Sep 2019 Charity & NFP Law Update
New Brunswick Passes New Cooperatives Act
On June 14, 2019, New Brunswick’s Bill 35, Cooperatives Act received Royal Assent. The new Cooperatives Act has not yet been brought into force, and will come into force on a day or days to be fixed by proclamation. As indicated by New Brunswick’s Financial and Consumer Services Commission, this date is currently targeted to be January 1, 2020. Once in force, the new Cooperatives Act will repeal and replace the current Co-operative Associations Act, which came into force in 1978 and has not had substantial updates since then, along with the regulations under the Act.
The new Cooperatives Act governs “persons that wish to organize, operate and carry on business on a cooperative basis.” In this regard, section 6 sets out the requirements for an organization operating on a “cooperative basis,” including matters such as open membership; no proxy votes for members; membership interest on any membership loan and dividends on any membership share being limited to the maximum percentage fixed in the by-laws; requirements to have surplus funds arising from the cooperative’s operations; and requirements for cooperatives to educate their members, officers, employees and the public on the principles and techniques of cooperative enterprise. The new Act modernizes the cooperatives regime in New Brunswick to bring it in line with the modern corporate law approach and best practices in other Canadian jurisdictions, modernizes the administrative processes for cooperatives, and reduces administrative red tape. Additionally, it enhances cooperatives’ access to capital by allowing them to issue investment shares in addition to membership shares, and by providing for small business tax credit incentives for investment shares.
Once the new Act is proclaimed into force, all existing co-operative associations incorporated or continued under that Act will be deemed to be continued as a cooperative under the new Cooperatives Act. Their letters of incorporation, directors and by-laws in force at the time of the transition will be deemed to be valid articles of incorporation, directors and by-laws in force under the new Cooperatives Act, despite any inconstancies with provisions of the new Act. However, articles of amendment for the continued articles of incorporation and by-laws to ensure that those documents are in compliance with the new Act and its regulations will need to be filed within 18 months of the deemed continuance. Failure to do so may result in the dissolution of the cooperative.