Less risky to buy or sell law practices in increments

Less risky to buy or sell law practices in increments

December 31, 2007

The Oct. 17 deadline for not-for-profit organizations transitioning to the Canada Not-for-profit Corporations Act has passed, and while dissolution is not automatic, Industry Canada will begin to focus on the least active, most dormant companies starting in November.

The federal act, passed in 2011, provides federal not-for-profit (NFP) corporations with ""a new set of rules that are modern, flexible and better suited to the needs of today's not-for-profit sector,"" says the notes to the act.

Toronto business lawyer Bill Northcote says prior to the passing of this act, federally incorporated NFPs were governed by a particular section of the Canada Corporations Act, which was ""quite archaic."

"Northcote, partner at Shibley Righton LLP, says the new rules are more modern, enhance the rights of members, and reflect the realities of being a director or member of an NFP or charitable organization."

"There are significantly enhanced rights of members,"" he says. ""For example, if a company engages in an act that is oppressive or unfairly prejudicial or unfairly disregards the interests of members and creditors then those people can go to court and get all kinds of orders to remedy that situation."

"He says there are also enhanced rights of members to vote electronically or over the phone, which never existed before."

"If you think about that for an association that has a large number of members, it really enhances the rights of members to participate in the governance of that association. If you had to elect the directors and, for example, you're a national sporting association and have 3,000 members across Canada, then you can have mail-in ballots. It's a lot less cumbersome,"" Northcote says.

An interesting fallout, he says, is that new Ontario NFPs are incorporating under the federal act rather than through the province."

"The Ontario government passed its own version called the Not-For-Profit Corporations Act in 2010," he says. "Ontario passed the legislation but they have not yet brought it into force. The reason they weren't bringing it into force is they wanted to write the regulations, which detail which documents you use to file, where do you file, very nitty-gritty stuff. They have identified some things they wanted to address that weren't adressed in the legislation. So then the provincial government, after a long waiting period, introduced new legislation to fix some of this and it died on the order paper when the last government fell."

"Northcote says some companies that are subject to Ontario law are just living with the mess, but adds he has at least one client who has moved jurisdictions so it can benefit from the new innovations at the federal level."

"Corporate law is perhaps not getting the attention it deserves in Ontario and if you think of these jurisdictions as competing in some sense, Ontario is either not interested in competing or they're unable to. I'm not sure which it is," he says. "Incorporations are beginning to flow to the federal government rather than the provincial government."