Default Rules

The Canada Not-for-profit Corporations Act provides for default rules if your corporation’s by-laws are silent. You have the option of overriding many of these rules by setting out your own rules in the by-laws or, if you so choose, in the articles. In some cases, the Model By-laws provide alternate rules to the default ones.

1. Financial Matters

Financial Matters
Provision	Default Rules	By-laws Providing Alternate Rules
Borrowing powers	Directors can borrow and grant security without authorization of members.	Can restrict borrowing powers.
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).

2. Membership

Membership
Provision	Default Rules	By-laws Providing Alternate Rules
Transferability of membership¹	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	A quorum is a majority of members, and if a quorum is present at the opening of a meeting, business may proceed even if a 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 members¹	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 facility. 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).

3. Directors

Directors
Provision	Default rules	By-laws Providing Alternate Rules
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 up to one-third of directors until the next annual meeting of members. See item 8 in the instructions on completing Form 4001 – Articles of Incorporation.
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.
Appointment of officers	Directors designate the offices, appoint officers and specify their duties.	Can provide otherwise. See Model By-laws (section 7).
By-laws²	Directors make, amend or repeal by-laws, except those requiring two- thirds vote of members. The by-law, amendment or repeal is effective until the next meeting of members when members confirm, amend or reject it.	Can provide otherwise.

4. Other

Other
Electronic documents	Electronic documents are permitted.	Can provide otherwise.

Footnotes

¹ Two-thirds vote 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. (Return to text)

² Directors cannot make, amend or repeal a by-law for which a two-thirds vote of members is required. These are the mandatory by-laws and the by-laws addressing transferability of membership and absentee voting by members. See footnote 1. (Return to text)