1. Legal Issues for Not-for-profits Derek W. Hillier, Q.C. Easton Hillier Lawrence Preston 61 Elizabeth Drive Gander, NL 1.800.256.4006

2. Legal Issues for Not-For-Profits Facilitated by: Derek W. Hillier, Q.C Easton Hillier Lawrence Preston

3. Three Sessions: Corporations Act and Corporate Procedures Directors’ Liability Corporate Liability Format:Lecture Case Study Questions and answers Non-profit Corporations Workshop

4. What is risk management?

5. Checklist for Risk Management

6. In law small things can make a big difference

7. Cost of a comma!

8. Introductions

9. Legal Issues for Not-for-Profits Corporations Act and Corporate Procedures http://www.assembly.nl.ca/

10. Objectives of Workshop Statutory basis for corporations without share capital Liability issues for the corporation Liability issues for the directors Minimizing liability through insurance

11. Introduction Importance of non-profit organizations Meaning of “non-profit” Comparison between charitable and non- charitable non-profit organizations

12. Comparison Charitable and Non-profit Similarities: Operated without a profit basis Not permitted to distribute profits to members Resources devoted to carrying out objects Benefit to public

13. Differences between Charitable and Non-profit What can be considered a public benefit is more restricted for a charitable organization Four categories of charitable objects  Relief of poverty  Advancement of education  Advancement of religion  Any other purpose beneficial to the community

14. Understanding the Non-profit Corporation Alternatives for non-profit groups Other business entities The Newfoundland and Labrador Corporations Act Incorporating the non-profit corporation By-Laws (Constitution)

15. Alternatives for Non-profits Incorporation under the Newfoundland and Labrador Corporations Act Incorporation under the Canada Business Corporations Act An unincorporated association

16. Other Business Entities Partnership Co-operatives

17. Differences between a partnership and a corporation Corporation: Exists as a separate legal entity in its own name Can sue and be sued in the name of the corporation Can enter into contracts in the corporate name Partnership: Does not have a distinct legal existence apart from the combination of its individual partners

18. Co-operatives Co-operatives Act Common shares Members

19. When organized on a co-operative basis A member or delegate has not more than one vote A member or delegate is not entitled to vote by proxy Business is carried primarily for the benefit of members

20. The Corporations Act general provisions Applicability to other corporations “Corporation” – a body corporate incorporated under the Act “Body corporate” – a body corporate however or wherever incorporated Application of the Act: “This Act …applies to every body corporate, whether incorporated under this Act, the former Act or an Act of Newfoundland or the province.”. (Section 4(1))

21. Corporations to which the Corporations Act does not apply A body corporate created for a Government or municipal purpose A body corporate under the Agricultural Societies Act A body corporate under the Cooperative Societies Act

22. Capacity and Powers The rights, powers and privileges of a natural person By-law not necessary in order to confer a particular power Restrictions in articles

23. Incorporating the Non-profit Corporation Articles of incorporation Notice of registered head office Notice of directors

24. Articles of Incorporation Name of Corporation Registered office Number of directors Restrictions on the business that the corporation may carry on Other provisions

25. GOVERNMENT OF NEWFOUNDLAND AND LABRADOR Department of Government Services Commercial Registrations Division The Corporations Act ( Form 1 A ) Articles of Incorporation ( Sections 12, 421 ) (Without Share Capital) 1. Name of Corporation ___________________________________________________ ____________________________ 2. The Place in Newfoundland and Labrador where the Registered Office will be situated ___________________________________________________ ____________________________

26. 3. (a) Please indicate a Minimum number of Directors (not less than 3): ________________ (b) Please indicate a Maximum number of Directors : ________________ 4. Restrictions, if any, on business the Corporation may carry on ( see schedule A ) _________________________________________________ ______________________________ 5. Other provisions: ( see schedule B ) _________________________________________________ _____________________________

27. Incorporators Name Address Signature Phone Number Registry of Companies, P.O. Box 8700, Confederation Building, St. John.s, NL, A1B 4J6 Telephone (709) 729-3317, Facsimile (7

28. By-Laws Members Meetings of members Voting at meetings of members Board of directors Meetings of board of directors Officers Authority to execute documents Notices Amendments

29. Members Who is eligible Can corporations be a member Will there be one or several classes of voting and non-voting members Is there a fee for membership Will there be delegates Under what circumstances can membership be terminated

30. Meetings of Members What is the quorum for a meeting What notice is required for meetings of members Who has the authority to call a general meeting What percentage of members can request a meeting of members

31. Voting at Meetings of Members Which membership classes have the right to vote? Is voting by proxy permitted?

32. Other Corporate Issues Subsidiary companies Record keeping Signing authority – banking Execution of documents and the corporate seal Youth presence and voting at board tables Proxy

33. Record Keeping – Corporate Records (Section 36) A corporation shall prepare and maintain, at its registered office or at another place in the Province designated by the directors, records containing: The articles and by-laws and all amendments to the articles and by-laws Minutes of meetings and resolutions of shareholders Copies of all notices of change of directors A securities register complying with Section 96

34. Case Study Corporate Procedures

35. Legal Issues for Not-For- Profits Directors’ Liability

36. Members Role and responsibilities of members Difference between director’s liability and member’s liability How members can lose limited liability

37. Role of Directors Nature of Directorship

38. To avoid personal liability a director must understand: The legal nature of the corporation The director’s role in the corporation The director’s duties under the statute, the by-laws and common law

39. Role of Directors Nature of Directorship Officers of the corporation

40. Role of Directors Nature of Directorship Officers of the corporation Standard of Care

41. Directors have the duty to act: Honestly In good faith and in the best interest of the corporation With care, diligence and skill

42. Role of Directors Nature of directorship Role of officers Standard of care Conflicts of interest

43. Role of Directors Nature of directorship Nature of officership Standard of care Conflicts of interest Higher standards concerning conflicts in charitable organizations

44. Role of Directors Nature of directorship Nature of officership Standard of care Conflicts of interest Higher standards concerning conflicts in charitable organizations Ultra vires acts

45. Liability of directors Difference between director’s liability and corporate liability Statutory liabilities (Federal)

46. Federal Statutory Liabilities Income Tax Act Goods and Services Tax Act Canada Pension Plan Employment Insurance Environmental Protection Act

47. Newfoundland and Labrador Statutory Liabilities Corporations Act Occupational Health and Safety Act Workplace, Health, Safety and Compensation Act Labour Standards Act

48. Specific liability issues Absence when decisions made Representation on other boards Serving on unincorporated committees

49. Discussion Directors Issues

50. Legal Issues for Not-For- Profits Corporate Liability

51. Introduction Negligence of the corporation Vicarious liability Difference between vicarious liability and negligence of the corporation

52. Other Corporate Liability Criminal and quasi-criminal liability Contractual liability Statutory liability eg for business tax or GST

53. Case Study Corporate Liability

54. Insurance Issues

55. Protection of Directors and Officers Corporation can indemnify Purchase of Directors and Officers Liability Insurance Exercise of Due Diligence

56. Directors and Officers liability insurance Does the policy cover: Employee practices? Defamation? Misrepresentation/non-disclosure? Unpaid wages? Un-remitted deductions at source? GST?

57. Information required by broker Details of corporation Revenues Number of employees and volunteers Details about activities carried on by the corporation Previous claims

58. Questions to ask your broker Monetary limit? Is the limit per year or per occurrence? Excess coverage? Coverage of actions taken prior to policy being put in place? Deductible for property damage? Deductible for personal injury claims? Who exactly is insured?

59. Possible Exclusions Personal profit to which directors not legally entitled Punitive or exemplary damages Criminal or deliberate fraudulent acts Bodily injury Destruction of property Acts or omissions of directors acting as directors of another entity Employee claims Environmental

60. Property Insurance Buildings Equipment Inventory Glass Personal property of officers and employees

61. Some Other Types of Insurance Commercial general liability Business loss insurance Travel accident insurance

62. Commercial general liability endorsements Employees renting cars in company name Tenants legal liability Excess insurance

63. Business Loss Insurance Loss of earnings for a specific time Loss of earnings until building or business reopens Extra expense

64. Discussion Insurance Issues

65. Web sites for reference EastonHillierLawrence Preston: http://www.ganderlawyers.com/index.htm Department of Innovation, Trade and Rural Development: lhttp://www.intrd.gov.nl.ca/intrd/regionalde v/capacitybuilding.html lhttp://www.intrd.gov.nl.ca/intrd/regionalde v/capacitybuilding.html

66. Newfoundland and Labrador Legislation: http://www.assembly.nl.ca/ Government of Canada Legislation: http://laws.justice.gc.ca/en/notice/index.html?redirect=/en/ Useful web sites

67. More Web Sites Canada Revenue Agency - Non-profit organizations http://www.cra-arc.gc.ca/tx/nnprft/menu-eng.html An example of a site which contains info on nonprofit practices: http://www.npgoodpractice.org/Default.aspx Risk management info from organization in London Ontario http://www.pillarnonprofit.ca/resources_and_links/risk_management/

68. Legal Issues for Not-for-profits Derek W. Hillier, Q.C. Easton Hillier Lawrence Preston 61 Elizabeth Drive Gander, NL 1.800.256.4006