Collaborative Response Submitted

Thank you to all of you that have contributed posts, comments and supported this blog over the last few weeks. A copy of the collaborative submission was submitted to the Ministry of Finance last week on behalf of almost 100 different organizations. We encourage you to keep in touch through www.yourtake.ca for any updates and continue the dialogue regarding the Act.

Reform of the Society Act

It is April 1st. Over the past month I have spoken at 8 events across the Province including many arts administrators. For many in the arts this has been a dispiriting month – may we see improvement in the coming Spring. Herewith my submission to the Review.

Dear Mr Minister:

My name is Martha Rans and I am a lawyer in private practice working with societies, charities and co-operatives. In addition, I direct a pro bono legal project that provides by-weekly summary legal advice to artists and arts organizations, the Artists Legal Outreach (www.artistslegaloutreach.ca). The ALO has been providing advice to staff and board members of societies on a monthly basis across the Province for the past 3.5 years. We have held three workshops on the Society Act and most recently launched a Society Survival Series for young and emerging artists and companies. My submission for the Society Act Review is entirely personal to my experience and observations working with (and within) the sector for the past 25 years.

In my experience if there is non-compliance with statutes it is often a result of lack of resources. Lack of resources lie at the heart of much inefficiency. That said, there is little doubt that modernization of the Society Act can only improve compliance where those changes simplify and streamline the process. In that respect I would recommend that the Society Act be modernized consistent with the Corporations Act and the Co-op Act. The BCLI Report for the most part ought to be adopted. One of the consequences of such a modernization would be consistency in corporate governance statutes and one can hope improved access to advice and information.

Improving access to information and advice whether legal, financial, management or governance would go a long way towards improving the efficiency and effectiveness of societies. It is a sector that is used to doing more with less often at the expense of the very administrative resources that ensure compliance with the myriad of regulatory requirements that impact most societies. Often this is to their detriment. I doubt very much that enacting new regulations towards “greater accountability” would address the skills and knowledge gaps on many society boards of directors including large, sophisticated ones. New regulations could make a basically functional sector (as a whole) – at a time when both public and private resources are decreasing – dysfunctional. A new regulatory structure without the information and advice to accompany it may not meet the goals of reform particularly given the absence of a clear and coherent policy framework.

The not for profit and charitable sector is an important part of the BC economy. It employs many more British Columbians than many sectors that are able to access resources to address such skills and knowledge gaps. Ongoing and effective legal advice and education delivered through the community is necessary if we are to address these gaps. Such a project could help enable the sector to function more efficiently and effectively no matter the regulatory framework. Whatever decisions are made with respect to changes to the Society Act they ought to come with sufficient resources to ensure that the hundreds of thousands of British Columbians who sit on boards (3 directors of each of the 26,000), the staff who work in the sector and the public are aware of and can understand how to comply with the statute and are able to access continued and effective information and advice.

In closing Mr. Minister I encourage you to consider the modernization of the Society Act within a larger policy context. One where resources will be committed so that we can support compliance rather than continuing the “if it ain’t broke, don’t fix it” reality that societies struggle with every day.

I would welcome an opportunity to discuss these issues with you and Ministry staff.

Respectfully,

Martha Rans

New Models

Yesterday evening, Margaret Mason, Michael Blatchford and I met with a group of emerging artists and arts organizations to talk about the Society Act and have a look at some bylaws. We called it the Society Survival Series because many of the issues are now a matter of survival. Among the comments we received were : “We need a beginner’s guide to reading legal documents! How do we manage volunteers? How about a glossary of legal terms? ” All great ideas that we hope to be able to followup with over the coming months. There were a number of newly-formed societies and a few folks who had not yet decided what to do. There was a distinct lack of clarity on whether there were alternatives to setting up a non profit society. These observations caused me to wonder whether funding and revenue streams too often dictate our choice of model and limit our ability to be creative across the non profit sector? Two arts administrators who collectively manage 50 or so groups express continuing frustration at the Society Act model for the arts. What are the alternatives? Would a new legal structure help or hinder the sector?

ENGOs, Volunteers and Surviving Difficult Times

In the last few days before the first review phase on the Societies Act closes I’ve been impressed by the huge commitment of volunteers in the ENGO sector. Environment organizations are a widely diverse bunch but none of them large or small could exist without engaged volunteer work.

Many of those that I have talked to over the past few weeks have relied on the volunteers in their ranks to take on the review of the Societies Act changes. So along with the BC Gaming cuts to environment groups which will devastate the core of many small local organizations now we learn that Volunteer Centres that support their activities are threatened. Imagine Canada’s nonprofit news service picked up a story late last week from Nanaimo and the struggles of their Volunteer Centre working on half its previous year’s budget. These centres provide invaluable training and support for the sector by partnering with non-profits to build their capacity.

Those volunteers active in their societies, who give not only of their time and talents, will be the foundation that keeps many organizations and initiatives alive in these challenging times.

Enp response to Society Act Discussion

Enterprising Non-Profits – enp has signed on to the joint submission, and in addition have submitted a letter pertaining more directly to social enterprise… here is part of it, the full letter is available on our website at www.enterprisingnonprofits.ca:

A Social Enterprise is a business operated by a non-profit that is directly involved in the production and/or selling of goods and services for the blended purpose of generating income and achieving a social, cultural and/or environmental aim. In a social enterprise operated by a non-profit there is no distribution of profits to owners or members, rather surpluses from the business activities are re-invested in meeting community needs. By the nature of incorporation under the Society Act, social enterprises operated by societies are non-share corporations: operated by and for members without individual ownership rights.
Social enterprises meet many needs in urban, rural and remote communities; to name a few: Employment for persons with disabilities, youth at risk and others Expand the cultural offerings in communities Provide day care, access to health care, and other critical community services Engage in recycling and environmental education

Revisions of the Society Act should be framed and written to contribute to a supportive environment for social enterprise. Specifically we recommend:
The Society Act state clearly that societies are permitted to operate or own social enterprise businesses provided that the business activities:
1) further the social, cultural or environmental purposes of the society; and,
2) all net revenues arising from the business activity be retained within the society to be used to further its purposes.
OR
3) if a business activity is conducted by a society but is unrelated to its social mission or the society’s purpose, all net revenues must be used by the society to further its purposes.

On the matter of “calls for a whole new framework to enable a “hybrid” type of organization…”, enp believes this matter is outside the realm or concern of this consultation. A “hybrid corporation” consultation, decision and framework should be considered within the Business Corporations Act of British Columbia since it will clearly involve some ‘hybrid’ form of share based ownership and will use shared based investment instruments for investors seeking an economic return on investment. (See the American limited partnership models – L3C – and the United Kingdom’s Community Interest Corporations, CIC.)

David LePage
enp
david@enterprisingnonprofits.ca

Off Shore Society Directors

Did you hear the one about the foreign national who incorporated his own privately held off-shore Society in BC?  Currently the Society Act requires that every Society must have at least one Director who normally is actually resident in British Columbia.  Well, under the Business Corporations Act there no longer needs to be a local owner – someone who actually lives in British Columbia.  Could the same rules apply to Society Directors?  If not, what difference would it make?

The BC Law Institute’s paper recommends that the new Society Act accept the principle that no directors of any society must be residents.  To quote recommendation number 29: “A new Society Act should not impose residency requirements on directors.”  So, given that the Law Institute paper also recommends that a Society can have one member / one director, the one about the foreign national who set up her own private off-shore Society here in BC could be true.  So, what’s wrong with that?

I believe that continuing to unbundle the concept of community accountability from a form of incorporation that really needs community accountability is just plain the wrong way to go.  When do we stop thinking that automatically applying the globalization frame on everything is the right solution? In this context, globalization means that no one is actually accountable. I don’t think that is good enough.  How about a counter solution that builds community accountability?

Tim Beachy

What is a society?

I was reading Doug Saunders column in the Globe &Mail and was struck by the following comment he attributes to Margaret Thatcher: “There is no such thing as society . . . there are individual men and women.” I wondered whether in some sense the idea of a society is somewhat at odds with the prevailing view of individual achievement and accountability. I also wondered the degree to which our current economically driven policy discussions conceivably undermine our sense of ourselves as communities rather than groupings/collectives of individuals. This goes directly to what we mean by a society. Society is defined in the Oxford English Dictionary as “the fact or condition of taking part with others or another in some action; participation, partnership. The fact or condition of being connected, related, or allied; relationship, alliance An association or body of people united by a common aim, interest, belief, profession. A group of people meeting together, esp for discussion, conviviality or worship.” What are those common aims today? what are those common purposes?

This led me back to Gavin Perryman’s comments: “The policy question is whether societies need further regulation, and why?
One might argue that, because societies sometimes use volunteers in service delivery, they are unique; but, this could be addressed by developing, in parallel with the Employment Standards Act, a Volunteer Standards Act. . . . The general argument, however, for increased regulation of societies, different from regulation of public agencies and private enterprises, has been twofold: (i) they are often small and weakly managed/governed, and so need help, and (ii) they are of public interest (i.e. serve a public good). . . . The first argument is weak. There is no evidence to suggest that societies are less well managed or governed than public agencies or private enterprises. Nor is the reverse true that they are better managed or governed. These simply are myths. Nor is there evidence to suggest that regulation or increased regulation leads to stronger management and governance. In fact, the evidence is likely for the opposite (the more rules, the more internal rigidity, and the less flexibility, adaptability, productivity, and innovation). . . .The second argument might hold some weight if we could actually define the public good in a way that we all agree upon, and if all societies actually were about meeting the public good (which is factually not true).”

While I philosophically disagree with some of Gavin’s ultimate conclusions, I agree with Gavin in several significant respects: there is a considerable lack of research within the sector about what the actual needs are of the sector to better comply with regulatory standards. There is also a considerable need for basic legal education for Boards of Directors about governance and accountability. Quite frankly, too many of us become pre-occupied with problems and crisis and not nearly enough on basic education and support.

As a former lawyer with the Employment Standards Branch in my experience for profit businesses are at least as non compliant as not for profit societies when it comes to managing basic employment issues the difference is access to advice and representation. A Volunteer Standards Act will not change that. There continues to be a significant lack of clarity about the purpose of the sector and the degree to which regulation helps or hinders the sector. As a start the evaluations of the CRA compliance projects as well as those of other community based projects (whether Society Act 101, or VanCity’s Financial Fitness series) could form the basis for a discussion of what we need to be doing to better support the sector so that when we have a new Society Act we can respond effectively.

Sharing Information with Government

It continues to amaze me that, in this day and age, we haven’t figured out a way to get people onto the same page.  It might make sense, for example, that a provincial government could actually decide to make available, on a voluntary basis, one repository of information on each of the registered societies and associations. Annually (or whenever it chose) each Society could up-date its information.  That way all those different officials in Ministries, Authorities, Branches and regional offices could get on with real work rather than making up new forms and surveys to acquire information that already exists in the public domain.

Why is this question germane in discussions about revisions to the BC Society?  Simple: the provincial government has become ever more complex and unable to act with unity on much of anything.   When the Gaming Branch makes up its own rules about what constitutes a legitimate society membership and punishes perfectly legal and legitimate societies with very large fines (by withdrawing funds), no other part of the provincial government knows or cares much about it. Even low-level bureaucrats get to make up new rules and arbitrarily demand information in different formats time after time.  What a waste!  Why up-date the Society Act it at all if only to see government continue to subvert its own practices and use its vast size and complexity to avoid accountability and efficacy?  Not good enough.

Issues in the Arts: Society Act reform and beyond

When I wrote my last post I was not expecting the announcement Monday that “adult” arts and culture groups would be essentially shut out from gaming funds. Coincidentally, I was approached a few months ago by two groups working with young and emerging performers and performing arts companies asking the ALO to put on a workshop about becoming a charity. At the time I thought about how I might talk them out of adding to their administrative burden unnecessarily. The result is a 3 part series you can read about here. The process of putting the workshop series together raised a question that I think is particularly relevant to the reform of the Society Act: how have societies changed in the last 5 years? Do young folks looking at the sector see it differently from those of us who have been around awhile? These are interesting questions that might help us better understand how to make any reform work in our interests. Thoughts?

Regulation through Complexity and Confusion

Lots of discussion has recently emerged about social enterprise and the organizational forms most appropriate for social enterprise. Some suggest that we need some new forms, others bemoan the Charities rules that inhibit real enterprise and some advocate for mixed forms that allow charitable funds to be given to for-profit organizations.  It is a lively discussion, with advocates of various positions being very vocal.  In my opinion, there are highly confusing jurisdictional and legal issues that bear on this subject.

The relationships between provincially registered societies and federally (CRA) registered charitable societies are cluttered, not always understood nor understandable. Provinces have the right to declare something as non-taxable (not-for-profit) by giving them “non-profit” status, but the federal government reserves the right to tax not-for-profit organizations that make money through conscious enterprise activity. The CRA issues opinions on such things but the province issues nothing and apparently has no opinions.  Another example: if the province says an organization is for-profit (by refusing to grant not-for-profit status) federal government departments accept that opinion as fact. The Institute of Chartered Accountants (and the accounting rules they issue) has been granted great influence on business structures, auditing requirements and taxation in all jurisdictions, but both federal and provincial governments ignore them completely on other issues. Federal Departments and Provincial Ministries independently and arbitrarily make up procedural and practice rules regarding societies and associations in often contradictory ways.  All such behaviour contributes to an amazingly perverse complexity.

These complexities find expression in some conversation about alternative organizational forms for social enterprise: a ‘keep it simple’ and clear approach that supports not-for-profits to make profits and for-profits to get charity.   Complexity has, perhaps, gotten confused with confusion.  Mid-level CRA officials and solicitors could, if they ever thought about it(!), keep the work churning along by occasionally terrifying social enterprise advocates with the threat of taxes?  It seems pretty likely that confusion will continue under the guise that a regulatory framework dominated by complexity is somehow an important public good.  On the other hand, benevolent neglect is not often a friend of the community sector.