Information on by-laws Canada Corporations Act Part II

Note

See the Model By-laws prepared by Corporations Canada for Part II of the Canada Corporations Act (CCA II).

Table of Contents


By-laws for a corporation under the CCA II, must cover the following subjects:

Membership

The by-laws must provide:

  1. The conditions of membership

    The conditions must include who can be a member and how a member is accepted into membership. If there is to be more than one class of members, the by-laws must indicate the rights and conditions, including voting rights, attaching to each class of membership.

    There is no limit on the number of classes of membership as long as the conditions and rights attached to each class are set out and as long as at least one class has the right to vote at members' meetings.

    Voting rights of membership classes may be unequal as long as these are specified in the by-laws.

    Members need not be individuals.

    If a minimum number of members is stated, that number must be one or greater.

    There may be a maximum number of members stated in the by-laws.

    Membership may be transferable or non-transferable.
  2. Withdrawal from membership

    The by-laws must state whether and how members can withdraw.

Members' Meetings

The by-laws must provide:

  1. The procedures for holding an annual meeting of members.

    The by-laws must state that members' meetings will be held annually. They may provide that members may hold meetings by teleconference or by other electronic means that permit members to communicate adequately with each other. Teleconference meetings generally work best for corporations with a small number of members. The by-laws should set out the minimum percentage of members needed to approve the holding of such meetings. With respect to meetings by other electronic means, the by-laws should address the mechanics of holding such a meeting, for example, procedures for establishing quorum and recording votes. Each member should have equal access to the technology and should consent in advance to the specific means of communication to be used.

    The by-laws may provide that members' decisions are to be made by consensus unless the Act provides otherwise. The by-laws must define the word "consensus" and describe the means of referring any matter to a vote if consensus is not reached. (Decisions by consensus generally work best when corporations have ten or fewer members.)

    If the by-laws indicate that a member may vote by proxy at a members' meeting, they must also specify who may be a proxyholder, that proxies are to be in written form and that either a form of proxy or a reminder of right to use a proxy will be attached to the notice of meeting going to all voting members.

    If the by-laws state that a majority vote determines questions in meetings, the statement must be qualified by "unless the Act or these by-laws otherwise provide".

    If the by-laws provide that a subdivision of members will vote through a representative or delegate at a specified meetings of members, they should explain how that representative or delegate is selected.

    If the members' permanent delegate to the members' meetings is also the individual who represents them on the board of directors, the by-laws must make clear that:
    • in a vote at a meeting that members have requisitioned the directors to call (i.e., a requisitioned vote), the voting members must exercise their right to vote directly (in other words, the members' delegates cannot vote on behalf of the voting members); and
    • in other types of votes, the voting members themselves have the right to attend all meetings of members, even though their vote is exercised by their delegate.
    The by-laws may permit the use of written resolutions or mail ballots (including e-mail ballots). However, certain matters may not be dealt with by written resolutions or mail ballots because the CCA requires these matters to be dealt with at a meeting. The following are examples of matters that must be dealt with at a meeting:
    • approval of changes to the corporation's Letters Patent;
    • change of head office address;
    • request by a director of the corporation for indemnification by the corporation;
    • conflict of interest issues;
    • confirmation of contract by members despite conflict of interest;
    • the holding of annual meetings; and
    • the appointment of an auditor.
    If the use of written resolutions and/or mail ballots is permissible, the by-laws should clarify:
    • what would constitute the equivalent of a quorum, and
    • any special provisions respecting rights of voting and the percentage of votes required for approval. (There is no requirement that written resolutions must be approved by unanimous consent.)
  2. The time and place of the annual meeting.

    The time and place may be stated in the by-laws in general terms. For example, "The annual or any other general meeting of the members shall be held at the head office of the corporation or at any place in Canada as the board may determine and on such day as these directors shall appoint. The members may resolve that a particular meeting of members may be held outside of Canada."
  3. The method of giving notice of an annual or special general meeting to all voting members.

    Various ways of giving notice are acceptable:
    • by mail to individual members;
    • by notice published in a regular newsletter sent to all members individually;
    • if the corporation has more than 100 members, by notice published in a local newspaper circulating in a community where the majority of members reside;
    • if the corporation has a place where members normally congregate, by written notice posted in that location;
    • if the corporation has a place where members normally congregate, verbally, followed by written notice posted in that location or published in a special bulletin or regular newsletter sent to all members individually;
    • by electronic means such as e-mail or facsimile.
    Notice to members' delegates only is not sufficient.
  4. A reasonable period of notice of members' meetings.

    A minimum of 14 days is recommended for notices sent by mail.
  5. The information to be contained in a notice of a members' meeting.

    If special business is to be conducted (that is, other than business that is required to be dealt with at the annual meeting such as appointment of auditors and auditors' report of the financial statements), the notice must contain sufficient information to allow the members to form a reasoned judgment.
  6. The quorum for members' meetings.

    The quorum has to be fixed (fixed number, percentage or determinable formula). It must consist of at least two members present unless the corporation will have only one member in which case the quorum will be one member.
  7. The number or proportion of voting members who have the right to requisition a special general meeting of voting members.

    In order to spare the corporation the great expense of holding a special general meeting solely at the request of an inordinately small number of voting members, it is recommended that the by-laws state, for example, that a minimum of five percent of the voting members are needed to requisition the directors to call a special general meeting.

Directors

The by-laws must provide:

  1. The manner of appointment or election of directors.

    Directors need not be elected at a meeting. Directors may be appointed in any manner specified in the by-laws. This could include the appointment of directors by mail ballots.

    There must be a board of directors, but it may be referred to by another name in the by-laws, for example, board of governors.

    Directors cannot be less than 18 years of age, must be individuals, and must have the capacity under law to contract.

    Directors need not be members.

    Alternate directors are not permitted.
  2. The number of directors.

    There must always be a minimum of three directors. The by-laws may provide for either a fixed number of directors or specify how the number of directors on the board is to be established (for example, by formula, by directors or members or both) and, if applicable, how that number can be changed. If a formula is used to determine the number, this formula must be set out in the by-laws.

    If the number of first directors referred to in the application and the number of directors referred to in the by-laws are not the same, a separate provision must be included in the by-laws referring to the first directors specified in the application and stating when their term of office ends.
  3. The term of office for directors.

    There is no limit on what the term of office may be.
  4. The manner in which directors are removed.

    The by-laws must include a procedure for the removal of directors, including ex-officio directors, by the voting membership (through their delegates, if applicable).

    If specific directors are appointed or elected by a certain group of members, the by-laws may provide that each director is removable only by the group of members who appointed or elected him or her.
  5. The powers of the board of directors to manage the corporation.

    The by-laws must indicate that the board of directors has the power to manage the corporation. The by-laws may specifically exclude and retain certain powers for exercise by the membership at a general meeting.

    Under section 65 of the CCA, the by-laws may provide for the delegation of borrowing powers to any directors or officers of the corporation.
  6. The remuneration of directors.

    There is no limit on what the remuneration may be.

Directors' Meetings

The by-laws must provide:

  1. The procedures for holding a directors' meeting.

    The by-laws must include provisions regarding the time and place of directors' meetings. The by-laws may provide that directors may hold meetings by teleconference or by other electronic means that permit directors to communicate adequately with each other. The by-laws should set out the minimum percentage of directors needed to approve the holding of such meetings. With respect to meetings by other electronic means, the by-laws should also address the mechanics of holding such a meeting, for example, the procedures for establishing quorum and recording votes. Each director should have equal access to the technology to be used and should consent in advance to the specific means of communication to be used.

    The by-laws may provide that directors' decisions are to be made by consensus, unless the Act provides otherwise. The by-laws must define the word "consensus" and describe the means of referring any matter to a vote if consensus is not reached. (Decisions by consensus generally work best when corporations have ten or fewer directors.)

    Mail ballots are not acceptable to replace directors' meetings. However, the by-laws may provide that, in limited cases, if attendance in person or by teleconference or other electronic means is not possible, a director may be allowed to vote at a directors' meeting by means of a detailed voting ballot. The by-laws must provide that the vote in the ballot can be counted only if the motion that is on the floor at the meeting is identical to that contained in the mail ballot. All background material made available to directors at the meeting must also have been made available in advance to directors exercising their vote by mail ballot. A mail ballot cannot replace a director for the purposes of establishing quorum. It is recommended that the by-laws specify how far in advance of a meeting the ballot must be received and by which officer of the corporation. The by-laws should also contain rules specifying how directors who are not attending the meeting will comply with subsection 98(4) concerning declaration of conflict of interest, if they have not already done so at an earlier meeting.

    Proxy voting is not allowed.

    Written resolutions are not allowed to replace directors' meetings.
  2. The method of giving notice of a directors' meeting.

    The by-laws must specify an amount of time that is reasonable for notice of directors' meetings or indicate that reasonable notice will be given.

    If the notice period is specified, a minimum of 14 days is recommended for notices sent by mail.

    The by-laws may state that notice can be waived by directors who attend the meeting.

    Notices sent by electronic means such as e-mail or facsimile are permitted.
  3. The quorum for directors' meetings.

    The quorum must be fixed either by number or by percentage and must be no fewer than two directors.
  4. The voting rights of directors.

    All directors, with the exception of ex-officio and honorary directors, must have a right to vote. The by-laws may also provide ex-officio and honorary directors with the right to vote. The voting rights of all directors with voting rights must be equal.

Officers

The by-laws must provide:

  1. The manner of appointment or election of officers.

    Officers need not be elected at a meeting. Officers may be appointed in any manner specified in the by-laws. This could include, without restricting the foregoing, the appointment of officers by mail ballots.

    If an officer is elected and the individual is not a full-time employee, the by-laws must specify a term of office. There is no limit on what the term may be.

    There is no limit on the type of officer that may be elected or appointed.

    Officers need not be directors or members of the corporation.
  2. The manner in which officers are removed.

    There is no limit on the manner in which officers may be removed.
  3. The basic responsibilities or duties of officers.

    The by-laws must describe the basic responsibilities or duties of each officer. They may also include a statement that duties beyond the basic responsibilities may be added by the board of directors from time to time.
  4. The remuneration of officers.

    There is no limit on what the remuneration may be.
  5. The custody of the corporate seal.

Committee Members

If the by-laws provide for standing committees, they must also provide:

  1. The manner of appointment or election of committee members.

    The by-laws may include a statement that the board of directors may create ad hoc committees from time to time. The by-laws should provide for the manner of appointment or election of ad hoc committee members as well as the manner in which they are removed, and should include provisions for the remuneration of committee members.
  2. The manner in which committee members are removed.
  3. The responsibilities or duties of committee members.
  4. The remuneration of committee members.

Executive Committee Members

If the by-laws provide for an executive committee, they must also provide:

  1. The procedures for holding meetings of the executive committee.
  2. The quorum for executive committee meetings.

    The quorum must be fixed and must be no fewer than two directors.
  3. A reasonable period of notice of executive committee meetings, or indication that reasonable notice will be given.

    If the notice period is specified, a minimum of 14 days is recommended for notices sent by mail.

    Notices sent by electronic means such as e-mail or facsimile are permitted.
  4. The manner of appointment or election of executive committee members.
  5. The manner in which executive committee members are removed.
  6. The responsibilities or duties of executive committee members.
  7. The remuneration of executive committee members.

Execution Of Documents

The by-laws must indicate who has the authority to sign documents on behalf of the corporation.

By-Law Amendments

The by-laws must provide:

  1. The procedure for repealing or amending by-laws.
  2. The coming into force of repeal or amendment of by-laws.

    The by-laws must indicate that the repeal or amendment of by-laws or the enactment of a new by-law relating to the requirements of subsection 155(2) of the Act shall not be enforced or acted upon until the approval of the Minister has been obtained. By-laws that relate to the requirements of subsection 155(2) generally deal with corporate governance issues such as how the corporation is structured and how meetings are to be conducted.

    By-law provisions should not suggest that Ministerial approval will be obtained prior to, or without, membership approval.

    By-laws enacted by the corporation that do not relate to the requirements of subsection 155(2) of the Act do not require Ministerial approval. The by-laws should not suggest that Ministerial approval for such by-laws will be required if it is not necessary.

    By-laws that relate to the requirements of subsection 155(2) deal with corporate governance issues such as how the corporation is structured and how meetings are to be conducted. By-laws that do not relate to these requirements may, for example, deal with activities related to the purposes of the corporation. Accordingly, an association for figure skaters may have by-laws that define what skating jumps are, or an association for professions may prescribe the ethics of that profession. These types of by-laws do not require Ministerial approval.

Auditor

  1. Appointment.

    The by-laws must indicate that the members will appoint an auditor at each annual meeting.

    The requirements regarding who can be licensed to render an audit opinion may vary from province to province. However, the auditor may not be a director, officer or employee of the corporation or of an affiliated corporation, or associated with that director, officer or employee, unless all of the members have consented.
  2. Reporting.

    The by-laws must indicate that the auditor will audit the accounts of the corporation and make a report to the members at the annual meeting.

    An auditor must audit the annual financial statements of the corporation and report to the members at the annual general meeting on whether these financial statements are fairly presented in accordance with generally accepted accounting principles.

    It is important to be aware of the fact that the Canada Corporations Act does not permit a waiver of audit.

Checklist for By-laws

Conditions of Membership

  • who can be a member
  • how a member is accepted into membership (must be voluntary)
  • if more than 1 class of membership: rights and conditions attaching to each class, including voting rights
  • if members may withdraw
    • if members may withdraw, how members may withdraw

Members' Meeting

  • time and place of annual meeting
  • method of giving notice of annual or special general meeting of members
  • reasonable period of notice
  • notice of special business must contain enough information to allow the member to make a reasoned decision
  • quorum has to be fixed (fixed number, percentage or determinable formula) (minimum 2 unless there is only one member) ("members present will constitute a quorum" or "at least X members will constitute a quorum" are NOT ACCEPTABLE)
  • number or proportion of voting members who have right to requisition a special general meeting
    • directors shall call the meeting
  • if unequal voting rights, number of votes for each class of members
  • if meetings by teleconference
    • % of members for approval of holding such a meeting
  • if meetings by other electronic means
    • must permit all members participating in the meeting to communicate adequately with each other
    • each member consents in advance to method of communication and has equal access
    • % of members for approval of holding such a meeting
    • procedures for establishing quorum and recording votes
  • if decision by consensus
    • qualify by "unless the Act provides otherwise"
    • "consensus" is defined
    • means of referring to vote if consensus not reached
  • if proxy right given:
    • who can be a proxy holder
    • proxy must be in writing
    • a form of proxy or a reminder of proxy right to be attached to notice of meeting
  • if majority vote, must be qualified by "unless the Act or these by-laws otherwise provide"
  • if delegate to vote on behalf of subdivision of members
    • how delegate is selected
  • if delegate of members is also representative on board of directors,
    • delegate cannot vote on requisitioned vote
    • members have right to attend all meetings
  • voting by mail ballot for a certain purpose is acceptable unless the Act requires a meeting for that purpose
    • specify quorum and voting requirements
  • written resolutions to approve a certain type of matter is acceptable unless the Act requires a meeting to approve that type of matter
    • specify quorum and voting requirements

Directors

  • reference that board of directors will manage the corporation
    • how elected or appointed
  • directors must be 18, individuals and have capacity under law to contract
  • if not a fixed number (3 or more), a minimum of 3
    • how number of directors is to be established
    • how number of directors is to be changed
  • if number of directors is not the same as in Application, must include statement referring to first directors in Application and when their term will end
    • how number of directors is to be established
    • how number of directors is to be changed
  • term
  • removal by members
    • if appointed or elected by group, may be removable only by same group
  • remuneration
  • alternate directors NOT ACCEPTABLE

Director's Meeting

  • time and place
  • reasonable notice
  • quorum, fixed or percentage (minimum of 2 directors)
  • voting rights (must be equal)
  • if meetings by teleconference
    • % of directors for approval of holding such a meeting
  • if meetings by other electronic means
    • must permit all directors participating in the meeting to communicate adequately with each other
    • each director consents in advance to method of communication and has equal access
    • % of directors for approval of holding such a meeting
    • procedures for establishing quorum and recording votes
  • if decision by consensus
    • qualified by "unless the Act provides otherwise"
    • "consensus" is defined
    • means of referring to vote if consensus not reached
  • mail ballot NOT ACCEPTABLE EXCEPT FOR detailed ballot replacing a director at a meeting
    • motion at meeting is identical to mail ballot
    • documentation/background material available in advance
    • mail ballot cannot replace director for quorum purposes
    • when and who must receive ballot (optional)
    • explain how director attending by ballot will comply with subsection 98(4) re conflict of interest
  • proxy voting NOT ACCEPTABLE
  • written resolutions in lieu of meetings NOT ACCEPTABLE

Officers

  • how appointed or elected
  • specify term if officer is elected and not an employee of corporation
  • removal from office
  • basic duties and responsibilities of each officer specified
  • remuneration
  • custody of the corporate seal

Committees (if applicable)

Table for Committees
  Executive Standing Other
appointment      
removal      
duties      
remuneration      

Executive Committee Meetings (if applicable)

  • when and where
  • reasonable notice
  • quorum (fixed and min. of 2)

Execution of Documents

  • who can sign on behalf of the corporation

Amendments of By-Laws

  • mode of repealing or amending by-laws
  • members approval required before Ministerial approval
  • Ministerial approval required before amendments enforced or acted upon

Auditor

  • appointed by members at each annual meeting
  • to audit financial statements for report to members at annual meeting
  • may not be director, officer or employee of the corporation without consent of all members

Not-for-profit Corporations with more thant one level in their structure

(see the Model By-Laws)

  1. Membership
    Levels at which members are found:
    • the individual / corporate member, or
    • the regional association or
    • different classes of membership for different levels
    • rights and conditions attaching to each class specified
    • how each type of member is admitted to membership
  2. Directors
    • how directors are appointed or elected to office
    • directors must be 18, individuals and have capacity under law to contract
    • removal of directors by all voting members or a subdivision of voting members
    • how meeting may be requisition by voting members for purpose of removal of directors
    • no voting through delegates
  3. Members' Meetings
    • notice of members' meeting to go to actual voting members (not delegates, nor regional associations, nor chapters)
    • if members' delegates to members' meeting is also representative on board of directors of the corporation:
    • actual voting members and not delegates vote on removal of directors
    • actual voting members have right to attend all members' meeting, even though their votes are exercised through delegates
    • how the right to vote is exercised
    • control by the corporation over its chapters
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