Simon's Megalomaniacal Legal Resources

Corporations - Non-Profit

. Birhane v. Medhanie Alem Eritrean Orthodox Tewahdo Church

In Birhane v. Medhanie Alem Eritrean Orthodox Tewahdo Church (Ont CA, 2023) the Court of Appeal noted the authority of even an 'overdue' corporate board under the Not-for-Profit Corporations Act, 2010 [s.24(5)]:

[33] To the contrary, under the terms of the 2014 Bylaws, an AGM is not required to amend the 2014 Bylaws. Article 18.1 provides that the Bylaws “may only be amended by the Church members at any Members’ Meeting”. Article 3.12 defines a “Members’ Meeting” to mean not just an AGM, but also to include “Special Meeting[s] and Emergency Meeting[s].” Article 6.2 then stipulates the conditions under which special and emergency meetings may occur. Both may be called by the board of directors. While the local Church is overdue for an election, s. 24(5) of the NFPCA provides that the appellants retain their offices as board members “until their successors are elected.” Accordingly, the appellants have retained the power to bring the 2014 Bylaws in line with the Canon Law Promulgation to the extent that the two conflict. Before the issuance of the order below, nothing stopped them from calling a special or emergency meeting at which they could have put the relevant amendments to a vote of the local Church’s members.

. Vietnamese Association, Toronto v. Duong

In Vietnamese Association, Toronto v. Duong (Div Court, 2023) the Divisional Court considered (and dismissed) an appeal of an application judge's order to practically sort out what can only be described as a non-profit corporation political 'melt-down', primarily by ordering new board elections [see para 6 for this part of the order]:

[8] The application judge had broad discretion to impose terms under which fair board elections will be held at a properly constituted AGM. Such terms include terms to identify persons qualified to vote at the elections, and the process to be followed to identify additional persons who may be qualified to vote. The terms imposed by the application judge are reasonable and designed to achieve these goals. I see no error in principle and no palpable and overriding error of fact that would justify intervention by this court, and so, for the reasons that follow, the appeal is dismissed.

Jurisdiction and Standard of Review

[9] This court has jurisdiction over this appeal pursuant to s.192 of the Not-for-Profit-Corporations Act, SO 2010, c. 15. ...

....

Analysis

[12] I begin by quoting from the application judge’s decision as follows:

I am very concerned that this charitable organization, which has done significant positive work in the GTA for many years, may be in jeopardy if this in-fighting does not cease. This is a small organization, with an annual budget of approximately $900,000, with a staff of 15. There are two other Court actions involving [the Appellant], which have been commenced by some of the respondents, that are ongoing. This needs to stop. (Decision, para. 4)

I agree.

[13] One major cause of the conflict in this organization has been the board’s approach to determining who is a member of the organization. The application judge reviewed the history of this issue in detail and found as follows:

It is clear in the By-Laws that the Board has the authority to approve membership. This obviously must be done in good faith and must not be exercised in a manner that is contrary to the principles of natural justice. However, the By-Laws do not refer to members being unilaterally terminated by the Board for failure to file a form. The Internal Regulations do not refer to members being unilaterally terminated by the Board either. (Decision, para. 34)

[14] In respect to payment of dues as a condition of continued membership, the application judge found as follows:

The By-Laws do not speak to members being terminated or removed from membership if there is no annual application, nor do they require members to re-apply annually for membership. The By-Laws do refer to the requirement for members to pay membership dues on an annual basis. Article 9.3 provides that a member whose membership due is not paid after being informed through the AGM invitation will be deemed to have voluntarily withdrawn his or her membership. The Internal Regulations provide that members who do not pay membership fees after three reminders will no longer receive newspapers and documents from VAT. There is no evidence before me that the members claiming membership rights have not paid their annual dues. (Decision, para. 35)

[15] These findings do not disclose any palpable and over-riding error of fact. They comport with the principles of natural justice, a lens through which the board of directors is bound to exercise its discretion respecting membership. It follows that the application judge made no error in finding that “any members as at the 2019 AGM, other than any who have voluntarily resigned their membership, died, or have been expelled in accordance with the By-Laws and Internal Regulations, and in accordance with the Not-for-Profit Corporations Act, continue as members entitled to vote at the next AGM” (Decision, para. 37).

[16] The Respondents argued before the application judge that a monitor ought to be appointed to conduct the AGM. The Appellant argued that its reinstated board should have the authority to run the meeting, and that the cost of a monitor would be too expensive for this small organization. The application judge agreed with the Appellant on this point and gave directions for the reinstated board to convene and run the AGM.

[17] The Appellant proposed that the AGM be held within 120 days and proposed various other consequent deadlines. The application judge concluded that the meeting should be held within 60 days, to “right the ship” promptly, and thus shortened other deadlines to fit within this deadline for the meeting. Section 61 of the Act provides authority for making this order, and there is no error in principle in the application judge directing abbreviated deadlines in all the circumstances.

[18] The Appellant argues that the application has suspended the operation of Article 18 of the Bylaws for the purposes of the board elections. Subsection 31(2) of the Act grants the court broad powers to make “any order that it thinks fit” in response to an application to determine a controversy with respect to an election. In any event, that is not what the application judge ordered. Only to the extent that Bylaw 18 is inconsistent with the terms set out in para. 3(vi) of the order is its operation suspended. Thus, a member is eligible for election if they have been a member for twenty days, rather than ninety days, prior to the meeting – a term required as a consequence of directing a meeting within sixty days, rather than the 120 days advocated by the Appellant. Other aspects of Bylaw 18 continue to apply. With respect, if the application judge had intended to exclude the operation of Bylaw 18 entirely, that is what she would have ordered, rather than the tailored direction that she did make.

[19] The Appellant argued that the application judge erred in failing to apply Article 9.3, which deems memberships “voluntarily withdrawn” if membership fees have not been paid after notice of the AGM. The application judge considered this argument and concluded that it had not been established that any of the roughly 200 members as of 2019 had failed to pay dues as required. That conclusion was available on the record. Members must still comply with Article 9.3 in respect to the upcoming AGM, but the board is precluding from finding members voluntarily withdrew for non-payment prior to the abortive AGM as a result of the application judge’s findings and order.

[20] The Appellant argued that the application judge erred “by citing and applying the 1985 Rules, which [are] clearly outdated and inapplicable.” The application judge found as follows (at Decision, para. 25):

It is clear that some of the issues in the organization have arisen due to changes in membership protocol that have been implemented by the Board, but not reflected in the constating documents.

This finding is reasonable. I see no error in the way in which the application judge reviewed these matters, nor with her conclusion that members as of the 2019 AGM should be permitted to vote at the upcoming AGM (subject to the terms directed by the application judge).

[21] The terms ordered by the application judge confirm the role of the board of directors in determining membership, calling the AGM, and running the AGM, all subject to the constraints imposed by law including principles of natural justice. These terms were well within her discretion pursuant to the Not-for-Profit Corporations Act. The appeal is dismissed.