LEGAL RISK MANAGEMENT CHECKLIST FOR NON-PROFIT HOUSING ORGANIZATIONS (Non-Charities) BC NON-PROFIT HOUSING ASSOCIATION CONFERENCE

Transcription

1 LEGAL RISK MANAGEMENT CHECKLIST FOR NON-PROFIT HOUSING ORGANIZATIONS (Non-Charities) BC NON-PROFIT HOUSING ASSOCIATION CONFERENCE Thursday November 6, 2003 WESTIN BAYSHORE RESORT & MARINA, VANCOUVER, BC KEN VOLKENANT DE JAGER VOLKENANT & COMPANY

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4 INTRODUCTION - WHY WE NEED A RISK MANAGEMENT STRATEGY Increase in Complexity Increase in Litigation

5 IDENTIFICATION AND MANAGEMENT OF LEGAL RISKS General overview of organizational & legal documentation Identify the existence and location of key organizational documents Develop an inventory of key documents Maintain central location for key documents Identify key organizational documents for an unincorporated non-profit organization Constitution and amendments, if applicable Policy statements, if applicable

6 IDENTIFICATION AND MANAGEMENT OF LEGAL RISKS Key organizational documents for an incorporated non- profit organization Constitution, Certificate of Incorporation, Letters patent and supplementary letters patent, if applicable All amendments to Constitution and Bylaws Membership covenant or mission statement, if applicable By-laws and resolutions Directors, members and debt registers Copies of government filings Correspondence with the Registrar or Industry Canada

7 IDENTIFICATION AND MANAGEMENT OF LEGAL RISKS Determining other key legal documents Leases, deeds and mortgages Agency, association and joint venture agreements License agreements Business name, trade-marks and domain names Policy statements, i.e. sexual abuse policy statement Insurance policies Financial Statements Communications with Members - newsletters etc. Other governance, financial and business records as applicable

8 IDENTIFICATION AND MANAGEMENT OF LEGAL RISKS Review of key documents for unincorporated non-profit organization Are there objects stated in the constitution? Do constitutional documents correctly reflect how the organization is actually structured and operated?

9 IDENTIFICATION AND MANAGEMENT OF LEGAL RISKS Review of corporate structure for incorporated non-profit organization Review of Certificate of Incorporation and Constitution Is the name in the Certificate the name used by the non-profit organization?

10 IDENTIFICATION AND MANAGEMENT OF LEGAL RISKS Proper Use of Corporate Name All documents should be signed for the society as follows: ABC Housing Society Per: (Signature of Officer) followed by the Signatory's title, such as "Director and Secretary".

11 IDENTIFICATION AND MANAGEMENT OF LEGAL RISKS Are the objects in the Constitution appropriate for a non-profit organization, i.e. are they not charitable? Are the activities of the non-profit organization authorized by its objects? Is the dissolution clause complementary to the objects or does it provide for distribution to its members?

12 IDENTIFICATION AND MANAGEMENT OF LEGAL RISKS Review of Amendments to Certificate of Incorporation and Constitution Has there been a change of corporate name? Has there been a change of corporate objects? Overview of Bylaws Do provisions conflict with Constitution? Do provisions reflect changes to applicable corporate legislation?

13 IDENTIFICATION AND MANAGEMENT OF LEGAL RISKS Are basic provisions of Bylaws adequate? Expanded Member qualification requirements Expanded removal procedures for members and directors Classes of Members Default Rules of Order for Meetings Directors roles, offices and roles of officers & executive authority Indemnification of Directors Directors and Officers liability insurance provision

14 Directors and Officers Liability Insurance Wrongful Acts Loss Exclusions actual or alleged libel and slander prior wrongful acts known to the insured pollution, seepage or contamination Optional Endorsements Extending reporting or discovery period Retroactive coverage for unknown prior wrongful acts wrongful dismissal/employment practices espousal endorsement failure to procure effect or maintain coverage

15 Are basic provisions of Bylaws adequate? Dispute resolution provisions Committee structures Restrictions on inspection of documents Notice by means other than regular mail Electronic meetings and communications

16 Notice by means other than regular mail and Electronic meetings and communications Need Order(s) from the Registrar Bylaws must deal with: the mechanics of holding electronic meetings, including procedures for establishing quorum and recording votes equal access to technology for all members member consent in advance of the meeting the determination of how the time and place will be recorded how to deal with the requirement for signatures on documents (user authorization) the technology being used and how to deal with any technological problems that may arise

17 IDENTIFICATION AND MANAGEMENT OF LEGAL RISKS Was the initial corporate organization of the non-profit organization properly done? Was there a documented transfer of assets and liabilities on incorporation? Are the records of board decisions and/or membership meetings complete? Was there adequate board and/or members authorization for indebtedness? Has there been improper maintenance of corporate records?

18 IDENTIFICATION AND MANAGEMENT OF LEGAL RISKS Have necessary corporate filings and registrations been kept up to date? BC Society Annual Reports Amendments to Constitution and Bylaws Change of Directors and Official Address Federal Non-Profit Corporation: Annual Summary (Form 3) Canada Does the non-profit organization operate in any other provinces? If so, there may need to be registration as an extra-provincial corporation in other provinces.

19 IDENTIFICATION AND MANAGEMENT OF LEGAL RISKS Has there been loss of corporate status for failure to maintain government filings? Is the non-profit organization aware of the importance of proper use of corporate name and operating name? Has the non-profit organization developed and implemented a policy statement on child abuse, sexual abuse, sexual harassment or bullying, where applicable? Has the non-profit organization developed and implemented a policy statement on privacy?

20 BOARD MANAGEMENT ISSUES Is the non-profit organization able to identify which group is in charge? i.e., Where does the defacto control of the non-profit organization lie? Is it with a board, a committee or executive staff? Is board authority recognized by the membership? Are there clearly defined lines of control between the board and the executive staff? Does the board meet on a regular basis and do directors regularly attend?

21 BOARD MANAGEMENT ISSUES Does an independent audit committee need to be established to review financial statements and the auditor s s report? Is there adequate communication of board responsibilities to existing and future board members? Need to create a board binder of all corporate documents, as well as an explanation of the general operations of the corporation as a non-profit organization and the board of directors legal duties and liabilities Need to provide regular updates on changes in the law to board members

22 REDUCING BOARD LIABILITY Duty of Care act honestly and in good faith and in the best interests of the society Standard of Care a director must exercise the care, diligence and skill of a reasonably prudent person, in exercising the powers and performing the functions as a director Minimum standard Due Diligence Get Good Advice!

23 REDUCING BOARD LIABILITY Do any directors receive direct or indirect remuneration from the non-profit organization that has not been disclosed to the full board of directors? Has the non-profit organization adequately indemnified its directors and officers? Has the board authorized the non-profit organization to acquire directors and officers liability insurance? Has the board delegated too much responsibility to executive staff by restricting itself to establishing policy decisions only without careful and ongoing monitoring and review?

24 REDUCING BOARD LIABILITY Should the non-profit organization consider reducing the size of the board to limit the number of people who are exposed to liability as directors? Is the non-profit organization effectively making use of committees as an alternate to a large board of directors? Should the non-profit organization consider implementing an advisory board to complement the board of directors without a corresponding exposure to liability? Has the non-profit organization established a comprehensive due diligence review process by establishing and utilizing appropriate legal risk management checklists? Has a risk management committee of the board been established?

25 INSURANCE CONSIDERATIONS Has the non-profit organization maintained a historical record of its insurance coverage in the event of a future claim? Is there occurrence-based or claims-made made insurance coverage for sexual abuse? Has the non-profit organization provided full disclosure of all risks to its insurer to avoid denial of coverage? Does the non-profit organization request regular reports from its insurance broker on existing coverage, exclusions from coverage and recommendations to enhance coverage? Is there a regular review of the adequacy and extent of general liability coverage and property insurance? Is there directors and officers liability coverage in place and is it reviewed on a regular basis?

26 THIRD PARTY USE OF NON-PROFIT ORGANIZATION PROPERTY Is the non-profit organization aware of the potential liability exposure in permitting third parties to use its property? Has the non-profit organization developed and implemented a third party property use agreement with appropriate indemnification? Does the non-profit organization require evidence of liability insurance from third party users of its facilities? Does the non-profit organization charge appropriate fair market rental fees to third parties?

27 REAL PROPERTY ISSUES Has the non-profit organization properly registered its interests in real property? Has the non-profit organization addressed and rectified encroachments with neighbouring lands? Are municipal zoning and legal non-conforming uses being complied with? Has the non-profit organization identified and evaluated the extent of liability exposure for toxic property? Have property tax exemption opportunities been considered?

28 INTELLECTUAL PROPERTY ISSUES Does the non-profit organization need to register any of its key names and/or logos as trade-marks? Identify trade-marks Protect trade-marks by registration Use trade-marks in conjunction with appropriate markings Ensure that any third parties using trade-marks enter into a trade-mark licensing agreement Has the non-profit organization protected its trade-marks by securing multiple corresponding domain names? Who owns the copyrights for publications of the non-profit organization? Should copyright be registered, assigned or licensed?

29 EMPLOYMENT AND VOLUNTEER MATTERS Has the non-profit organization developed appropriate hiring policies and practices for its employees? Is there a need for an employment contract with key employees? Is there a need to develop and adopt policy statements and/or manuals for employees as well as volunteers?

30 EMPLOYMENT AND VOLUNTEER MATTERS Do employees and volunteers who deal with children need to be screened and supervised in accordance with an appropriate sexual abuse policy statement? Is there need for a discipline procedure for employees and/or volunteer members? Is the non-profit organization aware of and complying with applicable statutory requirements, such as pay equity, employment standards, human rights legislation, privacy legislation and occupational health and safety prerequisites

31 FISCAL MANAGEMENT ISSUES Are all salaries, benefits and statutory deductions being paid by the non-profit organization on a timely basis? Is the non-profit organization operating with a deficit and, if so, for how long? How is the deficit being funded? Has a sinking fund been established to retire any long-term debt? Are investments being offered to the public without full disclosure to potential investors? Are funds being used to fund separate business operations of the non-profit organization?

32 NATIONAL/INTERNATIONAL RELATIONSHIPS Are relationships with national organizations and/or subsidiary chapters adequately documented? Are relationships between national and international structures adequately documented? Has the ownership of trade-marks and/or copyrights been determined? Have trade-marks and copyrights been adequately protected and licensed in Canada or in other countries as necessary?

33 ANTI-TERRORISM TERRORISM LEGISLATION Does the non-profit organization carry on operations that may require it to be in compliance with anti-terrorism terrorism legislation? International operations Domestic operations Has the non-profit organization undertaken appropriate due diligence procedures in complying with anti-terrorism terrorism legislation? Development of an anti-terrorism terrorism policy statement Development of resource materials on anti-terrorism terrorism legislation Requiring disclosure statements for board members and staff Evaluating all programs for compliance Requiring disclosure statements from affiliated non-profit organizations, third party agents and/or partners and conducting appropriate inquiries Determining when to make inquiries of donors Are directors aware of risks associated with failing to comply with w anti- terrorism legislation? Personal liability in civil law Possible criminal law sanction

34 Asset Protection Strategies Duty and Standard of Care Insurance Restructuring Organization Incorporation Multiple Incorporations Opportunities For Implementation Consider separating particularly risky aspects of operations Consider separating independent operations within a single entity Consider legal separations where there are multiple locations Obstacles

35 QUESTIONS & DISCUSSION