On 19 September 2019, Quebec’s finance minister introduced bill n° 36. This bill proposes changes to decision making processes of not-for-profits incorporated under the Quebec Companies Act. In fact, these would be the first substantive changes to the rules for not-for-profits in the Quebec Companies Act in eight years. The bill has not yet passed, however, so the old Companies Act remains in force. However, as many of you are affected by this question (especially for those who need to take decisions over email, videoconference, etc), we thought we would give you a heads up about the proposed changes!
Proposed Changes to Facilitate Remote Decision Making
According to the bill, unless the organization provides otherwise in its governing documents:
- the consent of all directors would no longer be required in order for directors to take part in board meetings from separate locations, using means that enable all participants to communicate directly with one another;
- directors would be able to vote at these meetings using any means of communication that enables votes to be cast in a way that allows them to be verified afterwards and protects the secrecy of the vote when a ballot has been requested; and
- the two changes to board meetings above would also be accompanied by the analogous changes for member participation and voting at general meetings.
The bill would also:
- make any resolution signed by all of the organization’s members as valid as if it had been adopted at a general meeting; and
- confirm that members may waive notice of a general meeting in the same way that directors may waive notice of a board meeting.
What Do These Decision Making Changes Mean?
These changes to Quebec’s ancient Companies Act, which was first passed in 1920, would bring it generally in line with contemporary laws such as the 2009 Canada Not-for-Profit Corporations Act and Quebec’s 2011 Business Corporations Act in their approach to these issues.
In at least one respect, the changes would in fact go farther than the rules for federal not-for-profits, which still require the unanimous consent of their directors to allow remote participation in board meetings.
The changes would particularly benefit not-for-profits whose members find it inconvenient or impossible to meet in person, for example, if they are in different cities. One situation where this might be particularly relevant is in the process of “organizing” a newly incorporated not-for-profit, which involves passing a number of resolutions at the board and general meeting level. The changes in the bill would allow the organization’s founding members (legally referred to as “requérants”, or applicants) to hold the required meetings remotely, or perhaps even more conveniently, to simply distribute the required resolutions by email to have each founding member or provisional director sign the set of resolutions at their leisure.
If adopted, these amendments would constitute the first substantive amendments to the Companies Act since 2011, when a major restructuring effectively removed for-profit corporations from its scope, moving them instead into a new Business Corporations Act. Since that time, the remaining relevance of the Companies Act has primarily been to not-for-profit corporations.
Text of the Proposed Changes about Decision Making
The bill’s proposed additions are shown below as bolded, and it’s deletions as
89.1. A director may waive in writing a notice of a meeting of the board of directors.
His sole attendance at a meeting is a waiver except where he attends a meeting for the express purpose of objecting to the holding of the meeting on the ground that the manner of calling it was irregular.
89.2. Unless otherwise indicated in the constituting act or in the by-laws of the company, the directors may,
if all the directors consent,> participate in a meeting of the board of directors by such means, particularly by telephone, as permit all persons participating in the meeting to communicate directly with one another hear each other. They are then deemed to be present at the meeting.
A vote may then be held entirely by any means of communication enabling votes to be cast in a way that allows them to be verified afterwards and protects the secrecy of the vote when a ballot has been requested.
89.3. A resolution in writing, signed by all the directors entitled to vote on that resolution at a meeting of the board of directors, is as valid as if it had been passed at a meeting.
A copy of every resolution shall be kept with the minutes of the proceedings of the board of directors.
89.4. Sections 89.1 to 89.3 apply, with the necessary modifications, to the meetings of the executive committee and general meetings.
You can follow the progress of bill n° 36 on the website of the National Assembly. Please remember that, as of the time this blog entry was posted, the amendments described in this post have neither been finalized, approved, nor entered into effect. The old version of the Companies Act remains in force.
Analogous Provisions in the Canada Not-for-profit Corporations Act
If you are outside of Quebec or incorporated under the Canada Not-for-profit Corporations Act instead, analogous provisions in the Canada Not-for-profit Corporations Act to those discussed above are its sections 136(7), 159(4)–(5), 165(3)–(4) and 166(1), as well as section 71 of its regulations.
Legal Information for Non-Profits in Quebec
This blog post was written by Mark Phillips, a lawyer who advises non-profits and charities. He can be reached at email@example.com. Nothing in this blog post is legal advice: please consult a lawyer to receive advice regarding your organization’s situation.