How to get your NFP unstuck when it's in Limbo

I was recently contacted by a friend in a predicament. One of their friends sits on the board of a not-for-profit corporation which has recently landed itself in limbo. More than half their directors resigned en-mass.

For those who aren't aware, the Board of Directors of an organisation is the highest body of a corporation, and answers only to the general meeting--the collective of the members. The Board of Directors needs to have a certain number present--a quorum--in order to conduct business. This number can be defined by law or by the corporation's by-laws. In this case, the by-laws of the corporation required the Board to have five of eight Directors present in order to have quorum. With five directors resigned, this Board could conduct no business.

In order to elect more directors the corporation must call a general meeting. But in order to call a general meeting, the corporation needs a quorum of directors. Quite the pickle!

What you have to do to fix this depends on the jurisdiction in which you are incorporated.

As a Federal Corporation:

This is easy. Section 132 sub-section (2) of the Canada Not-for-Profit Corporations Act allows the remaining directors to call a special meeting to elect new directors.

As an Ontario Corporation:

The only way out I could find for Ontario corporations is a little more complicated. Section 295 of the Corporations Act of Ontario allows a members petition to call a general meeting. It requires 10% of the members of the corporation to sign it, and then the directors have to call a meeting within 21 days. However, if they don't (or in this case can't) then any one of the members whose signature is on the petition may call the meeting. So it takes a bit longer, but it can be done.

The good news is, the laws of Canada and Ontario both allow a not-for-profit corporation to get unstuck if it gets stuck. It's pretty rare to have that many directors resign at once, but in volunteer organisations (which are almost always not-for-profit corporations), it's more likely. Good to know there's a way out.