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NON-PROFIT CORPORATIONS - Bylaws - Membership - Voting rights

Wednesday, October 04, 2017 @ 8:27 AM  

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Application by the Ottawa Humane Society for a declaration the respondent Society’s bylaw 12, the suspension of the applicant’s agents, and a non-suit clause in a funding agreement were invalid. The applicant, a non-profit, animal welfare registered charity, was the largest affiliate of the respondent, the Ontario Society for the Prevention of Cruelty to Animals. Six of the applicant’s employees had been appointed as agents of the respondent. In 2016, the respondent amended its bylaws and enacted bylaw 10, which removed voting rights from affiliate societies. After the applicant demanded the changes be undone and refused to sign a funding agreement with the respondent, the respondent suspended the applicant’s agents. The funding agreement contained a non-suit clause. Later in 2016, the majority of the affiliates attended an annual general meeting and voted in support of bylaw 12, which changed the respondent’s governance model from an open-membership to a closed-membership model, one with voting rights in favour of the board of directors.

HELD: Application dismissed. Bylaw 12 was lawfully passed. There was no legislative or other accountability owed by the respondent to the affiliates. The respondent was entitled to consider a governance-focused membership, where the voting members were the directors of the organization. The decision of the board was entitled to deference under the business judgment rule. The applicant was in breach of the funding agreement as a result of the current litigation. The non-suit clause was not unconscionable. The suspension of the applicant’s agents was not an arbitrary exercise of discretion.

Ottawa Humane Society v. Ontario Society for the Prevention of Cruelty to Animals, [2017] O.J. No. 4722, Ontario Superior Court of Justice, R. Beaudoin J., September 12, 2017. Digest No. TLD-Oct22017007