Running a nonprofit operation is never easy, but the Societies Act adds an extra layer of complexity for organizations operating in the province of British Columbia. Enacted on November 28th, 2016 as a new governance regulatory framework, many societies and not-for-profit entities are now in the process of transitioning to the new act as the November 28th, 2018 deadline quickly approaches. Here is what you need to know to make the transformation as simple as possible.
What is the Societies Act?
The Societies Act is a new series of guidelines that addresses how societies incorporated in British Columbia must be governed. An update to the Society Act, the previous piece of legislation addressing regulation for societies, this new policy is designed to both increase flexibility as well as to better protect the public's interest. By law, all societies in BC must transition to the new act by November 28th, 2018, two years from the date the act the was passed. On this day, any non-transitioned society may face punitive charges, obstructing the course of ordinary business.
Facilitating an easy transition
When the Societies Act passed in 2016, few societies jumped right into action. With two years to prepare, most nonprofits assumed that there would be plenty of time down the road to address the necessary steps in transition. However, that two years is rapidly coming to an end; societies in British Columbia now have just ten months to ensure compliance.
For some societies, the transition will entail little out of the ordinary, but for others, an overhaul of both procedures and governance will be required. Understanding the major changes and best practices can help ease the transition process, ensuring societies are fully prepared for what lies ahead.
Filings and reports
As a part of the switch to the Societies Act, all BC societies must be up to date on all significant reporting and filing requirements. While seemingly daunting for larger organizations, most of these filings can be completed at any time before the transition date. This includes:
- An updated statement of directors and registered officers
- Current annual report filings
- Any changes to the organization’s constitution and bylaws, including adhering to new requirements; specifically, constitutions under the societies act can only include the society's name and purpose, with all other statements and conditions existing as bylaws
- A completed transition application
For organizations with available capacity, it is recommended that a committee be formed to ensure these tasks are completed. Transition applications should only be submitted when all filing requirements are met.
Bylaw changes can be made after transition if necessary; any changes made prior to November 28th, 2018, requires a 3/4 vote, while any adjustments after only require a 2/3 vote.
Differences between society types
Previously, under the Society Act, virtually all forms of societies were treated relatively equally, with a main exception including asset distribution upon winding up for non-charitable societies. The new act, however, separates member-funded versus non-member-funded organizations in several distinct ways. It is important for entities to be clear on these differences. For the sake of the Societies Act, member-funded organizations are those funded primarily by the organizations members for the benefit of the members. Any society receiving any outside funding cannot be classified as member-funded.
Under the new act, only member-funded societies can convert to for-profit entities and/or distribute assets without restriction upon winding up. Further, member-funded societies are subject to reduced accountability and disclosure requirements.
Societies should also note the following notable changes:
- Remuneration to directors must be reported for all non-member-funded societies in financial statements
- Asset disposal now follows stricter rules, including a receipt of full consideration and payment in furtherance of a society's purposes
- Senior managers and directors must be at least 18 years of age, or 16 to 17 under special circumstances
- A majority of directors must not be employed by the society or be under any other kind of contract for services
- Directors must formally consent to be directors in writing
- Directors may be held personally liable for misuse of a society's money or assets
The prospect of changing how your organization is governed can be a challenge, but many of the requirements mandated under the Societies Act are beneficial to both societies and the public at large. With a little preparation and planning, it's possible to navigate the transition with ease in advance of November 28th, 2018.
Chris Adams-Brush is an Accounting Manager at Enkel, an accounting firm offering high-end bookkeeping services to small and medium-sized organizations. With a great deal of experience in accounting and audit, Chris focuses on helping not-for-profit organizations to better manage their bookkeeping and streamline their internal processes.