All NPO's referred to in this exam are incorporated under the Quebec companies act; All cooperatives are established under the Quebec Cooperatives Act; _____________________________________________________ Part I: True or False (Justify your answer with one sentence and include the article of the law concerned, if applicable) 1. The name \"Anglophones right to choose the language of their education\" would be acceptable despite being in English because its objects is to support Anglophones ? 2. The members in a not for profit at a special general meeting can overrule the Board of Directors and vote a different administrative decision ? 3. The directors cannot borrow money unless they are authorized by a ByLaws that must be in the general By-Laws ? 4. A clause in the By-Laws stating that a special general meeting with a 2/3 vote is necessary to adopt the annual budget adopted by the board of directors is contrary to the law ? 5. Charitable organizations upon their dissolution must give all their assets to another not for profit organization ? 6. The board can adopt a resolution by e-mail as long as all directors respond to the president and the procedure is allowed in the By-Laws ? 7.The price of a common share of a cooperative is determined by its ByLaws ? 8. If all the members at a general meeting of a NPO consent to modify the By-Laws, they can do so at that meeting ? Part II: Technical Problem solving: Question 1 Ms Karana Cashme is the president of a NPO called Jeunes en sant de Montral (JSM). The NPO is designed at preserving the health of children in the Montreal community. Being concerned with the lack of insurance for medication and services offered by the government, the NPO wants to offer a better coverage at a discounted price and offer health and proper diet counselling to its members. The NPO is extremely popular and has 2000 family members. The relevant structure of the NPO found in their by-laws is: Excerpt from By-Laws of JSM: Members: All families can become members by registering one or more of their children under the coverage program offered by the NPO and paying the annual fee. Annual Fee: The annual fee is set at $50 and is payable by March 31st of each civil year. This fee does not cover the cost of the extended insurance coverage that will be billed separately. For humanitarian reasons the board can waive the annual fee for a family. They cannot, however, waive the fee for the insurance coverage. Board of Directors: The Board shall consist of five (5) directors elected by the members at the Annual General Meeting for a mandate of one (1) year or until their replacements are elected. (number is fixed at 5 in the letters patents as well) Voting at board meeting: Each director is allowed one (1) vote. In case of a tie the president has a second vote to break the tie. Chairperson and Secretary: At the first meeting following the election of directors the board will elect a chair and secretary. Should these individuals not be directors of the corporation they will not have the right to vote at meetings of the board of directors. Officers: The officers of the corporation shall consisit of the president, the vicepresident, the secretary and the chairperson of the board of directors. Arbitration committee: Any disputes regarding the By-Laws or the functioning of the NPO must be brought to the arbitration committee. This committee will consist of three (3) members elected for a three years mandate at the Annual General Meeting. The election is staggered so that one arbitrator is elected every year. Arbitrators cannot be directors. Note that the letters patents or the By-Laws do not give the power to members to remove directors from office. Facts: The board of directors that was elected at the AGM in September 2008 and completed at the first meeting of the board following the election was composed of the following: Karana Cashme: President and Director Harim Goldprick: Vice-President and Director Terry Chivini: Secretary and Director Stphane Hosenshein: Director Louis Birdshaw: Director Brendon Harrington: Chairperson (elected at first meeting following the AGM) The extended insurance coverage offered to the members is part of a long term contract with the insurance company Taxa that expired on June 30th 2009. (Taxa has been the insurance provider for the last 17 years) In April of 2009, Brendon Harrington, who works for the NYHN (National youth health network), saw a business opportunity in the renewal of the contract. He contacted Karana Cashme and told her that he could find a better deal for the members. He said he knew someone who could advise the board in light of the renewal and recommended Jocelyn Dufferin, who accepted to work as a consultant for free (actually for the symbolic sum of $1). At the board meeting on May 3rd 2009 Cashme announced that a report was happening and would be tabled at the next meeting where a decision would be made about the renewal of the contract. The next board meeting was scheduled for June 5th 2009. Louis Birdshaw was taken by surprise because he never heard complaints from the current arrangements and decided to investigate further. He found out the following around May 25th 2009 : -Jocelyn Dufferin is a former colleague of Harrington and worked for NYHN for 13 years. He retired April 15th 2009. -For every contract signed through NYHN (NYHN does not provide insurance coverage directly), NYHN receives a cut representing about 4% of the value of the contract. -Stphane Hosenshein worked previously for a Summer internship (in 2007) for NYHN. He worked directly for Harrington and uses Harrington as a reference on his CV. On June 5th 2009, Dufferin presented the following recommendation: Insurance renewal for families with TAXA: $300 Insurance renewal for families with NYHN : $295 He therefore recommended to accept the lower quote at $295 and sign a four years contract. The vote was all in favor with one opposition (Birdshaw) who was not at ease with the whole process and felt that NYHN had an undue advantage in that process. Following the board meeting the contract with NYHN was signed June 10th 2009. Following that board meeting Birdshaw continued his investigation and discovered around July 25th the following facts: -Cashme and Harrington went on a vacation together from July 4th until July 11th 2009 on the boat of the president of NYHN, Anthony Accursanam. -Hosenshein was rehired for another internship at NYHN that started on June 15th 2009 and scheduled to last until August 31st 2009. -The report from Dufferin did not state that the current contract with the current insurer states that 5% of premiums paid will be distributed back in forms of bursaries and emergency assistance to the family members on an annual basis. (around $30,000 annually) -NYHN has a program where 2% of the premiums go back to support the youth on a national basis. (around $11,750 annually) At the AGM in September 2009 Birdshaw produced a document outlining the facts he discovered in May and July. The members were shocked and decided to elect a complete new board. Birdshaw was congratulated by the assembly for his diligence and despite overwhelming support decided not to run again after the events of this year. Following the election of the new board the new directors unanimously decided to cancel the contract with NYHN after the first year and hold a proper open tender process for a new contract to start July 1st 2010. Questions: The new board of directors (after deciding to cancel the contract after one year) is analyzing the conduct of past board members in the awarding of the contract : Based on the information provided please provide your opinion (justify your answer with legislative articles or by-law articles) 1-Can the contract signed with NHYN be cancelled ? (2 marks) 2-Can Karana Cashme be held liable by JES for any damages ? (2 marks) 3-Can Stphane Hosenshein be held liable by JES for any damages ? (2 marks) 4-Can Brendon Harrington be held liable by JES for any damages ? ( 2 marks) 5-Can Anthony Accusanam and NYHN be held liable by JES for any damages ? (2 marks) Question 2 Upon starting their terms on the board of directors of JES, the new board wants to look at applying to Revenue Canada for charity status. From what you know of their structure and activities: A-would they qualify ? If not what should they change and why ? (no need to refer to specific articles) B-Assuming they have none of the clauses required in their letters patents to become a charity what should they modify in their letters patents ? What is the process they need to follow to modify their letters patents ? (refer to specific articles)