Understand that these initial claims are often intended to intimidate you or at least bring you to the table to give them something for free without them having to incur the major expense of taking you to court. So take a deep breath and get into the habit of separating out the bluster and posturing from verifiable claims of fact and sound legal arguments of their implications. Focus your mind on the objective argument and try to tune the rest out. If there’s no sound basis behind what they’re saying, you have a lot less to be concerned about.

Step 2: Verify the facts

If the allegations someone is making have caught you off guard, then it is especially important to verify every detail of what they are claiming. Gathering detailed information (including exact dates and locations of events) complete with supporting documents will not only help focus you, it will make it easier, faster, and therefore cheaper to present your case to any lawyer you retain. It will also increase the likelihood that you’ll get a clearer legal opinion faster from them if your counsel starts with a full picture of the situation. 

Step 3: Notify the board and relevant insurers

The board should be notified of any credible threat of or pending litigation. If gathering the facts does not entail a significant delay, being able to present them with a fulsome picture of the situation also helps ensure board decision-making is well-informed from the start. 

Additionally, depending on the nature of the lawsuit, this liability may be covered by your insurance policy. So review your insurance policy and if there’s a chance that it is covered by your insurer, get in touch. Insurers often have what’s called a “right of subrogation” basically to take over the defence of a lawsuit so they can recover any costs for the damages they need to pay for. 

Step 4: Seeking and retaining the right legal counsel

Lawyers are expensive and if you do not have lawyers in your organization’s network it can be difficult to find pro bono support. However, the expense is more effective the earlier it is incurred in the process. For example, early advice on how credible the threat of litigation is can inform what level of organizational resources are directed to respond to it and avoid costly errors in communications. You may conclude you can simply ignore the threat or decide to indeed settle as soon as possible.

When it comes to choosing the right lawyer, Community Legal Education 91ĘÓƵ developed that offers a general framework for vetting lawyers. Though the page is focused on transitioning to 91ĘÓƵ’s Not-for-Profit Corporations Act, the same principles can apply to other legal issues. In short, it is important that the lawyer’s fees are transparent, that they have the right values and approach that align with your organization, and have the relevant competence for the issue at hand.

Step 5: Giving instructions to your lawyer

Your lawyer will likely require that the board appoint one or more individuals who are empowered and trusted to act as point person (often appointed through a board resolution if the authority is not clear under some bylaw or policy) with the lawyer. This individual (or individuals) must have clear parameters around when they can give instructions to the lawyer and when they must seek broader board approval as well as how, when, and in what detail communications from the lawyer will be communicated back to the board as a whole. 

Especially if there are disagreements on the board or between board and staff about how to handle the litigation, having these systems in place will help ensure the nonprofit is taking a consistent and internally coherent approach to litigation. 

Step 6: Communicating during litigation

Often the biggest concern of nonprofits during litigation is the impact it will have on the nonprofit’s reputation. As such, having a clear plan for how litigation will be communicated about with the community is crucial. Often, if there is an outside party threatening or undertaking litigation, they may simultaneously be engaged in damaging communications on social media and traditional media. For this reason, while your lawyer may want you to minimize all communications about the litigation to mitigate the risk of prejudicing some claim in the litigation, you likely need to have a broader calculus in mind about the impact of failing to speak to certain allegations publicly. Engaging with communications staff and volunteers early and often as you discuss communications strategy with your lawyer will help you strike the right balance between legal and reputational concerns throughout the process. 

Step 7: Learn from the experience

As painful as litigation, or the threat of litigation, can be, it can also be a significant opportunity for your organization to learn and grow (especially if the claim against you has some basis). Documenting your processes as you go along for the future and improving your policies and practices to prevent the situation from recurring will help leave you better prepared.

Conclusion

We have only scratched the surface of this topic, but a few good principles can go a long way in helping to turn down the temperature during a turbulent time. If you are interested in learning more, consider viewing .

But what about the disputes that can’t be resolved? What about the divisions that run so deep and are so acrimonious, the most robust process in the world won’t get people to sit down together? It’s still possible for directors and officers to fulfill their fiduciary duties under these circumstances in a way that accounts for everyone’s interests whether they recognize it or not. 

I want to take a step back and reflect through the lens of corporate law what these governance disputes mean in our polarized world. After all, nonprofits are often referred to as “schools of democracy”, i.e. places where individuals learn the skills necessary to participate in public decision-making processes. As with any school, the habits we practice within them could reflect the pathologies or foster the kind of skills and attitudes so desperately needed outside of them.  

What are we doing here? Remembering the corporate purposes.

Those charged with responsibility for nonprofits (directors and officers) are required to first and foremost act in the best interests of the corporation. Courts¹ have said the best interests of a nonprofit is the accomplishment of its corporate purposes. Reasonable people often disagree over what these are. How are these disputes to be settled? 

The Supreme Court in the classic case said:

In considering what is in the best interests of the corporation, directors may look to the interests of, inter alia, shareholders, employees, creditors, consumers, governments and the environment to inform their decisions. Courts should give appropriate deference to the business judgment of directors who take into account these ancillary interests, as reflected by the business judgment rule.  The “business judgment rule” accords deference to a business decision, so long as it lies within a range of reasonable alternatives…

Among other things, commentators have puzzled over: 

1. How could a board ever be held accountable if they can always fall back on one interest group or another with directly opposing views?
2. How could a board, in the pursuit of the corporation’s best interests, be required to consider groups who may have opposing interests of the corporation itself?

The conflict is the way

In the context of acrimonious and apparently unresolvable disagreement, the Supreme Court invites us to consider the following principles: 

1. Governance is an exercise of weaving together disparate interests towards a particular goal. Those with opposing interests are every bit as relevant as those who support your cause since they have the capacity to undermine your purposes. This doesn’t mean appeasement of every critic is necessary, it means an effective strategy must account for this opposition in its design. Alienating an interest group is not in itself a sign of governance failure, making decisions without accounting for an interest group’s perspective just because you disagree (e.g. the “difficult” member) is by definition a failure. Put differently, the fact that a party will never be satisfied does not absolve an organization of its duty to consider them. For example, certain neighbours may not be pleased at a social service provider expanding its facilities; in order to win municipal approval, the social service provider may incur additional costs to install noise reducing fences. Though this doesn’t satisfy the oppositional neighbours, it clearly takes them into account.
2. The who matters as much as the what. Governance is not a science in the sense that a good governance process checks all the boxes of consulting all the relevant people to gather all the right data to discover the correct answer. In the absence of a marked defect in the process, (e.g. failing to consider a relevant interest-holder) a range of solutions will pretty much always be possible. Within that range is the space of a board’s discretion that no amount of expertise can settle. It’s a space filled by nothing else but the board’s collective judgment, so who’s at the table and, who they are accountable to, matters.
3. A decision must be made. The law assumes that a decision must be made because there is an underlying duty to move towards the purposes of the corporation. Making no decision at all due to a fear of acrimony or an inability to achieve sufficient consensus is treated for the purposes of corporate law as a decision in the sense that a board may be held accountable for any consequences of inaction. 

Conclusion: Conflict happens and that’s OK

The above principles explain why we cannot let polarization freeze us or ignore third rails if we know addressing them is vital to the mission. It also reminds us that everyone is part of the solution whether or not they like that solution. Governance practices aimed at eliminating conflict may mitigate some and hide the rest. 

“Depolarization” in the corporate law context means navigating towards our end goal cognizant of the reality of conflicts, minimizing unnecessary conflict, and taking principled positions on those we cannot minimize. 

1. Bloorview Children’s Hospital Foundation v. Bloorview MacMillan Centre, 2002 CarswellOnt 517, 22 B.L.R. (3d) 182, 44 E.T.R. (2d) 155, [2002] O.T.C. 108, [2002] O.J. No. 521 (Ont. S.C.J.) at para 32. ↩︎

Nonprofits incorporated under 91ĘÓƵ’s Not-for-Profit Corporations Act or the Canada Not-for-Profit Corporations Act are required to hold a members’ meeting at least every 15 months and within six months of the end of your last fiscal year. This annual members’ meeting is commonly called an AGM. 

In this blog post, we’ll review: 

• the purpose of AGMs, 
• what nonprofits can do to increase member attendance and participation, and
• if necessary, how nonprofits can reduce their quorum.

The purpose of AGMs: Nonprofits and democracy

Some nonprofits rarely see their members. They may not come to meetings when invited or even open emails. In some cases, you may not even know who your members are. All of this may lead someone to ask, “why do nonprofits have to have AGMs anyway?” or “why do nonprofits need to have members?”

The short answer is to ensure that boards of nonprofits are accountable to someone. AGMs are designed to bring the organization’s stakeholders together, however a nonprofit has chosen to define that group in their bylaws. At an AGM, the board must present the nonprofit’s financial statements and board members face election or removal by its members. Just like in our broader society when voters don’t show up or pay close attention to what people in power are doing, accountability is significantly reduced. AGMs that are well attended by engaged and informed members help to ensure that those on the board are not abusing their positions and that the people who are on the board have the skills and vision to steward the nonprofit.

What nonprofits can do to increase member attendance and participation

Understanding what you need to do to increase member participation requires understanding why members are not attending in the first place. Here are four common reasons people don’t attend and what you can do about it.

Implementing these strategies below takes time and resources, but they are strategic investments in your organization.

How can nonprofits reduce quorum

If a nonprofit has tried these strategies but is unable to meet its quorum of members for its AGM, then it may want to consider the following legal strategies.

1. Lowering the quorum: You can change the quorum in your bylaws or articles to a lower percentage or absolute number of voting members or define quorum in another way that works for you. Remember that the lower the quorum, the easier it is to have the meeting but less accountability may result. There is also a risk that a small group of individuals may exploit this opportunity to take over the organization.
2. Redefining membership: If a large portion of the individuals you define as members do not want to be engaged in governance, you may wish to reconsider which stakeholders in your community really want to have . Who you define as members may be the most important governance question your nonprofit asks itself. Fundamentally, it is about who you believe the nonprofit should answer to. explores the pros and cons of different membership structures.

Conclusion

Ultimately, AGMs are one small way your nonprofit stays responsive and relevant to its stakeholders. If you are struggling to get quorum at your AGM, you may still be very successful at engaging with your stakeholders in other ways. In other cases, the struggle to get quorum may be a warning sign of deeper issues of your governance and stakeholder engagement that you should address. You are best positioned to assess the situation. But one thing is for certain, AGMs can and should be an opportunity to strengthen your organization. 

This story begins when the 91ĘÓƵ Not-for-Profit Corporations Act (ONCA) was first introduced. We often refer to it as our “founding and forever” issue. ONCA was the burning platform that created the spark for ONN – a cross-sectoral issue that affected all nonprofits incorporated in 91ĘÓƵ and had the potential to truly impact how we worked.

Our priority when ONCA was passed into law was to ensure ONCA would meet the needs of the sector, and that there would be support for the sector to transition to the new law. It was clear that as a small emerging network, ONN did not have the legal expertise to support the transition to ONCA. We also wanted to make sure that we were able to continue to advocate for improvements to ONCA and its regulations by staying at arms-length from provincial funding for ONCA transition support. 

With our first grant from the Law Foundation of 91ĘÓƵ, ONN focused on policy improvements and began considering how to support the sector in implementing the new law. 

Beginnings of a long-lasting partnership

In 2013, we developed a partnership with Community Legal Education 91ĘÓƵ (CLEO) that has been one of our longest standing relationships! CLEO led the “Get Ready for ONCA” project that lasted more than ten years as a result of the delay in proclamation of ONCA. Finally proclaimed in October 2021, CLEO kicked into high gear with workshops and webinars, template bylaws, and FAQs now branded as “Nonprofit Law 91ĘÓƵ.” This helped the sector navigate the new law and provided them with as much plain language information as possible to understand the implications and opportunities ONCA presented.

Recently, both ONN and CLEO entered a period of internal strategizing and planning, and, with ONCA’s transition period coming to a close later this year, it was clear that it was time to re-think our roles. We are thrilled to take on Nonprofit Law 91ĘÓƵ as an ONN project, and both steward and grow it as a social enterprise initiative! 

We are incredibly grateful to CLEO for their stewardship of this amazing project and its vital resources, as well as for their leadership in supporting the nonprofit sector for more than a decade, and for their continued partnership. ONN is committed to growing the educational mission and innovative approaches to continue serving the legal needs of the sector. 

We are also grateful to the funders of Get Ready for ONCA and Nonprofit Law 91ĘÓƵ that made this project possible, including: 91ĘÓƵ Ministry of Public and Business Service Delivery, Law Foundation of 91ĘÓƵ, and the Lawson Foundation.

What the future holds with Nonprofit Law 91ĘÓƵ

Our network can look forward to more ONCA related support, as well as legal education on other topical and priority issues facing the sector, such as advocacy rules, employment law, funding agreements, and more. 

Bookmark our new Nonprofit Law 91ĘÓƵ webpage, which includes vital links and a list to the training sessions available to network groups. And, minor updates to the main site will also be made to reflect ONN’s leadership.

I am personally so grateful for the remarkable partnership ONN has enjoyed with CLEO and a special thanks to Julie Matthews, Brenda Doner, and Benjamin Miller for their commitment, leadership and camaraderie along the way.

I can’t think of a better way to celebrate our ten-year anniversary!