Ontario Social Clubs: Countdown to Automatic Dissolution

By Jide Babalola and Camdin Kingsbury

Non-Share Capital Social Clubs    

The Ontario Not-for-Profit Corporations Act (“ONCA”) came into force on October 19, 2021. The transition to ONCA was smooth for non-share capital social clubs, as they were automatically transitioned and continued under the new act. While this process is automatic, it is still essential for these non-share capital organizations to review their governing documents to ensure compliance with the ONCA.

Share Capital Social Clubs

The story is not the same for share capital social clubs, such as golf, tennis and curling social clubs. Share capital social clubs that currently exist under the Ontario Corporations Act (“OCA”) must actively seek continuance and will not automatically transition as non-share capital social clubs do. Section 2.1(1) of the OCA outlines the three possible statutory routes share capital social clubs can undertake to continue before the five-year window expires. These routes are:

1. as a corporation without share capital under ONCA;
2. as a co-operative corporation under the Co-operative Corporations Act; or
3. as a corporation with share capital under the Business Corporations Act.

As previously mentioned, the transition from the OCA to the ONCA is accompanied by a five-year period during which share capital organizations can seek continuance. This five-year period expires on October 19, 2026. If a social club with share capital fails to comply with Section 2.1(1) of the OCA by October 19, 2026, it will be dissolved as of October 20, 2026.

Dissolution

            Legally, the effect of automatic dissolution causes a corporation to cease to exist as a legal entity. The business can no longer operate and must wind up its affairs by settling debts and distributing any remaining assets, if applicable. The club can only exist after dissolution to file articles of continuance under one of the Acts listed above, no later than 20 years after the date of dissolution.

Moving Forward

            To ensure your club continues to operate, social clubs with share capital should transition now, thereby avoiding any interruption in their operations. Transitioning will involve reviewing current governing documents, determining goals for the next steps, considering tax implications, and passing appropriate resolutions, among other tasks. It is therefore imperative to work with experienced counsel to ensure a seamless transition that complies with the relevant statutes. The corporate team at SorbaraLaw is ready to help with your transition today.