GUIDE TO THE NEW LEGISLATIVE FRAMEWORK for the RCMP VETERANS ASSOCIATION

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1 Introduction: The RCMP Veterans' Association (hereafter, Association) is currently federally incorporated under Part II of the Canada Corporations Act (old Act), but prior to October 17, 2014, it will be required to comply with the requirements of the Canada Not-for-Profit Corporations Act (new Act). If the Association fails to apply to continue under the new Act, it will be assumed to have become inactive, and will be deemed to have been dissolved. The purpose of this guide is to provide a concise overview of how the new Act will impact the continuation of the activities and affairs of the Association. It will also include a description of what has been done to prepare for the new Act requirements. In order to be concise, this guide will avoid any protracted discussion of the legal requirements arising from the new Act. Rather, it will attempt to provide a basic approach to how and why practices and procedures of the past will change in the future. To the extent possible, this guide will follow the same sequence as the Act. For those wanting a more comprehensive description than what is in this guide, the Canada Not-for-Profit Corporations Act, the Canada Not-for-Profit Corporations Regulations, Corporations Canada s Transition Guide for Federal Not-For-Profit Corporations, and Making Sense of the New Canada Not-for-Profit Corporations Act by Richard Bridge, should be consulted. Legislative changes were deemed necessary as the old Act dates back to 1917 and was deemed to be substantially inadequate for today s federally incorporated not-forprofit organizations. The old Act essentially provided a skeletal framework for "corporations without share capital", and it was required to be supplemented by comprehensive organizational by-laws to guide corporations in their day-to-day activities, including in part: defining the duties, powers, and liabilities of its directors and officers; establishing the rights and remedies for its "shareholders"; and providing procedural detail for calling and conducting meetings. Revised 28/3/2014 1

2 The new Act, on the other hand, establishes a comprehensive set of principles and a procedural regimen for modern governance, and provides flexibility for corporations to adapt these principles and procedures to better meet each corporation's specific requirements. The new Act also recognizes that modern not-for-profit organizations usually have members, not shareholders, and that they are usually managed and run by volunteers. The language used in the new Act reflects this reality. While the new Act was designed to better facilitate modern business practices in running and managing the activities and affairs of today's not-for-profits, an equally important purpose was to ensure the rights and remedies available to the members of not-for-profits were clarified and expanded. 1. Highlights of the new Act: Incorporation Continuing under the new Act: - As the Association is already incorporated under the old Act, it is not necessary to file new Letters Patent, but rather it must file with Corporations Canada, Articles of Continuance, in prescribed form. This has to be done prior to October 17, The draft Articles have been prepared, and will be presented to the membership prior to, as well as at, the 2013 Annual General Meeting (AGM) in Saskatoon for review and discussion. Other than in form, the Articles make no substantial changes to what the Letters Patent provided. Changes necessitated under the new Act: - The new Act is comprehensive. It provides in great detail for the creation and governance of the Association. As compared to the governance regimen under the old Act, only two by-laws will be mandatory for all corporations; the conditions for membership, and the notice requirements for meetings of members. Everything else is set out in the Act, but often in a manner that is referred to as a "default" position; i.e., the Act may indicate in various sections that what is stated in that section may be varied by one or more mechanisms so as to better meet the specific needs to the Association. If it's not varied then what the Act states in that section prevails by default. For example: Subsection 143(1) of the new Act states: Subject to the articles, the by-laws and any unanimous member agreement, Revised 28/3/2014 2

3 the directors of a corporation may fix the reasonable remuneration of the directors, officers and employees of the corporation. Thus, what is stated above as the "default" position is that the directors of the Association can set reasonable remuneration for themselves, for officers and for employees. But that default can be varied by one of three mechanisms: in the Articles of Continuance; in the by-laws; or by unanimous member agreement (UMA). UMAs are not deemed practical for our Association with 4,600+ members spread across the country: unanimity would be difficult to achieve issue-by-issue. In some corporation structures (e.g., Soliciting Corporations - see below for further explanation) use of UMAs are prohibited in any event (s. 170). Thus, UMAs will no longer be mentioned in this guide as a mechanism to vary default positions. In order to keep the Articles uncluttered, and for ease of later amendment, by-laws were chosen to vary default positions whenever there was a choice. To continue with the above example of remuneration, a by-law is proposed (yet to be approved - to be presented for approval at the 2014 AGM) that: prohibits remuneration for directors as directors; authorizes reasonable remuneration (by honourarium) fixed by the directors for two officers (Secretary and Treasurer); and authorizes reasonable remuneration (by wages) fixed by the directors for employees. In effect, this proposed by-law maintains the status quo of the current regimen. If what was stated in the Act was acceptable, no by-law is proposed to vary it. A second example makes this point. Section 144 of the new Act states: Unless the by-laws of the corporation otherwise provide, a director, an officer or an employee may receive indemnification for their expenses incurred on behalf of the corporation as a director, an officer or an employee. As this provision seems reasonable in meeting our needs, and in fact maintains the status quo, no varying by-law is being proposed, although a by-law does require a process for prior approval of the expense before remuneration will be considered. The implication from these two examples is this. Under the old Act regimen, in order to conduct the Association's business, the membership, especially the executive Revised 28/3/2014 3

4 members (Board of Directors and Officers at the National and Division levels) could adequately cope by knowing only the by-laws of the Association, supplemented by the detail in the Association Manual. Under the new Act, this will no longer be the case. As stated above, except for the two mandatory by-laws, the new by-laws will now be used only to vary the default positions of the Act; i.e., the by-laws will not otherwise repeat what the Act contains. Therefore, in the future, knowing only the by-laws will be insufficient. It will be incumbent on the members, particularly the executive members, to have a good working knowledge of the Canada Not-for-Profit Corporations Act, the Regulations, as well as the by-laws and the Association Manual. 2. Two new concepts arising from the new Act: Two new concepts have been introduced in the new Act which will impact how we have to manage our activities and affairs, especially our financial affairs. (i) Soliciting and non-soliciting Corporations - The major impacts on the new concepts of soliciting and non-soliciting corporations, are the Association s governance structure and the level of financial accountability. A corporation will be deemed to be a soliciting corporation if it receives in any year publicly solicited income and/or government grants in excess of the "prescribed amount" 1 ($10,000). A more expansive and precise definition is found at subsection 2(5.1) of the new Act. The implications of being deemed a soliciting corporation are reflected in the number and sources of directors required (s. 125)(discussed later), the types of audits that are optional or mandatory, and the requirement to file financial statements annually with Corporations Canada. If the Association meets the criteria for a soliciting corporation in any year, it maintains that status for the next three years whether or not it continues to meet the criteria in those subsequent years. (ii) Designated and non-designated corporations - The new Act defines a 1 When the Act refers to "prescribed amount" or "as prescribed", it means the "prescribed" detail, including any dollar amounts, is contained in the Regulations. Revised 28/3/2014 4

5 designated corporation as a soliciting corporation having less than $50,000 in gross annual revenues, or a non-soliciting corporation having less than $1 million in gross annual revenues (s. 179). The implications for being a designated corporation are the types of audits that are optional or mandatory, and whether the corporation can resolve not to have a public accountant (s. 182(1)). The chart below depicts the various audit options. Options respecting engaging a public accountant will be discussed later. Type of Corporation Gross Annual Revenues No Review Review Engagement Audit soliciting less than $50K optional default optional soliciting between $50K and $250K not possible optional default soliciting more than $250K not possible not possible mandatory non-soliciting less than $1 million optional default optional non-soliciting more than $1 million not possible not possible mandatory "Default" in the above chart means that if the audit-type is not "mandatory" for the respective corporation type, and if no optional form of audit has been selected by way of approved by-law, then the "default" audit-type must be undertaken. The requirements to determine whether the Association is categorized as a soliciting or non-soliciting corporation, and/or a designated or non-designated corporation, and the consequences that flow from it, necessitates that the Association's books of account be consolidated, and thereby include the financial statements of all subsidiaries, in our case, all the Divisions (s. 174). While this has probably always been the case, compliance in the past has been more by exception than the rule: full compliance will no longer be optional. At the time of the revision of this guide, preliminary financial information received from Divisions has determined that the Association will be categorized as a soliciting corporation with more than $250,000 gross annual revenue. As such, annual audits are mandatory and must be conducted by a qualified independent public accountant, the choosing of which is done by ordinary resolution (50% + 1) at every AGM. Revised 28/3/2014 5

6 The next portions of this guide will highlight the major differences under the new Act. Where default positions are to be varied, or where the Act provided options, the guide will briefly explain why the variances and options were chosen. 3. Capacity and Powers: The new Act (s. 16) gives the Association the rights, powers and privileges of a natural person without the need for a long list of powers conferred by the Act, or the need for corporate by-laws to confer particular powers on the Association or its directors. However, the Articles and by-laws can establish limits to those powers and privileges. In a few instances, the Articles were used to restrict those powers and privileges when the Act mandated its use, but more often the by-laws have been used. References in this guide to the terms by-laws and Articles means that at this time they are proposed by-laws and Articles. The expectation is that both documents will be presented to the membership prior to, and at, the 2013 AGM in Saskatoon. This will launch the consultation process. At the 2013 AGM, and for the year following, commentary will be sought on these draft documents so that at the 2014 AGM in Ottawa, revised draft documents will be presented by resolution for final approval by the membership. More will be said about the anticipated consultation and approval process at the end of this guide. 4. Registered Office and Records: The Articles specify that the Association s registered office shall be in Ontario: no further specificity is required. The Act requires certain corporate records to be prepared, maintained, retained (usually for six years), and available for access at the registered office, including: the Association s Articles and by-laws; minutes of meetings of members (i.e., Annual General and or Special Meetings); resolutions; any debt obligation documents; and registers of directors, officers and members. The latter three registers must contain certain information as set out in the Regulations (Reg. 2), including: the name of each director, officer or member as the case may be; current residential address; address if consenting to receive information and Revised 28/3/2014 6

7 documents by electronic means; the date each became and/or ceased to become a director, officer, or member; and as far as the member register is concerned, the class of membership; i.e., voting or non-voting. As these registers must be made available or accessible to directors, members, debt obligation holders, and the Director (with a capital D, means a senior government official appointed within Corporations Canada), some with strict limitations and conditions of access, it has yet to be determined how frequently Divisions will be required to update their members lists to the registered office (the National Secretary). That information will be announced in due course, and such detail will likely be set out in the Association Manual. The new Act also requires that adequate accounting records be prepared, maintained, and retained for 6 years. As the Association s accounting records may be subject to independent review or audit, and as accounting records must be consolidated from all Divisions, the types of accounting records that Divisions will be required to maintain and submit to the National Treasurer will also be announced in due course, and also set out in the Association Manual. At the time of the revision of this Guide, Don Belke, Edmonton Division has provided a series of templates for financial records and reporting forms for use by Divisions. 5. Corporate Finance: The new Act at paragraph 28(1)(a) provides that directors may, subject to by-laws, incur debt on behalf of the Association by borrowing on the assets of the corporation and engage in other basic business activities without prior authorization of the members. A by-law has been proposed to slightly vary that position by authorizing the directors to overspend a budget without prior authority, but must report it to the members at the next AGM. A by-law was also written that authorizes directors to incur debt, and to make changes to existing debt, but again, must report it to the members at the next AGM or Special Meeting of members. These by-laws recognize the principle that the directors were elected to manage the activities and affairs of the Association, so let them manage it. There are provisions (s. 130) that allow the membership to remove directors from office during their term if the membership is dissatisfied with the director's performance. Revised 28/3/2014 7

8 The new Act authorizes directors to invest its funds as it sees fit (s. 33), however a bylaw is proposed to limit that authority by requiring the directors to make investments through a licensed investment broker, financial advisor or banker, and requiring that the Association's investment strategy be "conservative", which in investment circles, reflects a medium to low level of risk for the Association's investment principal. Of principle importance, section 30 of the new Act provides that directors may require members to make an annual contribution or pay annual dues, and may determine the manner in which the contribution is to be made or the dues are to be paid. A by-law proposes that the directors will set an amount for annual dues paid to "National" (replacing the concept of per capita dues), and will authorize Divisions to set an amount as they determine appropriate, as an annual contribution towards Division expenses. The mechanisms for paying National dues and making Divisional annual contributions will be set out in the Association Manual (formerly known as the Operations Manual). 6. Debt Obligations, Certificates, Registers and Transfers: This guide will not assess or interpret these very complex and intricate provisions as they are unlikely to be used. But if they are, it is likely that only directors and officers will require being conversant with them. 7. Trust Indentures: Same as for 6 above. 8. Receivers, Receiver-Managers and Sequestrators: Same as for 6 above. 9. Directors and Officers: The new Act treats directors and officers differently than what our current practice reflects, and unfortunately, there is complexity to the description. At present, the Association elects it officers (e.g., President, Vice-President, Secretary, Revised 28/3/2014 8

9 Treasurer) as officers, and its directors as directors, notwithstanding that all sit on the Board of Directors. Furthermore, current by-law 108.1(e) states: The Directors shall head such committees as are required and shall perform such other duties as may be delegated to them by the National President or the Board. Under the new Act, it is the directors who manage or supervise the management of the activities and affairs of the corporation (s. 124), not the National President; and it is the directors who designate the offices and appoint the officers (s. 142), not the National President. Furthermore, directors must be elected 2, although in limited situations, one or more director(s) may be appointed by the Board of Directors (see below). Officers, on the other hand, are appointed and needn't be directors, but elected directors may be appointed as officers [this is an important distinction, and requires careful reading]. The anticipated process for election of directors is that currently serving directors whose term has not expired will carry over their term. If there are an unequal number of directors so created, some directors will thereafter be elected in year 1, initially for 1 year, others for 2 years. Subsequently, all will be elected for a 2 year term. At each AGM, a full slate of directors will be either elected to office at that AGM, or their term will continue until the next AGM (reflecting the staggering of elections). Immediately as the conclusion of the AGM, the Board of Directors shall meet and shall appoint (or elect) from amongst themselves, the President and the Vice- President. The Board, at that same meeting shall also appoint (or elect) from amongst themselves of from amongst any other voting member of the Association, the Secretary and the Treasurer. If the Secretary and the Treasurer are not appointed from within the Board, then they are not members of the Board because they have not been elected to it by the membership. In such circumstance however, a by-law has been written authorizing, as of right, the Secretary and the Treasurer to attend Board of Directors' meetings as non-voting members (only directors can vote at Board of Directors meetings). The only other non-director entitled to attend Board meetings is 2 The processes available to nominate and elect directors at a meeting of members will be detailed starting at page 11, below Revised 28/3/2014 9

10 the Executive Officer (formerly the Executive Director), which entitlement, as a nonvoting member, is also conferred by way of by-law. This conforms to the new Act requirements that directors are to be elected and officers are to be appointed by directors. The possibility of appointing the Secretary and the Treasurer from outside the elected Board provides for the additional flexibility of allowing the Board to appoint persons with the requisite skills and abilities for those offices. The new Act does not require that directors be members of the Association (ss. 126(2)), however that is varied by a proposed by-law requiring all directors to be members (Active or Life Members). As all directors must be elected, the new Act thereby prohibits ex officio directors; i.e., an appointment to director resulting from holding a particular office. Thus, the Past-President, who is currently a Board member, will no longer be a member of the Board unless the Past-President is elected to the Board as a director, but in the capacity as Past-President. If the Past President is not elected as a director, no vacancy is thereby created on the Board. The new Act allows directors terms to be staggered; they can serve no longer than 4 years (a by-law proposes a 2-year term); and may be re-elected. The Articles of Continuance specify the minimum (4) and maximum (11) number of directors. Except for the director qua Past-President, a vacancy on the Board created by a director being elected but failing to fulfill their term, may be filled by appointment by the Board for the unexpired term of the predecessor (the current practice makes such an appointment valid until the next AGM). The appointment by the Board could have been varied by a by-law requiring such a vacancy to be filled only by election by members. However because of the complexities and costs of calling a meeting of members on an urgent basis, the option of not varying the default was chosen. A Board vacancy created by a failure to elect sufficient directors cannot be filled by the Board, and must either remain vacant (as long as there is a quorum (50%+1) of directors), or be filled by election at a Special Meeting of members. The Articles also permit the Board to appoint additional directors, not exceeding 1/3 of the number Revised 28/3/

11 of directors elected at the previous AGM, and such appointment is valid only until the next AGM. If, for some reason, no new directors are elected at a meeting of members, the incumbent directors continue until the next election of directors. A director can be removed by ordinary resolution (50%+1) of members (s. 130(1)). The members may fix or change the number of directors to be elected by an ordinary resolution at an AGM as long as the number is between the minimum and maximum number stated in the Articles. The members may also amend the minimum or maximum number stated in the Articles, but this requires a special resolution (not less than 2/3 of those entitled to vote), and also requires an amendment to, and refiling of, the Articles of Continuance, for which a re-application fee will be assessed. A non-soliciting corporation must have at least one director; and a soliciting corporation must have a minimum of three directors, two of whom can be neither officers nor employees of the corporation. As the proposed Articles and by-laws provide for a minimum of 4 directors, two of whom cannot be appointed as officers, and none being employees, the statutory directors' requirements are thereby met while the Association is deemed to be a soliciting corporation. A process to nominate directors for upcoming vacancies on the Board is provided for in the by-laws in a manner that is somewhat similar to current practice. One major difference is with respect to current by-law which states that Nominations by any other method than through the Nominating Committee shall be invalid. In fact, the new Act provides for two additional valid methods for nominations: by written proposal (discussed in part (iii) below), and by nomination from the floor at a meeting of members, neither of which can be varied or prohibited by by-law. The Board of Directors may meet at any place and on any notice that they determine, and shall meet at least once a year. They may meet by telephone or by other electronic means, and if so participating, are deemed to be present at the meeting. By contrast, the by-laws specifically prohibit members from attending a meeting of members (AGM or Special Meeting) by telephone or other electronic means, but more will be said about this later. Also, and unlike for members at a meeting of Revised 28/3/

12 members (AGM or Special Meeting), directors may not be represented by proxy at a meeting of directors. The new Act contains extensive provisions (s. 141) for directors to make initial and on-going disclosure of interest in a material contract or material transaction, and a director making a disclosure of interest shall not vote on any matter relating to that contract or transaction. Ultimately, a court, on application of the Association or any of its members, may set aside a contract or transaction if the required disclosure is not made in accordance with the Act. Unlike the current by-law , which states: Officers of the Association and members of officially appointed committees shall not be liable for any act, or the results of any act, carried out in the name of the Association, under the new Act, directors may be held liable for employees' wages for work performed for the Association not exceeding six month's wages; and may be held liable for any obligation or debt of money or property paid to a member, director or officer in a manner contrary to the Act. A particular director may avoid liability by specifically dissenting on a resolution approving the decision, either at the meeting or within 7 days of becoming aware of the decision, if not at the meeting. In order to protect against potential personal liability, the standard of care required of directors and officers in exercising their powers and performing their duties, as set out in s. 148, must be met. It requires them to act honestly and in good faith with a view to the best interests of the Association; and requires them to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. This is an objective standard, which means a director may not be able to claim his/her actions were sufficient given his/her level of knowledge and expertise. In other words, there will be an expectation that all directors, including newly elected ones, have a working knowledge of their respective authorities (Act, Regulations and by-laws) before exercising powers and performing duties. Directors will be able to claim a due diligence defense if they rely in good faith on Revised 28/3/

13 reports (e.g., financial statements) made by a person whose profession lends credibility to a statement made by that person. As long as the director or officer acts honestly and in good faith, they would be entitled to indemnification from the Association (by way of liability insurance) for any damages awarded. 10. By-laws and Members As stated above, the new Act mandates two by-laws. A by-law setting out the conditions of membership is required by s. 154; and the notice requirements for the meetings of members is required by ss. 162(1). The provisions dealing with by-laws and with members are both important and detailed, so will be dealt with separately By-laws: It is intended that the Association will have only one set of by-laws; i.e., those National by-laws that are authorized to be made under the new Act. To supplement the by-laws with required procedural details, the by-laws will authorize a National Association Manual to be formulated and maintained. Divisions also will be authorized to formulate and maintain their own Division Manual which should set out all the necessary detail to conduct the affairs and activities within respective Divisions. The terms Association Manual and Division Manual were selected solely to distinguish between National policy and Division policy manuals. As stated above, only two by-laws are mandatory. All other by-laws are written only to vary the default positions of the Act, and only when specifically authorized by the Act. Also, the by-laws must be filed with Corporations Canada within 1 year of being approved by the membership (s. 153), unlike the Articles of Continuance which must be filed on or before October 17, The Association intends to file the Articles of Continuance and by-laws at the same time. Also, unlike the by-laws under the old Act which must be reviewed and approved by Corporations Canada before they have force and effect, by-laws under the new Act must merely be filed, and have force and effect at soon as they are approved by the members, or on a date specified in the by-laws. The new Act (s. 152) states that: directors may by resolution make, amend and repeal Revised 28/3/

14 any by-law (except those listed in s. 197(1), called "Fundamental Changes"); such bylaws have effect on the date of the resolution of directors; such by-laws must be presented to the membership at the next meeting of members, at which meeting the membership may confirm, reject or amend the by-law; and the effective date of any amendment to, or rejection of, the by-law, is the date of the members' vote. A by-law varies this procedure by stating that a by-law made, amended or repealed by the directors is effective only from the date it is confirmed, or accepted as amended, by the membership at a meeting of members. These accord with current practice Members: It is mandatory for the Association to have a by-law specifying the conditions of membership in the Association. A by-law states that only individuals may be members, thus eliminating any possibility that another corporation or other entity may be a member - which is otherwise allowed by the new Act. A by-law states there are two classes of membership: voting and non-voting, and this also accords with Section 8 of the Articles which sets out these two classes of membership. Within the class of voting member, there are two categories: Active and Life Member. Each of the two categories has defined eligibility criteria which are to be detailed in the by-laws. The criterion for Life Member as a category of membership under the new by-laws is the Life Member must have been so appointed prior to the adoption of the new by-laws. In other words, after the new by-laws are approved, no new Life Members will be appointed as a separate category of membership, however the rights and privileges of existing Life Members shall be preserved; i.e., grand-fathered. The reason for making this change is explained below. Currently, within the class of non-voting member, there are several categories: Transitional, Associate, Honourary, Honourary Life, Honourary Officer, Honourary President, and Patron. For the same reason that an appointment to Life Member has changed, each of the non-voting categories has been reduced to one non-voting category: Associate Member. Revised 28/3/

15 The justification for these changes originates from the application of section 199 of the Act. This provision allows for members of a class or group (category) of members to vote separately as a block on certain amendments that directly or indirectly affect their rights and privileges. When they vote as a block, each block of votes has to pass by the required majority before the amendment is considered to be adopted by the required majority of all members. Thus, a relatively small class or group of members has an effective veto over certain amendments, and can possibly thwart the will of the majority of members. Furthermore, by subsection 199(2), this ability to vote separately as a class on those types of amendments applies whether or not that class or group otherwise carries the right to vote. In order to reduce the impact of block or class voting and the potential for vetoing those types of amendments, it was believed prudent to reduce the number of categories of membership to the absolute minimum. Before leaving the subject of the change to Life Member, it may be helpful to explain that Life Member has been retained as an award of recognition, but not as a category of membership (except for those who have been grandfathered). It is proposed that an Active Member, who has made a significant contribution to the affairs and activities of the Association at the Division or National Level, may be recommended for recognition by a Division credentials committee or by the Board. If recommended by the Board, the Board shall refer that recommendation to the Division to which the member belongs. If a recommendation is approved by a 2/3 majority vote at a Division General meeting, the member will be presented with a Life Member award. Such an award, although known as "Life Member" award, will not constitute a category of membership, but rather that member will remain as an Active Member. A Life Member award may be recognized by way of a certificate signed by the Division President, as well as being given an appropriate lapel pin. Other than meeting qualifying criteria, further conditions of membership are that all must apply; they must pay an appropriate fee if a fee is required to be paid for the category of membership being applied for; and the application must be accepted by a Division credentials committee (or vote of the membership for certain Associate memberships) in accordance with the by-laws. A member may apply for only one Revised 28/3/

16 category of membership, but as a member may, through time, meet different qualifying criteria, their membership in one class or category may end, and be transferred to another class or category. This detail is necessary as the Act requires that if there are two or more classes of membership, the by-laws must provide the conditions of membership for each class or category, the manner of withdrawing from or transferring between classes or categories, and the conditions under which membership in a class or category ends. The required details are precise in order to protect the members' right to being a member of an appropriate class and/or category and to prevent that right from being arbitrarily altered. In keeping with the desire to reduce the number of membership categories, special appointments have been authorized to be made to distinguished individuals the Association has historically honoured: the incumbent Commissioner as Honourary National President; the Governor-General as Patron; and the incumbent Commanding Officer of a Division or of a policing jurisdiction as Honourary Division President. These special appointments allow the Association to maintain its traditions without creating distinct categories of membership: these appointments are in effect made without offering membership in the Association. One addition has been proposed, and that is to authorize Divisions to appoint a Provincial or Territorial Patron, should the Lieutenant-Governor or the Territorial Commissioner accept such appointment. The by-laws also broaden the types of former employees of the RCMP who are eligible to be Active Members, and establishes minimum service criteria to be so appointed or to be appointed as an Associate Member. The various criteria are set out in Part VI of the by-laws (which see), and are too detailed to repeat in this Guide. There are a couple of provisions in the Act, at first glance, may appear unusual; one a default position, the other a mandatory provision. Each will be described. The new Act states a membership may be transferred only to the Association (i.e., and not to another individual). To avoid any confusion, a by-law is proposed simply Revised 28/3/

17 stating that a membership may not be transferred. A member may however resign his/her membership, or a membership may be suspended or terminated for cause. By-laws specify the reasons that may lead to membership suspension or termination, as well as procedures for initial decision-making and for appealing that decision. To avoid this guide becoming too "legal", the specific detail will not be described further, but it will be available in the proposed by-laws. The other provision states that in some limited, but important, matters even nonvoting members can vote. As this may cause some initial consternation, this guide provides a summary description of those matters, all of which are found in Part 13 of the Act; i.e., "Fundamental Changes": certain changes to membership classes, rights and conditions (s. 199); decisions to dissolve or amalgamate the Association (s. 206); and other than in the ordinary course of the Association's activities, to sell, lease, or exchange all or substantially all of the property of the Association (s. 214) Meetings of members: Meetings of members in this guide and in the by-laws, means a National Annual General Meeting (AGM) or a National Special Meeting, and does not mean directors' meetings or any meetings at the Division level. The new Act requirements for calling and conducting meetings of members are detailed, but also are important as they ensure members have full opportunity to participate in decisions affecting the Association. The new Act requires that meetings of members be held annually. The Regulations impose some rigid time frames for holding meetings; i.e., not later than 15 months after the preceding annual meeting, but not later than 6 months after the end of the preceding financial year (ss. 160(1)). Such meetings shall be held in Canada, at a place specified in the by-laws or as determined by the directors. Meetings may be held at a place outside Canada, but unanimous member approval of that specific place is required. While the Act authorizes attendance at meetings of members by Revised 28/3/

18 electronic means, due to the enormous potential cost and complexities of electronic meetings for almost 6,000, a by-law proposes to prohibit such method for meetings of members, other than for electronic voting (discussed below) Notice Requirements for Meetings of Members: Subsection 161(1) of the new Act authorizes the directors to fix a "record date" within a prescribed period (21 to 60 days - Reg. 62)) to determine: (a) the members entitled to receive a Notice of Meeting of members; (b) the members entitled to vote at a meeting of members; (c) the members entitled to participate in a distribution of assets on liquidation; and (d) the members for any other purpose. In effect, the "record date" will serve as a "closing date" by which members must qualify (e.g., pay dues, apply for membership, etc.) in order to receive a notice of meeting and/or be permitted to vote. The record date fixed by way of by-law is 45 days prior to the date of the meeting for (a) and (b), and 60 days prior to the event for (c) and (d). If no record date has been fixed, subsection 161(2) fixes alternative dates of record. The Act and Regulations contain detailed information regarding the methods available to give Notice of Meetings of members, including the form, timing, and content of such notices. (i) Form: The Regulations (Reg. 63(1)) prescribe four methods for the Association to provide Notice of Meeting of members: (a) by mail, courier or personal delivery; (b) by telephonic of electronic communications; (c) by affixing a notice to a notice board used regularly to post activities; and (d) for corporations with more than 250 members, by publication once a week for three weeks prior to the meeting in one or more newspapers, or once in a publication of the Association sent to all members. As the Association doesn't have the mechanisms to provide notice by options (c) and (d), they were eliminated in favour of (a) and (b). It is expected that Notices of Meeting will be distributed through Divisions, primarily through electronic means, and for those with no capabilities, by post. If the Association has no by-laws or Revised 28/3/

19 the by-laws are defective regarding the distribution of Notices of Meeting, default delivery is by post. (ii) Timing: Strict time limits are prescribed for each method of Notice delivery. Delivery by electronic means must take place 21 to 35 days prior to the day of the meeting. Delivery by post must take place 21 to 60 days prior to the day of the meeting. (iii) Content: The Notice shall contain the time and place of meeting. It shall also state the nature of the business to be transacted at the meeting in sufficient detail to permit a member to form a reasonable judgment on the business, and shall state the text of any resolution to be submitted to the meeting. Other business transacted may include consideration of financial statements and the public accountant's report, election of directors, and the re-appointment of the incumbent public accountant. A member entitled to vote at a meeting of members may submit, within a period of 90 to 150 days prior to the anniversary of the previous AGM, a written "proposal", not exceeding 500 words, and may describe any other business to be transacted at the meeting. If the proposal includes nominations for the election of a director, it must be signed by not less than 5% of the members entitled to vote at the meeting. A proposal complying with the prescribed requirements must be included in the Notice of Meeting, however the member submitting the proposal shall pay the corresponding additional costs, if any (ss. 163(4)). There are other details relevant to proposals contained in s. 163, however they will not be included in this guide Quorum: The quorum for a meeting of members is proposed by by-law to be 5% of the members entitled to vote at the meeting; the 5% being comprised of members present at the opening of the meeting in person or represented by electronic voting (s. 164) and Reg. (70). Revised 28/3/

20 Voting: The prescribed methods of voting at meetings of members will be unlike current practice. The new Act states that members not in attendance at the meeting may not vote. A by-law can vary that by allowing members not in attendance to vote, but only if the Association provides in the by-laws for one or more of the 3 methods prescribed for absentee voting. The 3 possible methods (Reg. 74) include: by proxy; by mailed in ballot; and voting by telephonic or other electronic means. Each of the options has specific requirements to meet. Mailed in ballot and electronic voting requires votes to be gathered in such a way as to enable verification of voting eligibility, and enabling the tallying of votes in such a manner as to prevent the Association from knowing how each member voted; i.e., blind voting. Currently, a Division "delegate" carries all proxy votes for all Active and Life Members in their Division, and votes these proxies en bloc", most likely based on Division meetings where either by local vote or by consensus, the Division delegate learns of the voting wishes of the majority of its members. Thus, if the majority of those at a Division meeting support a resolution or a candidate for election, the Division delegate usually delivers all of the Division's votes accordingly (except for those Division members who are present at the meeting, and who vote as they see fit). Under the new Act, proxy voting would be different. Every member entitled to vote, but not intending to be present at the meeting, may identify a proxyholder who will vote in accordance with the member's written directions. A proxyholder will not be permitted to re-assign a proxy. A standardized proxy form provided by the Association, or a proxy form of the member's own design conforming generally to the prescribed requirements, will be used to provide the written direction. The member may indicate precise choices to be voted, or may give the proxyholder discretion on any or all votes to be cast. The member must sign the proxy, and it must be verified by scrutinizers before votes are cast. A proxyholder may carry numerous proxies, and perhaps of different vote choices, and must vote accordingly and not en bloc. If a Revised 28/3/

21 member otherwise entitled to vote at the meeting is neither present in person nor by proxy, they would have no vote to cast. There are some very practical difficulties with the new form of proxy voting. The sheer volume of paper (proxy forms) being carried to AGMs and the requirement to validate each proxy before any votes can be cast may be a logistical nightmare for a hosting Division. Instead, a form of electronic voting is being developed which is very cost-effective and efficient. Essentially, each member eligible to vote will receive via from a 3 rd party service provider, and ballot showing all the necessary detail. For those members who do not have capability, the same 3 rd party service provider will distribute and collect paper ballots by mail. The service provider will be responsible for receiving all ballots cast, for validating cast ballots against a voters list, and for reporting the results to the Secretary at the AGM. Appropriate time-lines have been developed to allow this type of voting transaction. The obvious disadvantage for this type of voting relates to those nominations for director that are made from the floor: only those physically present at the meeting may vote on such a nomination. That however may be the risk of making floor nominations. For those who don t want to take that risk, there are two other available mechanisms for making nominations. For those members who attend the AGM, rather than casting an e-vote, they will vote at the meeting by either secret ballot (for elections) or by show of hands (for other resolutions). Voting may be by show of hands, or by secret ballot if demanded by a member. Ordinary resolutions require a simple majority (50% +1) based on votes cast; special resolutions, when mandated, require not less than 2/3 majority approval. 11. Financial Disclosure: Comparative (i.e., current and preceding financial year) financial statements Revised 28/3/

22 conforming to the generally accepted accounting principles set out in the Chartered Accountants Handbook or Public Sector Accounting Handbook (Reg. 75), must be placed before the members at all annual meetings. As the annual general meeting must take place not later than 6 months after the end of the preceding financial year, the financial statements placed before the members likewise must cover a period ending not more than 6 months before the annual meeting. The report of the public accountant, if any (see below), must also be placed before the members (ss. 172(1)). The financial statements of the Association shall be the consolidated statements comprised from each subsidiary (Division), and each Division's financial statement shall also be kept at the registered office (ss. 174(1)). The Association Manual will describe the format for Divisions to send in their financial statements. In addition to placing the financial statements before members at the annual meeting of members, member access to financial statements must be provided, and is made by sending 3 a copy to every member, except to those who decline in writing to receiving them (ss. 175(1)); or by giving notice to all members that the statements are available at the registered office of the Association, or will be mailed to a member requesting them (ss. 175(2)). 12. Public Accountant: Subsection 181(1) requires the members at an AGM to appoint a public accountant until the close of the next annual meeting. This will be a standing resolution at each AGM. The public accountant is entitled to attend an annual meeting of members at Association expense (ss. 187(1)). A public accountant must be professionally qualified and be independent: i.e., be a member in good standing of an institute or association of accountants; meet the professional requirements to conduct review engagements and audits, and review and report on prepared financial statements. The requirements for independence are 3 Documents or information required to be sent to members may be satisfied by providing an electronic document provided the member consents to receiving electronic documents (ss. 266(2)). Otherwise, documents shall be provided by pre-paid mail or delivered personally (ss. 272(1)). Revised 28/3/

23 set out in subsection 180(2). As per the chart at page 5, whenever the Association is mandated to carry out an audit, it must be conducted by a public accountant (s. 189). 13. Fundamental Changes: This guide will not describe all of the provisions listed in subsection 197(1) that require a special resolution of the members (not less than 2/3 vote), but rather will summarize the types of provisions. They include such matters as changes to the conditions and rights of membership, changes to the minimum or maximum number of directors required, modifying anything contained in the Articles, and dealing with the distribution of assets upon dissolution. 14. Liquidation and Dissolution: Same as for 6 above. As stated in the Section 9 of the Articles of Continuance: On liquidation, any property of the corporation remaining after the discharge of any liabilities of the corporation, including the corporation s obligation to return any property a person has transferred to the corporation subject to a condition that it be returned on the dissolution of the corporation, shall be distributed to one or more qualified donees, within the meaning of subsection 248(1) of the Income Tax Act. 15. Investigation: These provisions authorize a court with jurisdiction in the place where the Association has its registered office, on application by a member or debt holder, to direct an investigation to be made of the Association, and to appoint an inspector and giving the inspector all the necessary powers to conduct the investigation. The details of this Part will not otherwise be described. 16. Remedies, Offences and Punishment: A present or former member, including a director, has a right to apply to a court to commence a suit on behalf of the Association against directors and officers (s. 251), or to intervene in any legal action in which the Association is already a party (s. 252). Members may also seek court redress for any actions of the Association, or its directors or officers, that may be oppressive, unfairly prejudicial, or unfairly Revised 28/3/