A member is arguably the most important and most commonly misunderstood component of a not for profit corporation. When I ask not for profit organizations who their members are, in most cases the response is “I don’t know” or “we don’t have those”. Such responses are surprising because every not for profit corporation has members, so if the directors don’t know who the corporation’s members are, it is cause for concern.
A member of a not for profit corporation is a person who has been admitted into membership in the corporation. The definition of person includes both individuals (i.e. human beings) and corporations.
There can be multiple classes of membership (e.g. regular, student, honorary, etc.) and different rights can be attributed to different classes.
The conditions of membership are set out in the by-laws of provincial corporations incorporated under the Ontario Corporations Act and in the Articles of Incorporation of federal corporations incorporated under the Canada Not for profit Corporations Act. A corporation has the discretion to define who can be a member such as those who pay a fee, donors, the board of directors of the corporation, etc.
If you’re still having trouble understanding the concept of a member then think of them like a shareholder of a business corporation, but without the right to profit.
Members of a not for profit corporation generally have the right to do the following:
- Vote at a meeting of the members
- Receive notice of members meetings
- Add items to the agenda of members meetings
- Request the directors to call a meeting of the members and to call a meeting themselves if the directors fail to
- Elect directors and remove them from the board
- Approve or confirm by-laws
- Examine corporate records (i.e. minute book)
- Receive financial statements and accountant/auditor’s report
- Approve major or fundamental changes (e.g. change to the objects/purposes of the corporation)
- Appoint the accountant/auditor
It is important to note that the rights of members have increased considerably under the federal Not for Profit Corporations Act and will increase provincially when the new Not-for-profit Corporations Act is proclaimed to come into force on a date yet to be determined.
If you are a director of a not for profit corporation and you don’t know who your members are, you need to inform yourself as soon as possible. There are serious legal ramifications that may occur if a corporation has not identified its members. For example, some actions of the corporation require membership approval. If a corporation has done so without actual membership approval then you may have breached your governing legislation and exposed yourself to personal liability. It is important to remember that ignorance of the law is never a defence.
If you are a member of a not for profit corporation and you are being denied your membership rights, you can ask the Court to enforce a right or to address a problem with the corporation. However, the process and remedies available to you depend on whether your corporation is governed by the Ontario Corporations Act or the Canada Not-for-profit Corporations Act.
If you have a specific situation or question in mind regarding members, please feel to reach out to me, David J. Mifsud, at George Street Law Group LLP.