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Denise Robertson |
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Benjamin Burford |
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Tanya Kuzman |
AGMs are typically held in a physical location, with members present in person who traditionally vote by a show of hands. Many non-voting members and guests also attend. As the race to flatten the curve intensifies, the traditional AGM format is no longer viable for most organizations.This article will examine the options available to NFPs and charities to proceed with their AGMs while maintaining compliance with their constating documents, applicable legislation, government directives and continuing to ensure fair and efficient corporate governance.
Delaying AGM for federal corporations
Under the Canada Not-for-Profit Corporations Act (CNCA), federal corporations must hold their AGMs within six months of their year-end. This is a challenge for federally incorporated NFPs and charities whose year-end is Dec. 31 and who have traditionally held their AGMs at the same time as their annual conferences. Pursuant to s. 160(2) of the CNCA and s. 89(2)(b) of the Canada-Not-for-Profit Regulations (the Regulations), and in line with a set of options released by Corporations Canada for NFPs and charities to remain compliant during the COVID-19 pandemic (the Corporations Canada Options), organizations can apply to Corporations Canada for an extension to hold an AGM at a later date. Applications are reviewed on a case by case basis to ensure, among other things, that members will not be prejudiced by the extension. For greater clarity, the purpose of the extension application is to delay an AGM not to exempt a federal corporation from the obligation of calling an annual meeting of members altogether.
Delaying AGM for Ontario corporations
The government of Ontario recently published Ontario regulation 107/20, made under the Emergency Management and Civil Protection Act. Regulation 107/20 confirms that an emergency was declared in Ontario pursuant to Ontario Regulation 50/20 on March 17, and temporarily suspends several provisions in the Corporations Act pertaining to the timing of AGMs for Ontario NFPs and charities.
Under Regulation 107/20, new corporations are still expected still hold their AGMs no later than eighteen months after its incorporation and subsequently not more than fifteen months after the holding of the last preceding annual meeting (AGM Timeline).
However, s. 4 of schedule 1 of Regulation 107/20 provides that, where the last day that a corporation can hold their AGM in order to comply with the AGM Timeline falls within the period of the declared emergency, corporations will be granted a 90-day extension, from the date upon which the emergency is terminated, to hold their AGM.
Additionally, corporations will not be expected to comply with the AGM Timeline even where the last day upon which the corporation can hold their AGM falls within the 30 days after the emergency is terminated. Rather, those corporations will have 120 days from the date the emergency is terminated to hold their AGM.
Holding a virtual federal corporation AGM
Pursuant to s. 159(5) of the CNCA and the Corporations Canada Options, and where the bylaws of the corporation explicitly provide, meetings of members may be held entirely by means of a telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting (a virtual meeting). Pursuant to s. 159(4) of the CNCA, unless the bylaws provide otherwise, a person so participating in a virtual meeting is deemed for the purposes of the CNCA to be present at the meeting. This model is only available to federal corporations with bylaws that permit calling a virtual meeting in the first place. For greater clarity, the bylaws do not also have to explicitly permit participation in a virtual meeting by electronic means before members can participate.
Federal corporations should be cautious, however, of their ability to comply with the electronic voting provisions set out in the Regulations. Pursuant to s. 71(2) of the Regulations, a person participating in a meeting electronically may vote by means of a telephonic, electronic or other communication facility, only where the facility (a) enables the vote to be gathered in a manner that permits its subsequent verification; and (b) permits the tallied vote to be presented to the corporation without it being possible for the corporation to identify how the person voted (i.e. ensuring anonymity in the votes).
Holding a virtual Ontario corporation AGM
Pursuant to Regulation 107/20, notwithstanding any provisions in an NFP’s or charity’s letters patent, supplementary letters patent or by-laws stating otherwise, members’ meetings, including AGMs, may be held by telephonic or electronic means (Virtual Means). Regulation 107/20 further confirms that a member who votes at the meeting or establishes a communications link to the meeting through Virtual Means is deemed to be present at the meeting. This means a corporation may hold member’s meetings by Virtual Means even where their by-laws or other constating documents state otherwise.
It’s worth noting that Regulation 107/20 contains similar provisions permitting directors’ meetings to be held by Virtual Means as well.
The show of hands challenge
Many organizations’ bylaws provide that voting shall be carried out by a “show of hands.” This language has created another challenge for corporations attempting to convert their AGMs into virtual meetings. Fortunately, however, technology has evolved to assist corporations in navigating this challenge.
There is virtual meeting and videoconferencing technology which contains a “Raise Hand” feature within its virtual platform. The feature allows meeting participants to virtually raise and lower their hands during the meeting. Subject to the specific wording of the corporation’s bylaws, the corporation may be able to take the position that this technology allows for compliance with the show of hands language in their bylaws while holding a virtual meeting. Corporations must test any technology to be used and consider holding an advance dry-run of the AGM in order to familiarize themselves with the available features.
NFPs and charities should be mindful of the additional challenges associated with convening a virtual meeting, such as ensuring that non-voting members and guests who are attending are not inadvertently permitted to vote. Any videoconferencing technology utilized for this purpose should have the capacity to protect against this risk.
Accessibility obstacles also arise in the context of a virtual meeting for members of NFPs and charities who cannot participate due to lack of Internet connectivity or possessing the required personal devices. These members may still wish to vote. Ideally, a corporation’s bylaws would provide for voting procedures for those not in attendance in-person (or electronically). This is called absentee voting and also includes proxy voting. Unfortunately, under the CNCA, absentee voting is only permitted where the corporation’s bylaws explicitly provide for it. However, pursuant to s. 171(2) of the CNCA and the Corporations Canada Options, a corporation may apply to Corporations Canada to permit members to vote as absentees. Another potential mechanism to address this issue is to conduct a hybrid meeting, which is discussed in more detail below.
Federal corporations would also be well advised to remember that s.165(2) of the CNCA still allows for a member to demand a vote by ballot before or after any vote by show of hands. NFPs and charities should consider how they may need to accommodate such requests when using any remote technology. There are numerous purpose-built and ad hoc technological solutions that may be well suited for a specific organization in accommodating such requests.
Holding a hybrid AGM
A hybrid AGM is a meeting where some members attend in-person at a physical location, (but no more than five if you’re meeting in Ontario) and while maintaining a distance of at least two metres from others during this period of physical distancing, and some members attend the meeting by electronic, telephonic or other means. The benefit of this approach, particularly for federal corporations, is that a corporation could implement this model without bylaws that explicitly permit virtual meetings. However, given the very clear expectations, set by all levels of government, that Canadians will stay home and continue to practice physical distancing, holding a hybrid meeting at this time may not be in the best interest of the corporation or its members. NFPs and charities should be sure to consult counsel before implementing such an option.
This article is intended to provide an overview of issues that may arise in connection with holding an AGM during the COVID-19 pandemic. Counsel should be consulted to find an approach that will be appropriate for their clients’ individual circumstances.
Denise Robertson is a partner with Mills & Mills LLP whose practice is focused on private business, corporate and regulatory law, including advising not-for-profit and charitable organizations. Benjamin Burford is an associate with Mills & Mills whose practice is focused on advising private companies on mergers and acquisitions, financing, negotiation and drafting of business agreements, corporate governance and general business matters. Tanya Kuzman is an associate who practises in the area of business law, advising private companies as well as charities and not-for-profits on both corporate and commercial matters.
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