Thursday 18 October 2012

To Be or Not To Be (Married)



Introduction

Today, more couples are choosing to live together in a relationship resembling marriage, without the formalities of marriage. There are many different reasons why a couple may choose not to get married; however, just as choosing to get married has legal implications, so does choosing not to get married. One of the most notable legal implications of not getting married relates to the division of property when the relationship breaks down. So, if you make the decision not to get married, do you really know what you are (not) buying into?

Division of Property for Unmarried Couples

Division of property is dealt with in Part I of the Family Law Act. When married couples separate, generally speaking they are entitled to divide their property equally between the two spouses, regardless of who legally owns the property.[1] Under the Family Law Act, “spouses” are entitled to divide their property on the breakdown of the marriage. “Spouse” is defined as either (1) two people who are married to each other, or, (2) two people who entered into a marriage that is either void or voidable, in good faith. It does not include “common law couples” – even couples who have lived together for more than least 3 years, or are living together and are the parents of a child. So, what does that mean exactly? It means that common law couples cannot look to the Family Law Act to make a claim to a share of property that they do not own. Let’s look at an example:

Jack and Jill have been living together for the past 15 years. They are not married. They live in a quaint house owed by Jill that they both spent time furnishing, decorating and renovating. They have two cars. Both vehicles are jointly owned. Jack and Jill each have their own chequing account. They also have a joint savings account in which they both deposit money to save for a vacation. Jill has a fairly substantial pension with the federal government. Jack only has a modest RRSP. Jack was never worried about his retirement because he knew Jill had a large pension that could support them both. They never had any children. Suddenly, Jill tells Jack she is no longer happy and wishes to end the relationship.

Dividing Jack and Jill’s Property

When common law couples break up, lawyers look to the title, or ownership of the property to determine how it will be shared. If the title is held jointly, the parties can share the value of the asset equally. If the title is held by only one person, only that person is legally entitled to the asset, with only limited exceptions.

What Jack and Jill Can Share

Jack and Jill will be able to share in the value of both vehicles, as well as the joint savings account. This is because these assets are held jointly. Both parties are automatically entitled to share in the value of those assets.

What Jack and Jill Can’t Share

Jack and Jill would each keep their own bank accounts. Unfortunately for Jack, the title to the house is in Jill’s name alone. While Jack and Jill have been living in the house together for the last 15 years, and both put time and money into renovating and decorating the house, Jack has no automatic entitlement to half the value of the house. Jack is also not entitled to exclusive possession of the home. If Jack and Jill were married, the treatment of the house would be very different.

Jack would be entitled to keep his RRSP. Jill would keep her pension; quite unfortunately for Jack, as he was hoping to share in Jill’s pension to fund his retirement. Now that Jack and Jill are no longer together, Jack is likely going to have to come up with an alternative retirement plan.

The Exception

While the law for dividing property on the break down of the relationship for common law couples follows the title of the asset, it may be possible to make a claim for an equitable share in an asset that is in the other person’s name. The best means of doing this is to claim a Constructive Trust[2]  based on equitable principles. Be forewarned that such a process is expensive and protracted. And the threshold for establishing a claim is high.

Conclusion

When asking the question: to get married or not, it is important to understand the legal implications of your decision. The best way to do this is to consult with a lawyer to better understand how the law will apply to you. A lawyer can advise you as to what you can do to protect yourself, and your assets, prior to entering into either a marriage, or a common law relationship with your partner. A lawyer can draft a domestic contract that can set out what will happen if the relationship breaks down and can address the equal sharing of assets, whether you marry or do not marry. This will help to save you from ending up as Jack did: a victim of the fact that common law spouses are not included in the division of property provisions of the Ontario Family Law Act.





[The above article is for general informational purposes only and is not legal advice. If you live in the Ottawa area and would like advice about a legal issue please email us or call 613-569-9500 to speak with one of our lawyers or a member of our staff.]

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[1] There are exceptions when it comes to dividing property between married couples, such as gifts or inheritances received by one spouse during the marriage, among other things. For more information on what can and cannot be equalized on separation, consult with a lawyer.

[2] A constructive trust is an equitable remedy that the court will impose if they believe the person retaining the asset will be unjustly enriched, to the detriment of the other, by being able to keep the entire asset.




Monday 1 October 2012

Changes to Canada Not-For-Profits Corporations Act Require Compliance By All

In an effort to modernize its statutes and processes, the Government of Canada has brought about wholesale changes to the Canada Not-For-Profit Corporations Act (“the new NFP Act”). All federal not-for-profit corporations must complete the process to transition to the new rules no later than October 17th, 2014. Any not for profit corporation which fails to make the transition will be automatically dissolved.

The actual transition process itself is straight-forward.[1] A not-for-profit corporation must seek a Certificate of Continuance pursuant to the new NFP Act. This process is similar to the original incorporation process but instead of seeking to be re-incorporated, not for profit corporations (“NFPs”) must instead seek to continue operating under to the new act and obtain a Certificate of Continuance from the federal Government. There is no fee to apply for a Certificate of Continuance.

The new NFP Act requires the creation of new articles. Some of the provisions from an NFP’s previous letters patent, such as the name of the NFP, classes of members of the NFP, and the maximum/minimum number of directors of an NFP may be carried over. Other provisions which previously had to be included, such as provisions dealing with the removal of directors, annual meetings of members, and the appointment of an auditor for the NFP, now are expressly required to be removed from an NFPs articles of continuance.

The NFP’s articles of continuance must be approved by no fewer than two-thirds of the NFP’s voting members. Apart from the 2/3 vote, the meeting will be governed by the existing NFPs by-laws and letters patent because the new rules won’t come into effect until the NFP has been issued a Certificate of Continuance.

Once the Certificate of Continuance is issued an NFP is also required to bring its by-laws into adherence with the new NFP Act. The by-laws don’t have to be amended at the same time as the articles. The new NFP Act only requires the new by-laws be filed within 12 months of the issuance of the Certificate of Continuance. There is no fee for filing amended by-laws either.

The new NFP Act has been designed to cover many of the provisions currently contained in most NFPs by-laws. The Act is purposely designed in this way to provide NFPs with default rules and by-laws for their operation which apply in all circumstances, unless an NFP expressly chooses to change the by-laws.

There are only two by-law provisions which an NFP is now required to include in its by-laws:

     - the conditions required to be a member of the NFP, conditions
        required to transfer among classes or groups of members,
        and conditions on which membership, whether in a class, or
        generally, ends; and,

     - the manner in which notice of a meeting can be given to
       members entitled to vote at that meeting.

Should the NFP so choose, all other matters can be governed by the default rules contained in the new NFP Act.

If an NFP wishes to adopt different by-laws from the default prescribed in the new NFP Act, it still must operate within certain restrictions. For example, the new NFP Act requires that 5% of the members of an NFP eligible to vote can require that a meeting of the NFP be held. An NFP can choose to lower this requirement to a percentage lower than 5%, but it cannot raise this to any percentage higher than 5%. Equally, the default voting rules requite a 50% majority for an ordinary resolution and 66% majority for a special resolution of the NFP. An NFP can make these requirements stricter (requiring a higher percentage of the votes) but cannot make the requirements less stringent.

The decision to adopt different by-laws than the defaults should be governed by the needs of each individual NFP. No one set of by-laws can meet the needs of all NFPs.

While October 17, 2014 may seem in the distant future, it is advisable that NFPs commence the transition process now. Legal advice and assistance should be obtained early to ensure the new articles of continuance and by-laws are put in place in time, comply with the requirements of the new Act and are consistent with the needs and goals of the NFP itself.

Once legal advice has been obtained, and the proposed new articles and bylaws prepared, an NFP should convene one or more meetings of its voting members ensuring there is sufficient time for the passage of the new articles of continuance and by-laws. This will allow all necessary documentation to be filed well within the government timelines so as to ensure an NFP isn’t dissolved for failure to comply.


Augustine Bater Binks LLP is able to assist not-for-profit corporations undertaking the necessary changes to adhere to the provisions of the new NFP Act. Call (613) 569-9500 to speak to one of our lawyers about the work required to assist an NFP in the transition process.




[1] There is a different set of requirements for charitable organizations, moving beyond the requirements of the new NFP Act.  This article does not address the needs of charitable organizations to conform with the new NFP Act so they don’t lose their charitable organization status.  It is recommended that charities contact the Charities Directorate of the Canada Revenue Agency for more information.