Episode Transcript
[00:00:25] Speaker A: Welcome to the latest episode of Sportopia. We're so excited to share our knowledge and have conversations about healthy human sport.
[00:00:33] Speaker B: Today we're going to focus on ONCA, the Ontario not for Profit corporations Act, and some of the main issues that have been surfacing. We'll also explore the importance of good governance and some of the progressive work our clients are doing. Before we get to that, Steve, what's coming across your desk?
[00:00:49] Speaker A: I always love this question and this one today. I may have talked about it before on other episodes, but Dina, you know that a lot of the work that I do is that reactive work.
What excites me is the proactive work. And having traveled Canada with you, we talked a lot about amalgamation and trying to minimize repetition and working in silos. And just last week, I actually got to file an amalgamation of two local clubs where they are now going to share resources.
And it was actually a fairly easy process.
Both clients saw it as a benefit with respect to amalgamation. And when we talk about the efficiencies, it's about one annual meeting, one board of directors, one audit, and it just streamlines people's ability to work, saves money. And really, it's just something I continually advocate for as to why do we need not for profits? And again, the intent of a not for profit is to not make money.
So why are we always competing with each other rather than trying to work together and simplify things? So that really excites me. I actually had a few other conversations about amalgamation last week, so hopefully we can streamline the system a little bit more and have less silos and have less entities. And it segues well. In today's topic of Onka, there are probably 6000 sport clubs in Ontario that need to do the work to comply with the new legislation. But we'll get more into that later. What's new with you?
[00:02:32] Speaker B: Well, I always love listening to your stories, Steve. Thanks. Thanks so much for sharing.
I. As always, this is something quite different, actually. And it was a really hard week. You know, the Goodrow brothers died tragically. And on the same day, a young soccer player in Cornwall was killed riding her bike to one of her teammates homes. And the district association asked me to reach out to the coaches to support them in mapping out a strategy to be able to support the athletes and the community. And, you know, we had. We had to think about some. Some pretty difficult things, like, do we reschedule the game?
How do we, when we first come together? Because she passed on a Friday and their practice was on on the Wednesday and it was a long weekend, so they hadn't seen each other since. So they. They were really very, very distraught around how they were going to navigate all of this. And I just want to commend the coaches and the manager for the way in which they held the conversation, the Eastern Ontario District Soccer association, for making my services available to them. It was such a beautiful experience for the team. They ended up practicing on the Wednesday. And my invitation to them is, don't do anything without first asking permission of the parents.
And the second thing is, these are 13 year old know, young, young women, like, ask them how they want to remember their teammate. So they did. And they had an honoring on the Wednesday, so it just helped to break the ice. They had kleenex tissues available, so tears were welcomed there. They knew that it was going to be potentially volatile. I helped, did a little bit of grief and lost literacy so that the coaches could, could know and understand, you know, what. What they could expect. The Thursday game, they decided to go with the game because they asked the. And the athletes, not surprisingly, wanted to play in honor of her, their teammate. And so they all wore a blue, a blue little ribbon around their hair. And then the parents came and they had a circle and a vigil, and it was really quite beautiful. So they sent me the pictures, and I have to say, I was so deeply touched by how they came together as a community. So we have to remember that when these things happen, it's an opportunity for us to connect as a community, which is what the parents and the close family need when tragedy strikes like this.
[00:05:16] Speaker A: Yeah, very unfortunate, Dina, but I'm very happy that you were available to them to guide them through a very difficult process.
[00:05:25] Speaker B: Thanks, Steve. I'm really pleased that I was able to do that as well. So today we're going to be talking about, you know, Onka, the Ontario not for profit corporations act. So get out your box of tissue, because that's also something that's, that's looming. And a lot of our clients are like, how are we going to do this? So we'd like to talk about some of the main issues that have been surfacing, and also I'd love to explore some of the. The importance of good governance and, and what some of our clients are doing. So, Steve, you know, tell us, what is ONCA and how do we help our clients transition?
[00:06:04] Speaker A: So Anka is the new legislation that came into force October 19, 2021, to replace the old legislation applicable to not for profits in Ontario, which was the Ontario Corporations act. That act was originally written in 1907. So a few things have changed in the last 120 years, particularly, of course, the use of the Internet. So the implementation date to be in full compliance is October 18, 2024. And in order to be in full compliance, current corporations have to update their bylaws to align with the new requirements of the legislation and file articles of amendment. The act now requires that we embed in the articles the definition of a member, voting rights if there are more than one class, and the dissolution clause if the corporation were to dissolve. What do you do with the assets after the payment of all debts and obligations?
So some people in Googling Anka will likely find that there are default bylaws available through the government website.
And people assume that they must adopt those default bylaws, which is nothing, which is not true. A new corporation, so one that is not created until after October 18, 2024, would have 60 days to adopt bylaws, or they would be subject to the default bylaws, which could very well not work for that organization, depending on the way in which they want to govern those who are current corporations. If you do not transition, meaning you don't update your bylaws or file your articles of amendment, you will be deemed to have transitioned under the new legislation. And what I try to explain that is you'll be in the gray zone. Your bylaws will say a, but the act says b, so you have an obligation to follow the act, therefore causing that gray zone with respect to your members. Well, wait a second. Our bylaws say this, but you're doing that. And I always like to say every organization has that person who knows every comma and punctuation mark in the bylaws and will want to make sure that you're in full compliance. So we don't want organizations to be in the gray zone to transition. You have to update your bylaws, file your articles of amendment with the ministry, and that would complete the transition to Onka.
In order to do that, Dina, what happened is, in October 19, 2021, the Ontario. The ministry created the Ontario business Registry. So all corporate compliance filings with the ministry used to be done through the mail, and now it's all done electronically. And in order to access your online ministry profile, you need a nine digit code called the company key. And you can request that key through the Ontario business registry, but they will send it to the last known address registered with the ministry. And you're laughing, and you should be laughing accordingly.
Most people haven't updated their registry filings, some in 20 or 30 years. I have seen addresses and dates falling back to the nineties. And of course, that mailing address no longer exists or we don't have access to it. So there have been some complications in getting the company key. In order to fix that, we can do an online electronic filing, unfortunately, for a fee, which we have to pay as well to get it done. And then we can actually get the key electronically through email, which would then give us access to our online portfolio. So we can do our filings, update the registry, and anything we have to do through the old methodology of mail. So one of the first hurdles is helping clients get their company key, tracking down their articles, because in order to update their articles, we need them to file the amendment because we're not sure what the first ones say. And again, those are quite easily accessible for a $3 filing fee with the ministry. So those are the first steps before we even get into the bottom so.
[00:10:35] Speaker B: People can't see my face, but I'm like God smacked right now. And I'm wondering, how is it possible you still have hair with the countdown ticker? So, Steve, before we get into like, you've laid a really nice painted picture for our clients here around why this is important, what are some of the most relevant sections to consider?
[00:10:58] Speaker A: So the old legislation, as I said before, the Ontario Corporations act, was very flexible in the way it allowed not for profits to govern. It would really, in short, say, call a meeting, a members meeting in accordance with your bylaws. There was a lot of flexibility on how we would govern, but Anka has taken away a lot of that flexibility and said, you will do it this way. So, as we said, we now have to embed in the articles membership structure, voting rights, dissolution clause. And where we're seeing absolutes is on the notice requirements. So it's ten to 50 days.
There's some flexibility with respect to board size. The old legislation mandated a fixed number. Now, Anka allows a min and a maximum number of directors, that number to be fixed by the members or the board if the members have given them that authority. And one of my favorite words, which people have probably heard me say a million times, is, I love flexibility in governance. So I love doing the min and maximum number of directors. Other absolutes is directors must consent within ten days of being elected to being a director in writing. I probably shared this before, too. We've had clients who have called us and said, hey, guess what? I just got elected to be president of an organization that I didn't know I was running for.
[00:12:26] Speaker B: Right? So I don't want to assume the risk. So get me off the ballot.
[00:12:30] Speaker A: So get me off, or don't. Or tell me I'm going to be on and get my written consent. There's also new eligibility criteria, criteria for directors, and one of the significant changes is financial reporting obligations. So the old legislation, again, used to say, basically, you must present financial statements to your members within 15 months of fiscal year end. And that timeline remains consistent. But now, the type of financial reporting that we have to show is dictated on two factors. One is, are you a public benefit corporation? So first and foremost, you are a profit. Secondly, you get a tag. You're either non charitable public benefit, which means you've received $10,000 or more of government grants or donations from non members. So if you receive that $10,000 threshold, you're deemed public benefit. And the financial reporting requirements are higher, meaning audit, review, or compilation dictated by revenue. So what I'm experiencing, Dina, when I'm talking to clients, and we go through this, through these parameters of financial reporting, they're like, well, we don't do an audit. I said, well, based on your deeming to be public benefit and your revenue is over $500,000 revenue, there's a lot of discussion about profit. It's not profit, it's revenue. At $500,000 and being deemed public benefit, you are required to do an audit.
And that could be a ten to $15,000 expenditures that a lot of our clients aren't, aren't budgeting for. There are provisions in the act to allow you to do a lesser, onerous financial reporting, but it will depend on your revenue and whether or not you're deemed public benefit or non public benefit.
[00:14:27] Speaker B: You know, Steve, it's such an important point. And our clients are, I think, you know, a little bit gobsmacked, too, in terms of these older systems and structures that were designed back in 1907, and maybe they aren't relevant to today's needs obligation, especially around proving that we are a legitimate, credible, trustworthy organization. And my relationship with financial auditing, I think it's really important as a practice, but also to save you money. Often at sport law, we have experts, a bookkeeper, as well as Kathy, one of our longstanding team members. They go in and they have saved our clients tens of thousands of dollars because of poor reporting or not having filed their HST and all kinds of things. So doing an audit requires, yes, more sophisticated measures, but it's also helpful, I think, to them in the long run, because they can modernize their financial practice. Instead of writing checks, they're putting things online and they're saving money.
That's what I've noticed, Steve.
[00:15:36] Speaker A: Yeah, absolutely. It's really important. Of course, most auditors would charge, likely buy on an hourly basis. So the more prepared you are to prepare your books and your records for the auditor, the better you'll be. One thing I do want to address, Dean, I mentioned that $10,000 threshold of government grants, non member donations is when you hit that threshold, your financial reporting, as I said, becomes a higher threshold. But you could be getting $10,000 in grants and spending $15,000 on an audit. So it is a number that I think organizations have to pay attention to and say, is it worth accepting the grant, knowing that at the end of it, it may cost us money? So we want to pay attention to that, that $10,000 threshold and, of course, our total revenue to make sure we're prepared appropriately financially, as well as the responsibilities, as you've mentioned, to have proper books and records.
[00:16:40] Speaker B: Wow. So let me get this straight. I'm going to play this back, and then I want to ask you about the significant challenges. What are some of the key kind of themes that you've seen as you've been supporting our clients and getting a compliant with Anka? So you got to get this key, and then in order to get the key, you have to go back into the bowels of your own bylaws and letters of incorporation and find out who has the information and addresses that are likely outdated with people who may have been deceased. Right. Because by the time they were compliant way back then. So you get all of this. Ideally, you are being supported by someone like you or a member of our team to help them navigate all of this. Then they have to be filing all of this by October 14 18th. Okay. You just bought four more days. So October 18, what happens if they don't?
[00:17:37] Speaker A: So again, like I said at the beginning, if they don't, they will be deemed to have transitioned, meaning that if their bylaws are contradictory to the act, the act will prevail.
[00:17:48] Speaker B: Okay. So there is this fail safe, a safety net, if you will, but we would never recommend that because you're probably going to. It's going to lead into all of the bug booths now that you're finding as you're trying to get them compliant.
[00:18:01] Speaker A: Back. In 2014, the federal government amended the legislation that applied to federal corporations. So for our perspective, it would be mostly national sport organizations who are incorporated federally and the corporations. Canada actually said, if you don't file. I'm making dates up. By October 2014, you will be dissolved. They were stricken from the record. So in Ontario, they're not doing that. They will be doing a deemed transition. And again, we don't want to be in that gray zone of that deemed transition where our bylaws or our governance practices don't align with the legislation.
[00:18:37] Speaker B: Of the 6000 organizations that have to become compliant with ANCA, how many have you done? Steve?
[00:18:46] Speaker A: We've done hundreds.
We've done hundreds. And of course, with the deadline being approximately a couple weeks away, we are getting a lot of requests recently. And because we've done so many, I think we have the ability to support additional clients. We're also offering three different service levels, Dina, for ONCA compliance. So one is we help you get your key and your articles, and then when we get into the bylaws, we look at three different methodologies. One is, as, again, I just described, that the anchor requirements are very, very direct. You must do it this way. And so what we can do is take your current bylaws, update them to comply with the ONCA provisions, get the articles, get them passed by the members, and file them. Option two is, wow, your bylaws are really old and bad, and we recommend giving you a new draft. And again, with the ONCA compliance requirements, we talk about the director's consent, we talk about the financial reporting, we talk about the new eligibility of directors. We talk about what else has to be in there, proxy voting or the, there's actually flexibility in proxy voting. So we give you that new draft, but we keep your governance intent the same. So your board composition, board titles or portfolios, membership structure, voting rights would all remain consistent.
Option three is kind of that option one or two, but having a governance review. And what we're finding, dinah, is that a lot of our clients, because they haven't looked at their bylaws in ten years, 15 years, 20 years, that they want to have a conversation about governance. And where, when I do the Onka intake sessions, they take about an hour. As I said, funny enough, we don't really talk about Onka. We talk about governance. So do you like your board composition? Do you like. And I'll challenge organizations and make them at least think about different models that exist. Wow, you have a board of 19 people. That's really large. Have you thought about going to a board of five to nine, seven to nine, and trying to remove the operational components of a board into committees or responsible individuals, rather than having everything sit on the board's shoulders. And the second part of that conversation is membership structure. I've been doing this 22 years and yeah, things have changed. Membership, we've really started to draw a distinction between being a member and being a participant. And they don't have to be the same. I have a pretty strict linear view of members. I think they do three things. I think they elect the board, they appoint the auditor, and they amend the bylaws. And when we talk about some sport organizations, larger ones, we're talking thousands of members. And one of my favorite questions I ask kind of rhetorically is how many people come to your members meeting? And the average answer is the board and two people, or the board and seven people. And once in a while you'll hear somewhere that number 20 or 30, but most of the time it's in that single digit range. So when I have a voting pool of 5000 members, particularly in soccer or hockey, knowing that seven or eight people are going to show up, depending on which seven or eight show up, can really dictate the future of the organization. So we spend a lot of time, like I said, on board composition, portfolios, titles, terms, and then within the membership, who do you want to be your members? And it doesn't have to be every single person who's a participant. And everybody's doing it a bit differently as deciding who they want to put that responsibility of really elections on. I again say this kind of half jokingly, no one really cares who the auditor is. We amend the bylaws every five or ten years. So what we're really talking about is who do we want electing the board? And that's where we spend our time on, on the governance review.
[00:22:59] Speaker B: Wow, I can. My heart started to race when I started to, you know, take in the mammoth amount of work. And as we know, when this was announced, it was during the pandemic. So a lot of these volunteer directors may not have stayed with the organization. So you have, you know, likely a crop of new directors who are probably shocked when you ask them questions about their bylaws. And they're like, I can't find them. And what's this thing about the key? And what do you mean, mailing address? And why haven't we done this work over the last 60 years? Because, you know, Steve, it's these invisible inheritances. That's what I call our governance system. We've inherited these systems and practices and policies and rules. And because we're pretty much volunteer driven in sport, we don't challenge a lot of that. We show up, we donate our time.
We become a coach or a referee or a volunteer director, and we just make these assumptions that it's all going to work out until it doesn't.
[00:24:10] Speaker A: I know you do this as well as I do, Dina. We do a lot of board trainings, we do a lot of work with boards. And usually, of course, when I'm in a room or even on a Zoom call with a board, the first thing I'll say is, tell me about yourself, your name, your profession, and why are you here and why do you want to be a director of this organization? And we hear it routinely, well, you know, I'm, my name's Joe and here's my profession, and I'm here because my kids play right, or my kids are involved. And I appreciate that, and that's what makes the sector move forward. But I jokingly and somewhat seriously say being a board member is boring because the foundational principles of a board are strategic plans, budgets, policy development, risk management. But what of course we really want to do is get involved in operations. We want to talk about who's going to win provincials and who's the best team and what color are the new uniforms. I recognize that. So sometimes we've talked about this a lot. Trying to educate people on what it means to be a board member is super important in advance of them wanting to become a board member.
[00:25:19] Speaker B: Yeah, exactly, Steve. And I think that's why we created governance essentials. Right, because there's only so many hours in a day and we can't keep doing this basic education to give these volunteer directors the governance literacy, that ought to be a requirement. Requirement. You know, for me, as part of Onco, would have been a stroke of genius for them to require that their directors be educated, proof of education.
And so I think it's really important that we educate our directors that we talk a lot about. When I do this work to support leadership, I talk about ethical stewardship. So how do you know you're living the values that you say matter to you as a group? And often I get kind of quizzical. Looks like there's an assumption that they know what those values are. In the absence of them not having the language around their core values, then how do you make really good decisions? So we start at the philosophical level to help them kind of get a handle of their culture. So what is our culture? What do we want to be known for? Remember, as boards, you are there to be in service of the membership.
The participants, you're not really the boss. And I remind them of that there's a sense of humility, right. For them to remember that they're actually here. Their bosses are the people that elected them, and for them to remember that, so that when they are providing, if they do have staff, to remember that they are now responsible for people, staff, not just the membership, but also the participants, who are often under the age of 18, so their duty of care is higher, and then their staff, who they owe a responsibility to.
It's complicated to be a director and you're doing this as a volunteer on top of everything else. Quite a few times. You know, I've had directors come to me and say, I'm not sure why I'm doing this now that you've educated me.
So I'm not sure whether I should say sorry or you're welcome.
[00:27:37] Speaker A: I think, Dina, we're starting to see a little bit of more proactive work, and you can see it in the Sport Canada and the COC good governance code where we're talking about how to recruit directors who do we want? And educating them in advance. So doing the board assessment, saying what skills and gaps are missing and let's try and find them, and then educating potential candidates. Well, how much time commitment is this going to be? What do you want me to do? When are the board meetings? What are my legal responsibilities? And you're right, when I become a director, a lot of the risks associated with the club or the organization falls on the director's shoulders. So educating them, what they're getting into is really important. And I like seeing that. And we are starting to see it in the call for nominations and the application forms to say to potential directors, this is what you're going to do. And I really like that. I think we come in eyes wide open in those scenarios.
[00:28:38] Speaker B: I'm with you, Steve. I think because we've traveled across Canada now over the last 18 months, I think there is reason to be hopeful. Right. Hope is here is what you and I have said, and we are seeing people want to do the good things to ensure that the participants are safe, that they have an enjoyable experience, because that's what we're into sport for the main reason. Right. We want to have fun and we want to connect as a community and let our governance system support that, not kind of prevent that from happening. So I, too, am hopeful. And as I look at some of the really cool projects that have come our way, I think we're going to see a lot of leadership from provincial and territorial sport organizations. In fact, we'll be talking a little bit more about this in the coming months. But we, we are going to be working with 76 provincial sport organizations and helping them modernize their governance to be compliant with that provincial act as well, though on parallel tracks, we're looking at their culture, assessing the state of readiness of the culture and the operational structure that overlays the governance. Governance, culture and operations are all connected. And then we, as you know, I talk a lot about values, right. Making sure we have language to be able to describe and invite people into our culture. Right. So I am hopeful that sport will heed the call, will make the active commitment to put in place these structures that are going to support healthy human sport.
[00:30:21] Speaker A: Yeah, I think we're starting to see that, Dean, and it's starting to become a priority for, you know, national sport organizations and now provincial, there is another provincial sport organization or government entity that's reached out to us to talk about streamlining governance and resources and tools. And I think that's awesome. And of course, it happened at Sport Canada COC good governance code, where we talk about the assessments, the nominations, the recruitment, the education, and giving people the skills to be successful in those roles. So it's interesting full circle how this came up through Anka was people would come to us and say, we haven't looked at our bylaws in a long time, and we do want to have this conversation about governance. And what does our board look like? And I said before, I love flexibility, so I love a board of seven to nine directors on three year terms. People always tell me three year terms is a long time, which I understand. But again, half rhetorically, the first year, you know, nothing. The second year, you figure it out. The third year, you get something done. So I do like the three year terms. I like the board seven to nine, and I like the board itself, assigning portfolios and not necessarily the members. So let the board decide who's the best chair slash president, who's the best person for financial management or recording documents rather than the membership. I like that flexibility. So lots of work in that area, for sure. It will continue, I think, even after the October 18 deadline. I have no doubt.
[00:32:01] Speaker B: Yeah, I really support that, Steve. And it wasn't too long ago where you and I were in the middle of a room. I think there were only three women in a room of, what, 40 men. And I think at the time, I said, you know what is strange here, right? There were like 27 directors and only two were women, and I was the third woman in the room. So now we're starting to see right gender equality. And it's not just the right thing to do, it's a smart thing to do. We know when we have diverse boards, we're going to expand the capacity of the board to make thoughtful, hopefully ethical legal decisions that they can stand by and reduce their risk. So there is a lot of thought that has gone into this for someone who's been in the system since 91. I've traveled alongside the system.
I think we're going to have to have the mandate from above to come down and say, this is how we are going to govern moving forward. It is unfair, I think, and unnecessary to download that onto the shoulders of all these volunteers who are trying to do the right thing but often feel ill equipped and way over their heads, not imagining that, you know, the system is as outdated as it is.
[00:33:16] Speaker A: I just did a governance intake session last week, Dina, with a client, and I challenged them on their board composition. They had a very large board with pre assigned portfolios. So president, VP, treasurer, secretary. Then they had director of House league, director of rep, director of register, director of website. And it was very specific and I challenged them on the flexibility of governance and their opinion was, well, we need these people to make our club work. So they decided not to kind of take that more flexible governance model. But I'm happy they had the conversation. At least they've had the conversation to look at different models and say, you know what? That might work or that might not work for us, but at least have the conversation about it.
[00:34:00] Speaker B: Yeah, well, that probably feels like a good place for us to end. Steve, thank you so much. You know, I've known you a long time and one of the things I most appreciate is I always learn something new when we connect. So thank you for expanding my Ankha literacy. I wrote down here we offer three support systems, Onca Lite, Onka standard, and Anka Premium.
[00:34:25] Speaker A: We called it option a, b and c. But I, like you know me.
[00:34:29] Speaker B: I'm a bit more creative. So thanks folks for listening. In the episode notes. Below you'll find some sport law blogs where you can find more information related to our conversation today. Thank you so much to our listeners. We're so grateful to share our vision of Sportopia with you as we all look to elevate sport.
[00:34:46] Speaker A: As always, to have your say in Sportopia, email us at Helloportlaw, CA or on social media at Sportlawca to let us know what you want to hear about next. Stay tuned for our next episode.
