A recent Ontario Court of Appeal case, Aga v. Ethiopian Orthodox Tewahedo Church of Canada (Aga), provides some insight into the vexing question of the extent of “member” rights in not-for-profit organizations. Although the idea of such rights seems straightforward, it is anything but.
The litigation in AGA came about because the membership status of a number of congregants in a religious parish was stripped after they questioned decisions by a church Archbishop. The congregants were not corporate members of the legal entity under which the group was constituted and operated. Given that, it was in dispute whether they could rely on the internal disciplinary procedures that the church had established. A broader concern is the extent of procedural fairness required in circumstances of this sort, but that issue was not dealt with in the ruling.
The case suggests that, at least in certain situations, individuals who are not formally part of a group’s corporate governance structure may have some protection from being treated unfairly by the organization.
All this speaks to the need for not-for-profit organizations to exercise care in who they describe as members, and in how they treat them.
The confusion around this issue comes partly from different uses of the term “member” by not-for-profit groups. In its legal sense, the term is used to refer to stakeholders with voting rights in an organization’s corporate structure. However, it is not always used in that way.
Many not-for-profit groups have corporate structures that are quite different from the operational structures they use to engage with their stakeholders. The term “member” often gets used as part of that engagement. In the Aga case, the litigants were not part of the Church’s corporate structure but were part of a Congregation.
It is certainly not uncommon for faith-based organizations to take this type of approach to their governance. But it also pops up in other contexts as well. For example, advocacy groups sometimes count those who financially support them (even where their contributions are relatively modest) as among those they speak for, while drawing their corporate governance from a narrower base. When making representations to government or the public, it is obviously valuable to assert the broadest possible backing.
And federated bodies may have a structure that gives members say in local decisions but where governance at the national level is driven by input from local leaders rather than from grassroots members. Being called a “member” of a sports league, or fitness or social club won’t necessarily involve you in the corporate structure of the organization.
When the Canada Not-for-Profit Corporations Act (CNCA) became law in 2009, it specified that all “members” – as that term is used in the CNCA – were entitled to vote on fundamental changes to the organization (winding up, amalgamation, etc.), while still permitting classes of membership with different voting rights on other matters. So, a member may be able to vote on winding up, but not for purposes of electing the board. The CNCA also sets out several member privileges and protections, such as the right to examine the organization’s membership list.
… the precision with which the term “member” is used varies considerably.For groups incorporated at the provincial level, sometimes the equivalent statutes mirror the federal approach. Other provincial incorporation statutes are silent on privileges and protections for members, other than setting out that they are empowered to choose the Board of Directors and have certain rights and responsibilities to an Annual General Meeting.
Given this legislative framework, the precision with which the term “member” is used varies considerably. CNCA corporations, and those incorporated under similar provincial legislation that use the term loosely, may find that they have unintentionally created rights where they did not mean to do so.
As well as the applicable statute, bylaws and other corporate documents may also come into play in determining what, if any, rights someone considered a “member” has.
Which brings us back to the Aga case. The litigants in Aga were not formally part of the Church’s corporate structure, and there was a question whether they were even aware of the provisions in the organization’s Constitution and Bylaws. The expulsions, which stemmed from a theological dispute, concerned their ability to participate in the Congregation.
The litigants submitted that they had not received due process when the disciplinary measures were administered. Although not members of the corporation, the litigants had completed and submitted “membership application forms” to join the Congregation. The application forms did not reference the Constitution or Bylaws.
In overruling the trial judge, who held there was no contractual link between the parties, the Court found that:
Voluntary associations do not always have written constitutions and bylaws. But when they do exist, they constitute a contract setting out the rights and obligations of members and the organization.
The Court held that the litigants’ rights to procedural fairness, whose form turns on the circumstances and gravity of the discipline, arose from this contract – i.e., the Ethiopian Orthodox Tewahedo Church’s Constitution and Bylaws.
… individuals who are not formally part of a group’s corporate governance structure may have some protection from being treated unfairly by the organization.Having found that a contract existed and gave rise to procedural fairness expectations, the Court considered the appropriate remedy. It ordered that – the respondents not having satisfied the burden of showing that the expulsions had been carried out in compliance with the rules set forth in the applicable documents – the matter should be returned to the lower Court.
Although it found that there was an expectation of procedural fairness, it did not offer an opinion on the extent of procedural fairness that applied on the facts of the case, nor whether the procedural fairness obligation had been met.
All this speaks to the need for not-for-profit organizations to exercise care in who they describe as members, and in how they treat them. At a minimum, groups should follow the rules set out in their corporate documents, but – especially in situations involving member discipline – they should be mindful that there may be procedural fairness obligations that extend even beyond what is required by those rules.