ONTARIO DISC SPORTS ASSOCIATION

INCORPORATION, LIABILITY and GOOD GOVERANCE

NATURE OF A CORPORATION

• An Artificial Person• A legal entity• Separate and distinct in law

from its members• Perpetual

OWNERSHIP

• Shareholders/Members own the Corporation through their membership/shares of the Corporation.

• Shareholders/Members do not own business or the property belonging to the corporation.

• Not-for-profit corporation may not be operated for gain of its members, directors or officers. (Directors may receive reasonable remuneration and expenses for acting as a director)

Should You Incorporate?Advantages• Separate Legal Entity• Carry on business• Sue and be sued• No personal liability (debts, lawsuits)• Perpetual• Corporate Shield• Buy, Sell, Mortgage Property• Borrow Money• Enter Contracts and Leases• Employ Persons

Should You Incorporate?Disadvantages• Initial Filing Fee• Supervision by the Government• Administrative Requirements

– Minutes– Financial Statements

• Affairs in accordance with the Corporations Act– Audits– Elections– Calling of Meetings– Bylaws

Corporations Act Requirements

Head Office Situated in OntarioDirectors No fewer than 3Annual Meeting Every 15 monthsElection of Directors Election or by virtue of

office.Quorum BOD not less than two fifths.Audit Mandatory unless revenue less than

$100,000 and all members consent.

Record Keeping Requirements

• Proper Books of accounts and accounting records

• Minutes of meeting of members and directors

• Maintain copies of the Letters Patent, Bylaws and Resolutions

• Register of its Members and Directors

WHAT IS A DIRECTOR?• An individual who is a member of the

governing board of an organization• Responsible for overseeing the operation of

the organization on behalf of its members• Have a relationship of ‘trust’ with the

members, from which arise legal duties• Manage and supervise the affairs of the

organization.• Exercise all of the Powers of the organization.

LEGAL DUTIES OF DIRECTORS

• Diligence to act honestly, reasonably, prudently, in good faith and with a view to the best interests of the organization and as a reasonably prudent person.

• Loyalty to not use one’s position as a director to further private interests

• Obedience to act within the governing bylaws and within the laws and rules that apply to the organization

Disclosure of Interests

• Every director must declare any indirect or direct interest in in a proposed contract (Section 71.(1)) at a meeting of directors.

• Disclosure must be immediate and in writing.

Conflict of Interest• “Conflict of Interest” – A real or seeming

incompatibility between one’s private interests and one’s fiduciary duties.

• “Pecuniary Interest” - An interest that an individual may have in a matter because of the reasonable likelihood or expectation of financial gain or loss for that individual, or another person with whom that individual is associated.

• “Non-Pecuniary Interest” - Family relationships, friendships, volunteer positions in organizations or other interests that do not involve the potential for financial gain or loss.

• “Perceived Conflict of Interest” – A perception by an informed person that a conflict of interest exists or may exist.

Indemnity of DirectorsIndemnity - To restore someone to the same financial position as before•Section 80:

– Upon consent of the organization, directors may be indemnified out of the funds of the organization from costs, charges and expenses related to any action or law suit.

• The director acted honestly and in good faith, in the best interests of the organization.

• Reasonable grounds to believe the conduct was lawful.

– Directors may be personally liable for unpaid employment wages.

Protecting Yourself as a Director

• Understand the mission of the organization.• Commit to doing the job well.• Ask for a written job description.• Educate yourself about your legal duties.• Ensure the board can govern effectively and provide

competent direction.• Confirm the organization indemnifies its directors and carries

directors liability insurance.• Disclose any real or perceived conflict of interests and ensure

it is recorded in the meeting minutes.• Ensure all decisions are not rushed and proper materials are

received and reviewed.

Protecting Yourself as a Director

• Review regularly the financial reports and budgets.

• Know who is authorized to sign cheques.• Ensure contracts entered into are reviewed.• Have a copy of the organization’s policy

manual.• Be familiar with the organization’s constitution

and bylaws.• Support professional development.

PERFORMANCE EXPECTATIONS OF BOARD MEMBERS

• Give ample notice, with reasons, if you are unable to attend a meeting

• Everything that you would like to present to the Board, put in writing

• Read minutes before the meeting, identify errors, and note actions that were to be followed up

• Develop a working knowledge of meeting procedures

• Keep delicate matters confidential

• Participate in the maintenance of friendly, positive working relationships

• Speak positively of the organization to the public

• Disclose any conflicts

Good Governance

ONTARIO DISC SPORTS ASSOCIATION

GOVERNING DOCUMENTS

Give the sport organization:

•Structure

•Power•Methods by which it governs or rules itself

SPORT ORGANIZATIONS RUN INTO TROUBLE WHEN:

• They do not set out rules [policies] or procedures to deal with something

• They set out rules [policies] but they are incomplete, vague or contradictory

• They set out rules [policies] but then choose not to follow them

• They have rules [policies] that do not “fit” with their culture or their resources

POLICIES ARE YOUR BEST FRIEND

• They provide you with a guide for your actions

• They help you to avoid a problem or crisis

• In the event you cannot avoid a problem or a crisis, they will help you to act uniformly, consistently and fairly in how you manage your problem or crisis

STRUCTURE & PROCESS

Corporations ActCorporations Act

Constitution (Purposes)Constitution (Purposes)

By-laws

Key Governance Policies

Other Policies

BYLAWS• Bylaws are the foundation of the private

organization’s contract with its members.

• This contract provides the legal authority to establish and enforce the rights, privileges and obligations of membership.

POWERS OF THE BOARDExcept as otherwise provided in the Act or this bylaw, the Board has the powers of the Association and may delegate any of its powers, duties and functions. Without limiting the generality of the foregoing:a) The Board may make policies, procedures and regulations for managing the affairs of the Association in accordance with the Act and this bylawb) The Board may make policies, procedures and regulations relating to the discipline of members, and shall have the authority to discipline members accordingly (continued)

POWERS OF THE BOARD (cont’d)

d) The Board may establish committees to assist in performing the work of the Association, and may delegate authority to committeese) The Board may employ such persons as it deems necessary to carry out the work of the Association

KEY GOVERNANCE POLICIES

Selection -> award benefits in sport

Conduct, Discipline, Harassment -> revoke benefits of sport

Appeals, Mediation, Arbitration -> disputes over allocation of benefits

Personnel -> employees, volunteers, contractors

Conflict of interest -> statutory requirements

Privacy -- > protects personal information

“For many sport organizations, it is a sobering lesson to learn that policy is what’s written on the paper and not what’s in the mind of the drafters of the policy, or in the collective memory of the organization”

[Your Risk Management Program: A Handbook for Sport Organizations, 1998]

POLICY WRITING• Be clear! - Show your policy to an

outsider to see if they understand it• Be concise! – Do not use three words

when one will do• Be consistent! - in your use of terms• Be friendly to your reader! - make ample

use of headings, subheadings, bullets

POLICY TEMPLATE

1. Statement of purpose of the policy2. Scope and application of the policy (what

and whom does the policy apply to?)3. Exclusions from the policy (what does the

policy not apply to? - just to be safe!)4. Policy “scheme” (who does what, when,

how)

SELECTION - WHAT SHOULD BE IN POLICY

• Purpose (selection of what, for what)

• Goals for selection• Authority for selection• Criteria to be eligible to

be considered for selection

• Criteria to be selected• Process for selection

• Timeline for selection• Exceptions to selection

policy• Dealing with unexpected

circumstances• Criteria to remain selected• Who will make selections• Appeal

WHAT SHOULD BE IN A CODE OF CONDUCT

• A statement of the organization’s values, beliefs and expectations of members and participants. This is usually a “positive” statement.

• The standard of behavior which is expected is further defined by giving examples of conduct which breaches that standard. This is usually a series of “negative” statements.

WHAT SHOULD BE IN DISCIPLINE POLICY

• Purpose• Application• Reporting an

infraction/making a complaint

• Minor v. Major infractions• Investigation Discipline

Panel• Preliminary meeting

• Hearing• Decision as to whether

there is a breach• Sanctions in the event

there is a breach• Serious infractions and

automatic sanctions• Confidentiality• Appeal

PROCEDURAL FAIRNESS

1. Authority - authority to make a decision has been delegated to the decision-maker

2. Right to a hearing - the person affected has a reasonable opportunity to present his case

3. Rule against bias - the decision-maker listens fairly to both sides to reach a decision untainted by bias

The content of “fairness” is not the same in every situation. It is a spectrum that depends on the seriousness of the sanction and the impact on the individual.

FAIRNESS

APPEAL POLICY

• What may be appealed• Grounds for appeal• Who does what & when• Scope of authority of decision-

makers• Arbitration

“Sound policies lead to informed and transparent decision-making and such decision-making results in improved management of

time, resources, disputes and risk exposures. Together, these are the hallmarks of

good governance.”

SOME THINGS WE’VE LEARNED

• It is definitely better to have policy than to not have it

• “The law should remain stable but must not stand still…”

• The law expects you to have policies and does not relieve you of this responsibility because you’re non-profit, because you’re small, because you don’t have the resources, because you don’t have time, because ….

Steven Indig

sji@sportlaw.ca

905-482-8987

www.sportlaw.ca