member Remedies

A remedy is a way for a member to ask a court to enforce a right or to address a problem with a corporation. Listed below are the remedies available to members under the NFP Act:

a. Oppression Remedy – A complainant (which includes a member or former member) can apply for an oppression remedy on the basis that any act or omission of the corporation, or the exercise of the powers of the directors or officers of the corporation, is oppressive or unfairly prejudicial or unfairly disregards the interests of the member (refer to section 253 of the NFP Act). The court can make any order it thinks fit, including an order:

• appointing directors in place of or in addition to the directors then in office
• directing a corporation or any other person to pay a member all or part of the amount that the member paid for their membership
• compensating an aggrieved person.

Note: The oppression remedy is not available to religious corporations that are successful in advancing a "faith-based defense" (that is, if the court is satisfied that the corporation is a religious corporation, that the conduct in question is based on a tenet of faith held by the members of the corporation and that it was reasonable to base the conduct on a tenet of faith, having regard to the activities of the corporation (refer to subsection 253(2) of the NFP Act).

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b. Derivative Action – A member can apply to the court for an order allowing the member to bring an action in the name of and on behalf of a corporation or to intervene in an action to which the corporation is party (refer to section 251 of the NFP Act). This remedy is not available to religious corporations that are successful in advancing a "faith-based defense" (refer to subsection 251(3) of the NFP Act).

c. Compliance or Restraining Order – A member can apply to a court for a compliance or restraining order (refer to section 259 ofthe NFP Act):

• directing the corporation or any director, officer, employee, agent or mandatary (see the note below), public accountant, trustee, receiver, receiver-manager, sequestrator (see the note below) or liquidator of a corporation to comply with the NFP Act, the NFP Regulations, the corporation's articles, by-laws or a unanimous member agreement, or
• restraining any person from acting in breach of them.

Note: In Quebec, a mandatary is an individual or a body corporate that has the power to represent another person according to a mandate contract. In provinces other than Quebec, the reference would be to an agent. In addition, the term sequestrator, in Quebec, is used to reflect civil law concepts. In provinces other than Quebec, the term receiver is used to reflect common law concepts.

Examples of situations in which such an order might be sought include the corporation failing to call anannual meeting of members as required under the NFP Act, or a soliciting corporation failing to have more than three directors on its board.

d. Court Ordered Liquidation and Dissolution on Application of a Member – A member can apply to the court for an order liquidating and dissolving a corporation or any of its affiliates if the court is satisfied that certain specified grounds exist (refer to section 224 of the NFP Act). This could include situations where an act or omission of the corporation is oppressive or unfairly prejudicial to, or unfairly disregards the interests of any member, or where the court is satisfied that it is just and equitable that the corporation should be liquidated and dissolved. A faith-based defense is also available to religious corporations.

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7. Dispute Resolution

The NFP Act is silent on how disputes between members, or between a group of members and the directors, can be resolved (refer to section 158 and part 16 of the NFP Act). A corporation might wish to address this issue by providing a mechanism in its by-laws for resolving disputes between members. Possible dispute resolution mechanisms include:

• information exchange
• non-binding mediation
• and binding arbitration.

The corporation will need to decide what mechanism is best suited to its particular circumstances, taking into consideration such matters as the purposes of the corporation, its activities and the size and type of membership.