Annex C
Mandatory and Default Rules
Table of Contents
Mandatory Rules
At minimum, a corporation must have the following two by-law provisions.
| Required By-law Provisions | Description |
|---|---|
| Conditions of membershipFootnote 1 | The by-laws must set out the conditions required for being a member, including whether a corporation or other organization can be a member. If there is more than one class or group of members, the by-laws must set out the conditions of membership for each class or group, the manner of withdrawing from or transferring to another group or class of members, and the conditions on which membership in a group or class ends. See Model By-laws (section 2.01). |
| Notice of meeting to members entitled to vote at the meetingFootnote 1 | The by-laws must set out the manner in which notice can be given to members entitled to vote and can include any of the following optionsFootnote 2:
|
Default Rules
The Canada Not-for-profit Corporations Act provides for default rules where the corporation's by-laws are silent. The corporation has the option of overriding many of these rules by setting out its own rules in the by-laws or, if it so chooses, in the articles. The Model By-laws and the By-Law Builder provide alternate rules to the default ones.
| Provision | Default Rule | Alternate Rule Permitted in By-laws |
|---|---|---|
| Borrowing powers | Directors can borrow and grant security without authorization of members. | Can restrict borrowing powers. Refer to item 10 in Annex B. |
| Providing annual financial statements to members | Annual financial statements must be sent to members 21-60 days before the annual meeting. | Can send notice to members that financial statements are available at the registered office. See Model By-laws (section 1.07). |
| Provision | Default Rule | Alternate Rule Permitted in By-laws |
|---|---|---|
| Transferability of membershipFootnote 1 | Membership can only be transferred back to the not-for-profit corporation. | Can specify different rules for transferability. |
| Place of meeting of members | The meeting of members is to be held at a place in Canada that the directors determine or a place outside Canada if all the members entitled to vote at the meeting agree. | Can provide otherwise. |
| Members calling a meeting | Members who hold 5% of the votes can request a meeting of members. | Can set a percentage lower than 5% but not higher. |
| Electronic participation at meetings | Participation by electronic means is permitted. | Electronic participation can be prohibited or restricted. |
| Meeting held entirely by electronic means | Not permitted. | Can be permitted as long as all participants can communicate adequately with each other. |
| Quorum for meetings | Quorum is a majority of members, and if quorum is present at the opening of a meeting, business may proceed even if quorum is not present throughout the meeting. | By-laws with a different quorum must set it out as a fixed number of members, a percentage of members or a number or percentage of members that is determinable by a formula. Can provide that an opening quorum at a meeting is not sufficient where there is a loss of quorum later in the meeting. See Model By-laws (section 4.03). |
| Manner of voting by members | Voting is by show of hands or by electronic participation. A member entitled to vote at the meeting can demand a ballot. | Can specify manner of voting. See Model By-laws (section 4.04). |
| Absentee voting by membersFootnote 1 | Not permitted except for electronic participation. | Can specify that absentee voting will be allowed by proxy, mailed-in ballot, or telephonic, electronic or other communication means. Must also set out procedures for collecting, counting and reporting the results of any vote. See Model By-laws (section 2.03) |
| Rights on termination of membership | Rights of a member cease to exist on termination of membership. | Can provide otherwise. See Model By-laws (section 3.02). |
| Provision | Default Rule | Alternate Rule Permitted in By-laws |
|---|---|---|
| Remuneration of directors | Directors can fix the reasonable remuneration of directors, officers and employees. | Can provide otherwise. |
| Place of meeting of directors | Directors may meet at any place. | Can provide otherwise. |
| Appointment of directors | No appointments allowed. | Cannot be overridden by the by-laws. The articles may permit the directors to appoint additional directors to hold office until the next annual meeting of members. No more than one-third of the total number of directors can be appointed. See item 10, Additional Directors, in Annex B. |
| Quorum of directors | A majority of the number of directors or minimum number of directors required by the articles constitutes a quorum. | Can provide otherwise. |
| Borrowing powers (also included in Financial Matters) | Directors may borrow money and grant security on property of the corporation without member authoriziation. | Can restrict this power in the bylaws or articles. Refer to item 10 in Annex B. |
| Appointment of officers | Directors designate the offices, appoint officers and specify their duties. | Can provide otherwise. See Model By-laws (section 7.01). |
| By-lawsFootnote 4 | Directors make, amend or repeal by-laws except those requiring a special resolution of members. The by-law, amendment or repeal is effective until the next meeting confirm, amend or reject it. | Can provide otherwise. |
| Provision | Default Rule | Alternate Rule Permitted in By-laws |
|---|---|---|
| Electronic documents | Electronic documents are permitted. | Can provide otherwise. |
Footnotes
- Footnote 1
A special resolution of members is needed to make, amend or repeal by-law provisions dealing with conditions of membership, notice of meetings to members, transferability of membership, or absentee voting. Majority vote applies to other by-law provisions.
- Footnote 2
If the by-laws do not comply with one of the options, the corporation will be required to send the notice to each member between 21 and 60 days before the meeting.
- Footnote 3
An alternative non-electronic option is also to be selected for members requesting a non-electronic copy of the notice of meeting.
- Footnote 4
Directors cannot make, amend or repeal by-law provisions for which a special resolution of members is required. These are the mandatory by-law provisions and the by-law provisions addressing transferability of membership and absentee voting by members.
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