Sask. Court Invalidates Election and Orders New List of Members

In Ray v. Morin (decided in 2002), Justice Allbright of the Saskatchewan Court of Queen's Bench found that there were sufficient grounds to invalidate an election of directors of a non-profit corporation and order the compilation of a new list of members and a fresh election based on the new list.

1. Facts

Sandy Bay Child Care Committee was a non-profit corporation incorporated under the Saskatchewan Non-profit Corporations Act, 1995 (the Act). It operated a group home in the Village of Sandy Bay.

The home housed children ranging from 12 to 16 years of age and employed a staff of 14. Some of the children staying at the home were young offenders and others were children apprehended by social services and placed in the home. The children did not leave the home. The home provided for all facets of their lives, including counselling, education and their behavior.

Before 2002, several differences had arisen between individuals with an interest in the home.

A meeting of members was requisitioned. The board set the date of the requisitioned meeting for January 24, 2002. Meanwhile, the requisitionists held a meeting of members on January 3, 2002 at which a new board of directors was ostensibly elected by the members in attendance.

Because of the uncertainty about the composition of the board of directors of the home, funding of the home was suspended.

2. Rulings

Justice Allbright had little difficulty in finding that there were sufficient irregularities in the purported election of directors on January 3 to set aside the election and order a new election.

There were also inconsistencies in the composition of the membership lists. There were two lists, one prepared by each faction. The lists were not identical. Some members were shown on one list but not the other.

Justice Allbright directed that a new meeting be held on the following basis;

● The new election of directors was to be held on or before June 30, 2002.

● A membership list was to be prepared by May 17, 2002.

● The list was to be prepared by a membership committee composed of:

● two members from the original board of directors (to be chosen by one faction); and

● two members from the subsequent board (to be chosen by the other faction).

● The membership committee was instructed to include any:

● individual who could produce a membership card in the corporation; or

● any adult who was otherwise eligible for membership and personally paid the general membership fee of $2.

● After preparation of the membership list, the membership committee was to give individual notice to all of the members of the scheduled meeting.

● The membership committee was to jointly conduct the meeting and the election of directors.

● In all other respects, the meeting and the election were to be conducted in accordance with the requirements of the Act and the governing by-laws of the corporation.

3. Key Observations

Requisitioned meetings of members are indispensable to the governance of not-for-profit corporations. They are an essential tool for director accountability to voting members.

However, they can also generate difficulties, including those exemplified in this case. Factions will convene a meeting without adequately disclosing the intended business. In this case, it appears that the requisition did not specifically state that the purpose of the requisitioned meeting was to remove and replace the board of directors.

Also, requisitionists may strategically time their requisition if they have already conducted an underground recruitment campaign to enlist supporters as members. The requisition is then sprung on the board when it has little time to react or mobilize support. As appears to have been the case here, the requisitionists have their own membership list and it may not be the same as that of the incumbent board.

Finally, as also demonstrated in this case, the requisitionists may proceed to hold their own meeting rather than wait for the board to control the time when the meeting may be called.

The law gives members the right to requisition a meeting. However, the board has the first right to run the meeting, including setting the date for the meeting and the cut-off date for determining the members entitled to vote at the meeting. Also, the membership list belongs to the corporation. A membership list prepared by requisitionists does not carry the same legal authority as a list compiled from the corporation's register of members.

In this case, the court had no alternative but to set aside the meeting held by the requisitionists and order a new meeting conducted in accordance with the guidelines set out by the court, including the crucial preparation of a new membership list.