What happens if you fail to transition as a member funded society?

Steve
Coal Harbour Marina in Vancouver, BC

On transition, a pre-exiting society which qualifies may become a “member funded society”, a special type of society which is not subject to the reporting, disclosure, and winding up requirements of a typical society. Many societies, particularly closely-held societies, will want this status. It is obtained by adding a statement to the society’s constitution at the time of filing a transition application with the BC Corporate Registry.

But if that deadline is missed, an application to the court is necessary. The particular phrasing of the section is unclear, as is the process for making the application.

STATUTORY LANGUAGE

Section 193(2) of the Act does not allow a society to adopt member-funded society status, “unless the court, on the application of the society, has, by order, declared that the society is not prohibited” from becoming a member-funded society.

PROCESS FOR OBTAINING STATUS

The process for obtaining status under this provision, after transition or loss of this status, is as follows:

  1. The society must meet all the requirements for being member-funded;
  2. The society must pass a special resolution authorizing the required constitution amendment;
  3. The society must make an application to the BC Supreme Court, in the form of a petition supported by an affidavit. This affidavit it should contain enough information for the court to make a decision as to whether the society meets the member funded requirements.  Though there are no cases expressly dealing with this yet, it is likely the affidavit it will be required to contain at least:
    1. Sworn statements from a director or senior manager of the society explaining how the society meets the member funded requirements (including a history of how the organization either gained or lost its original member funded status); and
    2. Financial statements or similar which demonstrate sources of funding to the society  within the relevant time period.

Pending on how British Columbia Supreme Court interprets this provision of the Act,  this process could, instead of going to judges chambers as petitions normally do, be dealt with as some form of desk order or order in writing.

It remains to be seen at how this procedure will be handled by the BC courts. If your organization wishes to take advantage of member-funded status, it should include the appropriate statement in its constitution the time of transition.

Photo by Gullhem Vellet. Used under a Creative Commons license. No changes were made to this image.

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