The Canadian Charity Law Podcast

In this episode we explore the purposes of the ONCA (the new legislation for nonprofits and charities incorporated in Ontario)  and what’s new, including its implications for existing corporations and the transition process.

We also discuss practical tips for directors and members on navigating the new legislation, including how to prepare for the ONCA transition and file necessary documents with the Ministry.

Finally, we highlight the key differences between Public Benefit Corporations (PBCs) and non-PBCs and the financial review requirements for each type of corporation.

This episode is sponsored by B.I.G. Charity Law Group Professional Corporation, a Charity Law Firm serving charity and not-for-profit clients across Canada (https://www.charitylawgroup.ca/ 416-488-5888) and B.I.G. Charity Accounts Group, a firm serving Canadian charities with all their financial statements and tax filing needs.

https://www.charitylawgroup.ca/
416-488-5888

https://www.charityaccountingfirm.ca/
289-301-8883

What is The Canadian Charity Law Podcast ?

Exploring the ins-and-outs of Canadian Charity Law in a way that can be understood by the layperson, including Charity Registration, Not-for-Profit Incorporation, Charity Governance, Charity Fundraising, Tax Receipting, and much more!

Rachel:

Alright. So today, we're gonna really dig into this new Ontario Not for Profit Corporations Act, the ONCA.

David:

Yeah.

Rachel:

You sent over a whole guide on this huge changes for Ontario nonprofits.

David:

Huge changes. Yeah. A lot of modernization. It's a big step for the sector for sure.

Rachel:

Yeah. And it really does cover everything, governance, transparency, day to day operations. It's really a complete overhaul.

David:

It is. It's like taking, I don't know, like a vintage car Okay. That's charming but a little outdated

Rachel:

Yeah.

David:

And trading it in for a brand new electric model.

Rachel:

Okay. I like that.

David:

You know? So there's a bit of a learning curve for sure, but the potential is huge.

Rachel:

Yeah. So with that analogy in mind, let's break this down for our listeners. You know, we're talking about board members, staff, volunteers, anyone really involved or just interested in how nonprofits in Ontario work. Right. Why should they care about this new act?

David:

Because it really does impact everyone. This isn't just about, you know, shuffling paperwork around. This is about making sure that these organizations have what they need, you know, the tools to really thrive. These organizations are so vital. I mean, the heart and soul of a lot of communities.

Rachel:

Yeah. And it really is like we're switching out the entire rule book for these organizations. Yeah. Some things are simplified. Other things are stricter.

Rachel:

And some things are just different. Definitely. So we're gonna unpack the biggest changes, those need to know details, point out any surprises.

David:

For sure.

Rachel:

So first up, remember those letters patent?

David:

Oh, yeah.

Rachel:

That was basically a nonprofit's permission slip to exist.

David:

Gone. Gone. Together

Rachel:

out. Out the window, what are

David:

they replaced with? Articles of

Rachel:

incorporation. Okay. So at first glance, it kinda just seems like we're swapping one jargony term

David:

for another.

Rachel:

Yeah. What's the significance? What's really going on

David:

there? It's more about, I think, self determination. You know, with letters, Patton, the government was kind of granting you the right to operate.

Rachel:

Mhmm.

David:

Articles of incorporation are more about the organization, kind of. Mhmm. Like, drafting its own

Rachel:

Declaration. Yeah.

David:

Like a declaration of independence.

Rachel:

Okay. I like that.

David:

Yeah.

Rachel:

So less about jumping through bureaucratic hoops and more about really asserting the organization's identity and autonomy?

David:

Exactly.

Rachel:

I like it.

David:

And speaking of simplifying things, you know those power clauses?

Rachel:

Oh, don't get me started on the power clauses. Yeah. I once spent an entire week

David:

Oh, I know.

Rachel:

Trying to help a friend decipher one for their organization.

David:

Right.

Rachel:

It was like, I needed a law degree

David:

Exactly.

Rachel:

To figure this thing out.

David:

Well and most people did. Yeah. Yeah. Good news is the ONCA has streamlined this significantly.

Rachel:

Okay. Good.

David:

So, essentially, now, nonprofits have the same powers as an individual.

Rachel:

Okay.

David:

They can essentially do anything a person can do within legal limits, of course. Right. But gone are the days of spelling out every single action in detail.

Rachel:

So much simpler. Yeah. And, hopefully, less work for everybody involved.

David:

Exactly. Yeah.

Rachel:

That's a win for efficiency.

David:

Huge. Yeah.

Rachel:

Okay. So no more endless power clauses, more flexibility for organizations to adapt.

David:

Right.

Rachel:

Sounds good so far.

David:

Yeah. And it gets even more interesting, I think, with the introduction of what's called public benefit corporations Okay. Or PBCs.

Rachel:

PBCs.

David:

It's a new way of classifying nonprofits.

Rachel:

Right. PBCs. Got it. But, like, before we get into the details, can you just give us the like, explain it to me, like, I'm 5 version.

David:

Okay.

Rachel:

What is a PBC? Why should our listeners care?

David:

Okay. So think of it this way. Imagine 2 piggy banks.

Rachel:

Okay.

David:

1 is for your kid's lemonade stand, and the other one is for the local community center.

Rachel:

Okay.

David:

The lemonade stand's pretty straightforward. You sell lemonade, you make money.

Rachel:

Right.

David:

Now the community center, that's more like a PBC. They might get funds from different sources, donations, renting out space for events.

Rachel:

Okay. Yeah. I see where you're going with this.

David:

Maybe they have a cafe. You know, they've got different things going on.

Rachel:

So it's not as simple as just, like, straightforward earned income. It's this,

David:

It's more about, I think, a broad public benefit.

Rachel:

Okay.

David:

And so with those different revenue streams coming in, that's where the OMNCA kinda steps in Okay. And takes a closer look at how those funds are managed.

Rachel:

So greater financial support, but also greater responsibility.

David:

Absolutely.

Rachel:

And I'm guessing greater scrutiny.

David:

Yes. Definitely. And this is one of the big things, is the ONCA introduces stricter financial review requirements for PBCs.

Rachel:

Okay.

David:

And so there are thresholds based on the organization's revenue. Okay. So for example, let's say you're noncharitable PBC. It brings in less than $100,000 annually.

Rachel:

Okay.

David:

You have some flexibility in deciding if you wanna have an audit or not. But if you're pulling in over $500,000

Rachel:

That's when it's time for a deep dive. Yeah. Yeah.

David:

And this could mean that organizations might shift from, like, a full blown audit Okay. Where every single transaction is examined to what's called a review engagement.

Rachel:

Okay. And a review engagement, for those of us who don't know all the lingo, what does that actually mean?

David:

Yeah. So it's, think of it like visiting your doctor for a checkup versus going to the hospital to get a whole battery of tests done.

Rachel:

Okay.

David:

So the doctor's kinda checking for anything glaringly wrong

Rachel:

Right.

David:

But not necessarily scrutinizing every tiny little detail.

Rachel:

Okay.

David:

So in a review engagement, it's a similar thing. They're looking for red flags, not necessarily combing through every receipt.

Rachel:

Got it. Okay. So maybe some cost savings there for smaller PVCs.

David:

Yeah.

Rachel:

But the key is still transparency, accountability

David:

Definitely.

Rachel:

Even if it's a slightly less intense review.

David:

Yeah. For sure.

Rachel:

Now what about, let's talk about the board of directors.

David:

Okay.

Rachel:

The people who are actually steering the ship, making the decisions.

David:

Right.

Rachel:

The ONCA does not hold back when it comes to their roles and responsibilities.

David:

No. It doesn't. We're talking about how many directors, qualifications, term limits, even compensation, which is a tricky one. Yeah. So let's break it down a little bit.

Rachel:

Okay.

David:

So first of all, no more, like, tiny 2 person boards.

Rachel:

Yeah.

David:

The ONCA says minimum 3 directors. No exceptions.

Rachel:

Okay. So we've gotta have at least 3 people on the board.

David:

At least 3.

Rachel:

It's not just about filling the seats, though. Right? Yes. There are rules about who can actually serve as a director too.

David:

Yeah. And it's all about ensuring that the folks in charge have sound judgment.

Rachel:

Okay.

David:

And, you know, they're financially responsible.

Rachel:

Yeah.

David:

So for example, you can't be a director if, you know Yeah. You've been deemed incapable of managing your own affairs Okay. Or if you're an undischarged bankrupt.

Rachel:

That makes sense. Nobody wants to hand over the reins to someone who's struggling with their own financial affairs.

David:

Exactly.

Rachel:

So stricter rules, but, again, all with that aim of greater accountability, greater transparency.

David:

Absolutely. And it gets a little more nuanced too when it comes to organizations that are also registered charities.

Rachel:

Okay.

David:

There are even stricter rules, especially when it comes to receiving any financial benefits from the charity itself.

Rachel:

So no double dipping.

David:

Exactly. Yeah.

Rachel:

Can someone, like, be a permanent fixture on a board under the ONCA? Are there term limits?

David:

Well, so the ONCA doesn't put a specific cap on how long you can serve.

Rachel:

Okay.

David:

But it does give organizations the power to set their own term limits

Rachel:

Okay.

David:

In their bylaws. But any single term can't be longer than 4 years.

Rachel:

Okay. So no more emperors for life on these boards Right. Which is probably a good thing. Right? Keeps things fresh.

David:

Exactly. Yeah. And it ensures a a wider range of voices and perspectives over time.

Rachel:

Now speaking of having a voice, we can't forget about the members

David:

Yes.

Rachel:

The folks who make up, you know, the base of these organizations. Right. They're getting a power up under the ONCA, wouldn't you say?

David:

A 100%. Yeah. The ONCA significantly expands member rights, particularly when it comes to holding directors accountable.

Rachel:

Okay. How so?

David:

So remember how we were talking about removing a director?

Rachel:

Yeah.

David:

Well, under the old rules, it required a 2 thirds majority vote

Rachel:

Yeah.

David:

From the members. ONCA changes that to a simple majority.

Rachel:

Wow. That's huge.

David:

It is big. Yeah.

Rachel:

Yeah.

David:

And it really just underscores how important the ONCA thinks member engagement is. Yeah. You know, it's not enough to just have members in name only anymore. Right. Organizations need to be prepared for a more active engaged base.

Rachel:

It's about building a true partnership.

David:

Exactly.

Rachel:

Not just kind of a one way street. Right. But as we all know, with great power come

David:

Great responsibility.

Rachel:

Exactly. So we were talking about greater responsibility for members under ONCA.

David:

Right.

Rachel:

And it's not just about, like, having the power to remove a director. Right?

David:

No. Not at all. It's about really being informed and engaged, you know, ready to exercise Yeah. Your rights as a member.

Rachel:

Okay.

David:

And the ONCA makes it clear. Members have the right to access key documents Mhmm. Articles of incorporation, those bylaws we talked about Mhmm. Even the organization's financial statements.

Rachel:

Okay.

David:

They can submit proposals to change the bylaws, raise important issues.

Rachel:

So no more passive bystanders.

David:

Right.

Rachel:

Members really have a seat at the table. Their voices deserve to be heard.

David:

Exactly. And I think it creates a whole new ballgame for both sides because organizations can't just assume their members are gonna stay silent and uninvolved.

Rachel:

Right.

David:

They need to really foster that engagement.

Rachel:

Create that open communication.

David:

Exactly. Be ready to listen.

Rachel:

It's a two way street.

David:

Yes.

Rachel:

Speaking of which, let's talk about the time crunch facing these organizations because they have to get on board with these new rules.

David:

They do. The clock is ticking.

Rachel:

It is ticking.

David:

They've had since October 2021 to bring their governing documents in line. So that's a 3 year window.

Rachel:

Yeah.

David:

Might seem like a while, but it can really sneak up.

Rachel:

It does. Time flies when you're, you know, overhauling your entire governance structure.

David:

Right. Exactly.

Rachel:

But seriously, this isn't just, like, a copy paste job.

David:

No. Not at all. I see this as a real opportunity, actually, for organizations to kind of hit the reset button. It's a chance to really look at their current structures and say, does this still work for us? Does this reflect who we are and where we wanna go?

Rachel:

It's like spring cleaning Yes. For your organization. Right?

David:

Exactly. Yeah.

Rachel:

Get rid of the cobwebs.

David:

Get rid of what's not serving you. Yeah. Exactly.

Rachel:

Create a more efficient system. Where do you even begin? This has gotta feel overwhelming.

David:

It can. And I think one of the biggest mistakes organizations make is jumping in without really understanding the ONCA.

Rachel:

Okay.

David:

It's not enough to just skim the surface.

Rachel:

Right.

David:

They really need to roll up their sleeves, do their homework. You wouldn't, you know, try to navigate a new city without a map.

Rachel:

Exactly. And that map is understanding the UNCA.

David:

Exactly.

Rachel:

And for our listeners, we'll be sure to link any, like, good resources from the Ontario government on our website so you guys can really dig in.

David:

Perfect. Yeah. That's great. And, you know, you don't have to go it alone.

Rachel:

Right.

David:

Getting some legal counsel can be really valuable, especially someone who specializes in nonprofit law.

Rachel:

They can help you navigate the ONCA and really tailor it for your organization's needs.

David:

Exactly.

Rachel:

What about internal communication? I imagine that's gotta be a big one.

David:

Oh, huge. This can't happen in a vacuum. You know, organizations need to bring their boards, their staff, their volunteers, everyone along with them.

Rachel:

It's making sure everyone understands the changes and how they fit into the bigger picture.

David:

Yeah. Otherwise, it's like trying to play a game without knowing the rules. Right?

Rachel:

Exactly. And don't forget about your members.

David:

Right.

Rachel:

Keep them informed.

David:

Exactly. This is a two way street.

Rachel:

Give them a chance to ask questions.

David:

For sure.

Rachel:

You know, address their concerns.

David:

It's about partnership.

Rachel:

Exactly. And you mentioned documenting this whole process. Tell me more about that.

David:

Yeah. It's all about creating a clear paper trail.

Rachel:

Okay.

David:

So we're talking about documenting board meeting minutes where these decisions are made, resolutions for new govern governing documents, any communication with those members we talked about.

Rachel:

So, basically, if it has to do with ONCA, write it down.

David:

Yes. Exactly. And this isn't just about, you know, checking a box. This documentation can be really important down the line if any questions or disputes arise.

Rachel:

It's like that old saying, an ounce of prevention is worth a pound of cure.

David:

Exactly.

Rachel:

Okay. So we talked about the pitfalls, but what about solutions?

David:

Right.

Rachel:

What are some ways to make this easier?

David:

Well, first and foremost, I would say assemble a transition team.

Rachel:

K.

David:

You know, think of them as your ONCA All Stars.

Rachel:

Okay. I like it.

David:

Yeah. This is a group of people who really understand the organization, its day to day operations, its vision, and, of course, the ONCA itself.

Rachel:

They're the project managers Exactly. And making sure it all runs smoothly.

David:

Yes. And then once you have your a team assembled, conduct a thorough self assessment.

Rachel:

Okay. So it's time for some organizational introspection.

David:

Yes. Exactly. This means taking a hard look at your organization. Ask yourself, do your bylaws still work? Are the board's roles clearly defined?

David:

Mhmm. Are we engaging our members?

Rachel:

So it's turning this compliance exercise into an opportunity to actually improve.

David:

Exactly.

Rachel:

I like that.

David:

And remember, the ONCA is a framework. It's not a straight jacket.

Rachel:

Right. It's not one size fits all.

David:

Right. You can tailor it to reflect your own priorities. The ONCA gives you flexibility. You can customize things like membership classes and voting rights and even how your board meetings are run.

Rachel:

So find that balance between compliance and customization.

David:

Exactly. And finally, I can't stress enough the importance of education. Right. This is not a onetime thing.

Rachel:

Ongoing education and training.

David:

Yes. Ongoing.

Rachel:

The nonprofit world is constantly changing.

David:

Exactly. Yeah. And it's not just about staying informed. It's about creating a culture of improvement. Regularly review your practices.

David:

Look for professional development opportunities. Stay curious.

Rachel:

So build a learning organization. Be adaptable. Be resilient. And on that note, we've covered a lot. We talked about the nitty gritty details, PBCs, director qualifications, but also this bigger picture of member engagement and organizational self assessment.

David:

Right.

Rachel:

Before we jump into what this all means for the sector as a whole, any final thoughts on navigating this transition?

David:

I think just don't be afraid to ask for help.

Rachel:

So we've talked about all the details of ONCA, the to do list, what to watch out for. Right.

David:

What does this all actually mean? Like, how could this law reshape the entire nonprofit sector in Ontario?

Rachel:

Yeah. That's the big question, isn't it? But I think one thing's for sure, we're gonna see a much bigger focus on good governance.

David:

Yeah. I mean, it makes sense. Yeah. ONCA really lays down the law, like, literally

Rachel:

Right.

David:

About how these organizations need to run.

Rachel:

No more. Kinda figuring it out as you go.

David:

Exactly. Yeah. And that might seem like a burden to some Yeah. But I think it's ultimately a good thing.

Rachel:

I think so too. Right. When nonprofits are transparent and accountable, it just builds trust.

David:

Because let's face it. Nobody wants to support an organization that seems shady or disorganized.

Rachel:

Right.

David:

Donors, funders, they wanna know their money's being used well.

Rachel:

Exactly. And that's where ONCA comes in. When you've got clear rules about finances, conflict of interest, board oversight, it's like the organization can say, look. We're taking this seriously. We're doing things the right way.

Rachel:

Yeah. It's a stamp of approval. Do you think it could change how nonprofits actually work? Like, how they relate to each other even?

David:

Yeah. I do. I think one of the exciting things here is that we might see a more collaborative sector overall.

Rachel:

Interesting. How so?

David:

Well, ONCA really stresses communication, member engagement, planning ahead. Yeah. It's pushing organizations to think bigger than themselves.

Rachel:

Right.

David:

It's not enough to just work in your own little silo anymore. It's about partnerships, sharing resources, tackling those big problems together.

Rachel:

So a more interconnected sector.

David:

Exactly. And I think that's where the innovation comes in too. Right?

Rachel:

Okay.

David:

When organizations can learn from each other, share what works, try new things, That's how we move forward.

Rachel:

Yeah. Instead of everyone constantly reinventing the wheel.

David:

Exactly.

Rachel:

It's like, let's share the blueprints or even build a better wheel together.

David:

Yeah. It's still early, obviously. Right. We'll have to see how it all plays out. But I'm optimistic.

David:

I think this could be a real turning point for nonprofits in Ontario. Yeah. A chance to be even more effective.

Rachel:

I like that vision. And for any of our listeners who might be feeling overwhelmed, just remember, you don't have to do this alone.

David:

You don't.

Rachel:

There's help out there, resources, experts, people who can guide you.

David:

Definitely. Yeah.

Rachel:

So don't hesitate to reach out.

David:

And if today's conversation has just made you more curious or maybe left you with some questions

Rachel:

Yeah.

David:

Don't be afraid to reach out to a professional. It can be a little bit of a bumpy road to get ONCA compliant, but with the right help, it doesn't have to be.

Rachel:

It can really be a positive thing for your organization in the long run.

David:

Absolutely.

Rachel:

And on that note, we'll leave you with this. How might this focus on members, on giving them more say, actually change a relationship between nonprofits and the communities they're serving?

David:

Something to think about.

Rachel:

This has been such a great discussion. Thank you so much for sharing your expertise with us today.

David:

Oh, my pleasure.

Rachel:

And to all our listeners, thank you for joining us on this deep dive. We'll see you next time.