Many Ontario non-profit corporations are struggling with how to deal with the Ontario Not-for-Profit Corporations Act, 2010 (“ONCA”). Over 50,000 ONCA corporations will need to make changes to their governing documents to conform with the new ONCA by October 18, 2024. We are receiving many requests for estimates as to costs for governance changes relating to ONCA and hopefully this note will be helpful to understand the complexity of what seems like a simple question.
There are many similarities and also many differences between these Ontario non-profits and their staff or volunteers. With some transactions, we can easily provide a very clear estimate of the cost such as setting up a new non-profit or establishing a private foundation. However, it is difficult to provide an Ontario non-profit corporation under ONCA with a cost estimate with respect to making corporate changes as a result of ONCA without knowing quite a large number of details about the organization, reviewing the current governing documents and discussing choices that a non-profit corporation would like to make. This can take hours, and we don’t have time with 50,000 groups needing to make changes over the next year. We also don’t want to provide inaccurate quotes.
Some corporate changes require quite a lot of work, but others, especially involving registered charities, require a lot more. Some corporate changes are more of a technical conversion where no major governance changes are made, for example, to branding or membership or board composition etc. Others are significant governance changes that require more effort.
Many Ontario non-profits are not only non-compliant with ONCA, but they were never compliant even with the old Ontario Corporations Act. Some have put off changes for decades and now need to catch up as their activities have changed considerably from when they last made changes to their governing documents.
It is not possible to provide a specific estimate to a group as to the legal costs. We generally work on the basis of hourly rates and the number of hours involved. We provide our firm billing policy which sets out our hourly rates. Some of the work during the process can be done by associate lawyers and law clerks at lower hourly rates to keep costs down.
We generally suggest having a budget of $5,000-$15,000 to start with – it could be less or more depending on many variables and decisions made and we discuss such variables extensively below for those who want such details as to how some groups can be much more work or less than others.
In terms of the cost, it depends on the number of hours involved and the particular people that are working on the file. However, generally, most of the work is completed by law clerks and associate lawyers at lower hourly rates. We work closely with clients and one of the biggest determinants of our time and fees is the assistance that we receive from clients. Also, it is best if clients provide complete information and make decisive decisions, clients review and return documents quickly and that the contact people remain the same throughout the process.
For some groups contemplating the ONCA changes and who are not ready to make a commitment for such a budget, it is often best to start off with a paid consultation. We are then retained, and we just charge normal hourly rates and at that consultation we can discuss many different issues relating to the Ontario non-profit corporation, whether it should stay in Ontario or move to the Federal Canada Not-for-profit Corporations Act (“CNCA”), and numerous issues of concern to the non-profit. A consultation is typically about one hour in length and we just charge for the time. We can cap the consultation amount at $500 if necessary but that limits the amount that we can do. In some cases, after the consultation, we will be able to give a better idea of the costs of different options. We suggest that if we have a consultation that there are a number of people, if possible, from the client in attendance so that everyone starts from the same place and understands the issues at hand. It also allows more people to ask questions and understand the answers.
We generally try to bill on a monthly or even more frequent basis, so clients have an idea of the amount of work that is being done and there are no unwelcome surprises.
As an aside, the internal staff time spent dealing with governance changes can often be far greater than the external legal costs. Trying to minimize staff time and distraction can be important for some organizations.
Having legal counsel who is very knowledgeable about non-profit, charity and registered charity issues can ultimately save the organization money, streamline/speed up the process and reduce risks and anxiety. The ONCA transition is not an annual exercise but one that may not need to be done again for 50 or so years. The old Corporations Act (Ontario) was originally passed in 1907 and so it makes sense to have legal counsel help with this once in a few decades transaction.
If you wish to retain our law firm, please visit our contact us page here.
Some of the factors or issues that may be relevant to the ultimate legal costs include:
- What transaction is contemplated? – is it a continuance to the Canada Not-for-profit Corporations Act (“CNCA”) or staying within the Ontario Not-for-Profit Corporations Act, 2010 (“ONCA”)? Typically staying in ONCA is more work than moving to the Federal CNCA.
- How much discussion takes place before decisions are made? Having decisive decisions made can be helpful in moving the process along. While changes may be necessary to decisions made, if there are frequent changes, it typically will increase the amount of time needed and the costs. Some groups are hierarchal – there is a leader, and they make quick decisions. Others are run differently and may have a more consultative approach which can mean more meetings and taking longer to make decisions and involve more discussion with our firm.
- Is the organization up to date in its corporate filings? If not, it is necessary to prepare and file a Notice of Change to update the registered office address, director and officers, primary activity code (NAICS), and the official email address.
- How quickly and completely is requested information provided by the client to us? This includes documents such as letters patent and/or supplementary letters patent, by-laws but also information such as a list of directors, etc.
- Does the corporation have a company key from the Ontario government?
- Unbeknownst to the organization, was it dissolved in the past and needs to be revived?
- What is the time horizon for completing the corporate changes (generally, neither having to do the transaction very quickly or having it take two years is ideal.)
- How much internal capacity does the client have to assist with the transaction? Different groups have different capacity levels to undertake certain work that the client would typically be involved with. Some have staff who have time and capacity. Others have almost no capacity and we have to stick handle everything, which results in us having to spend far more time on the transaction.
- How much assistance do we need to provide with the implementation such as AGMs or special meetings? Or are they just handled by the clients?
- Who will handle getting the documents signed? If we are involved, can DocuSign be used or do people insist on signing paper documents?
- Are we dealing with the same people from the beginning to the end of the transaction, which can save time and discussion? If there are numerous changes in those involved, it can add time.
- Are there concerns from funders and other stakeholders that need to be addressed? There are provincial and federal regulators that, depending on the circumstances, can be more engaged, require more information, etc. Some groups have lots of important stakeholders who can make the process more time-consuming and cumbersome.
- Is the organization part of a group or Federation, and do changes need to be approved by another body or are there significant rules that relate to the operation of the organization?
- How many drafts are needed before the client is satisfied with the documents?
- What work will need to be done to justify the objects to CRA if the entity is a registered charity? Has CRA recently approved your objects (after 2013) and your work has not changed? Or have you changed your objects without CRA approval? Has your work expanded, and your objects are no longer broad enough for the charitable work that you do?
- Some charities do more straightforward charitable work (e.g., handing out blankets to homeless people) that are easy to show CRA how they are charitable and they are clearly within the definition of charity. Other groups are involved with a multitude of complicated activities such as social enterprises, political activities, or foreign activities. Understanding the work of the organization and dealing with regulators can be different depending on the types of activities and risk profile of the organization. Some organizations may have a history with a regulator that the current group is not even aware of.
- Even if your organization is not a registered charity with CRA, will there be Ontario Public Guardian and Trustee (OPGT) concerns and requirements as the OPGT may consider your group to be a “charity” under Ontario law? If so these will need to be deal with. We generally use the “after-acquired clause” for Ontario charities or registered charities but do we need to seek pre-approval from OPGT to dispense with that clause?
- Are you changing your name or rebranding your organization in other ways, as that can take more time compared to keeping the same brand and name, etc.? By the way, for some organizations who have not changed their branding in decades, it might make sense to make such changes.
- Do you need to keep your current by-law and make modifications to it which is typically a lot more work than using a new “standard” by-law modelled on the ONCA by-law and adjusted to certain choices that your organization has made? Do you need special features in your by-laws that take more time to discuss, draft and approve such as ex-officio, term limits, etc.?
- Are the memberships broad or narrow that need to approve the transaction? Are there multiple classes of members? Will there be changes to the classes and number of members? If you have a small membership, it tends to be less time-consuming to deal with the transaction and more time-consuming if it is a large membership. However, if you are trying to reduce or change the membership, it can be much more work than dealing with a large membership in which there are no changes to the membership composition. Also, if you don’t know who your membership is that can create other issues.
- We often provide ideas to clients about minimizing legal costs, and the extent to which clients utilize or adopt those ideas can help keep costs lower. It is ultimately the client’s decision as to how to proceed.
- Are there constant changes by the client as to the client’s instructions relating to the transaction?
- Do you require assistance on other unrelated non-profit or charity legal issues while the transaction is being worked on? Often clients will be reviewing documents more carefully than they had in the past and may notice issues or concerns. While we are reviewing your documents, we may have suggestions, or you may have questions that can be dealt with quickly, and it makes sense to discuss them, rather than just focusing exclusively on the transaction. While it is cost-effective to sometimes deal with these side issues as part of the work, it will increase the amount of time required in total. Some of these “side issues” might actually be more important than the ONCA transition and may create significant risks for the Ontario non-profit corporation.
- Do you require ongoing assistance after the transaction is completed?
- Are your documents legible? Are they signed? Is it clear which documents are the correct documents?
- Clients typically take notes in meetings, but some clients would like a summary of the meeting in writing – this will take more time.
- There are many questions or issues that can be dispensed with in a quick conversation, but some clients will require a detailed memo outlining the issues, and that takes considerably more time.
- When we send emails to clients, do they carefully read the email, understand the content and respond to our questions? This can significantly reduce the amount of discussion, confusion and multiple requests for information.
By Mark Blumberg, Blumbergs Professional Corporation
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