Not-for-Profit corporations (“Not-for-Profits”) tend to have a lot of turnover in directors—with new directors being added and existing directors resigning on a regular basis. It is important (and required by law) to keep track of who the current directors are and to formally record and approve any election of directors and removal of directors. This article talks about the general role of the directors of a Not-for-Profit*, the steps to add a director, and the steps to remove a director.
*This article refers to Not-for-Profits incorporated under the Canada Not-for-Profit Corporations Act only. Although many of the rules for a federal Not-for-Profit are the same for Not-for-Profits incorporated under provincial laws, some may vary. If you have questions about a provincial Not-for-Profit, please contact us.
What Does a Director of a Not-for-Profit Corporation Do?
The definition provided in the Canada Not-for-Profit Corporations Act (“The Act”) (Part 9, S124) perfectly sums up the role of a director: “…the directors shall manage or supervise the management of the activities and affairs of a corporation.” In other words, directors of a Not-for-Profit are the overseers; they guide and support officers who carry out the corporation’s day-to-day activities.
Unlike for-profit corporations, the directors report to the corporation’s members, whereas the directors report to the corporation’s shareholders.
Who Qualifies as a Director?
It’s up to the members of a Not-for-Profit to decide who is a good fit to be a director of their Not-for-Profit, ensure they are qualified, and appoint them accordingly.
Quite often, the Board will make a recommendation to the members, suggesting who should be elected as a Director for the corporation.
The Board decides who to recommend based on a number of factors:
- who is available and willing to act as a Director;
- whose values align with the organization;
- how much time is left in the term of each existing Director (if there is a term set); and
- what skills and demographics are needed on the Board (this is accomplished by the Board, or a subcommittee of the Board, developing a matrix showing the skills and demographics that currently exist on the Board vs. what is needed).
Aside from a Not-for-Profit’s own requirements for a Director, the Act specifically disqualifies certain people from being a Director of a Not-for-Profit:
126 (1) The following persons are disqualified from being a Director of a corporation:
- anyone who is less than 18 years of age;
- anyone who is incapable;
- a person who is not an individual; and
- a person who has the status of a bankrupt.
The number of Directors on the Board must also be considered. A Not-for-Profit corporation needs to have at least one Director (and even more for “soliciting corporations”). When they submit their articles upon incorporation, they need to state the Minimum and Maximum number of Directors or if there will be a fixed number of directors (it is common to say a minimum of 1 and a maximum of 10—but it can vary greatly from one Not-for-Profit to the next). The members of the corporation generally elect not-for-Profit Directors. However, there are some circumstances where the incorporators or fellow Directors can elect a new Director.
Adding a Director
New Directors are typically appointed at the Annual General Meeting (AGM) of the members of the Not-for-Profit. There are exceptions to this rule, so it is important to know what is stated in the by-laws or articles of the corporation to see how Directors can be added or removed between AGMs.
If a Director is present at the meeting that elects them, this is enough to confirm their consent (and a record of this should be in the minutes of this meeting). However, if they are not present at the meeting when they are elected, they should consent in writing to act as a Director for the Not-for-Profit. It is a good practice to obtain written consent regardless of whether the Director is elected at an in-person meeting or via a paper resolution.
Resignation of Directors
If a Director wants to resign, they should provide a Notice of Resignation in writing, and that resignation should be stored in the Minute Book of the Corporation. Suppose the number of Directors of the Not-for-Profit is still within the range that it specified in its Articles, and they still have the minimum number required to be at a meeting of Directors (unless the By-Laws state otherwise). In that case, the remaining Directors can still carry on with their roles as normal. No action necessarily needs to be taken right away to add a Director.
Anytime a change of Directors occurs within a federal Not-for-Profit, Corporations Canada should be notified within 15 days of the change coming into effect. This includes changes to current Directors, such as a change to their mailing address or name. The internal records of the Not-for-Profit organization also need to be kept up to date—such as updating the Directors’ Register and saving records of Consents and Resignations in the corporation’s Minute Book.
We hope this article gave you a better understanding of the Directors of Not-for-Profits. Please contact us if you have any questions or need assistance making changes to your Not-for-Profit’s Directorship.
Alternatively, you can rely on a platform like Tobuso’s to manage and share your corporate records.
Resources
https://www.ic.gc.ca/eic/siTe/cd-dgc.nsf/eng/cs05004.html#toc-05
