The new Societies Act introduces “senior managers”, individuals who are appointed by the Board of Directors to manage the activities and internal affairs of a society, or a principal unit of it.
Senior manager is a legal status, and does not affect employment rights. One can only be appointed as a senior manager by the society’s Board of directors, and must meet the qualifications which apply to directors of the society under the Act, and any other conditions or restrictions on their appointment as set out in the bylaws. It is worth noting that unless the bylaws say otherwise, a director of the society may be a senior manager.
WHAT ARE THE BURDENS ON SENIOR MANAGERS?
Senior managers share the same obligations as directors: they must act honestly and in good faith with a view to the best interest of the society; they must meet the standard of care is reasonably and individual in similar circumstances; they must comply with the act and its regulations; and act in accordance with the bylaws of the society. When exercising their powers and performing their functions, they must act with a view to the purposes of the society. They must also avoid conflicts of interest and disclose, or face similar sanctions as directors.
WHAT ARE THE BENEFITS?
However, even with the burdens, there are benefits to being appointed a senior manager. Aside from the administrative benefits of being able to exercise the directors’ authority, senior managers have access to see sections of the act which allowed them to be relieved of liability, either in whole or in part, if they acted honestly and reasonably in the circumstances and ought, in the opinion of the court, to be excused of the liability. This applies where they were negligent, in default, in breach of duty, or in breach of trust.
Senior managers may also be indemnified and receive payment for their expenses in legal proceedings in certain circumstances, and the society may expressly insure the senior manager in their insurance policy.
AM I A SENIOR MANAGER?
As of transition, any person who manages the internal affairs of the society as a whole or who manages a principal unit and who has been placed in that role by the Board is a senior manager. In a sense, it will apply to most Executive Directors and other like persons who from day to day supervise the operations of the society, provided they have been previously selected to do that by the Board.
Post-transition or for new societies, senior managers will be those persons assigned, by the Board, the role of managing some key unit of the society.
I MAKE MAJOR DECISIONS, BUT I DON’T REPORT TO THE BOARD – WHAT AM I?
Persons who are not appointed by the Board may still be subject to significant burdens under the new Act, if they perform the functions of the directors in managing or supervising the activities and affairs of the society by becoming deemed directors. A deemed director is a person who, though not elected by the membership, performs functions for a director.
If one is a deemed director, obligations arise. These include restrictions on employment with the society and on the ability to be remunerated by the society, and the duties to act in the best interests of the society and the duty to disclose conflicts of interest. Some benefits are also available, such as the ability to be relieved of liability in a legal proceeding.
Whether one is a deemed director is a factual test — for example, a bookkeeper who supervises a small staff of payroll clerks is not “managing” or “supervising” the activities and internal affairs of the society merely by performing their job function, nor are they managing a principal unit of the society. Consider a director who has become disqualified, but does not know this and continues to attend meetings and exercise decision making power for the society — this is a much clearer case. In between are the less clear cases, and it is likely traditional corporate law deemed director cases will assist in a court’s determination.
GUIDANCE FROM THE REGISTRY ON SENIOR MANAGERS
In a Frequently Asked Questions document, released in July 2016, the Registry provided the following clarification:
25. What distinguishes a senior manager from a director?
Directors are responsible for the overall direction and management of the society. Senior managers (often called “officers”) exercise delegated authority. Some of the major differences are as follows:
A director is an individual elected or appointed to the position according to the bylaws of the society. Once elected or appointed, the director’s name and contact information must be recorded in the directors’ register that the society is required to keep at its registered office. A director may be removed by special resolution of the members or other method set out in the society’s bylaws. A director’s term of office is from one annual general meeting until the end of the next annual general meeting, unless the bylaws set out a different term. Directors may not be remunerated for acting as directors unless the society’s bylaws allow this (this rule does not come into effect until November 28, 2018 to allow existing societies to make adjustments to their bylaws, if necessary).
Unless the bylaws provide otherwise, the directors of a society may appoint senior managers to exercise the directors’ authority to manage the activities and internal affairs of the society as a whole or in respect of a principal unit of the society. The membership of a society could prohibit the appointment of senior managers. Senior managers take on the duties that are delegated to them by the directors, but the directors remain responsible to the society and may remove the senior managers. A director may be a senior manager, unless the society’s bylaws provide otherwise (and so long as the society is not offside the new Societies Act rule that requires that the majority of the board of directors not be comprised of individuals that are remunerated by the society as employees or contractors).
The addition of senior managers to the act recognizes the reality of many large societies to utilize executive directors, or certain individuals to run subsidiaries, and expressly sets of their obligations in statute, rather than common-law, while providing benefits in the form of indemnity and forgiveness from liability in certain limited circumstances.