72 lines
7.3 KiB
Markdown
72 lines
7.3 KiB
Markdown
---
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title: 'S5: Governance Requirements'
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collection: Cooperative Foundations
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path: 'Cooperative Foundations/Hub Adaptations/Ontario/S5: Governance Requirements'
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parentDocument: Ontario
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outlineId: 05d4c54c-c609-42fa-9434-d0c587921fb9
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createdBy: Jennie R.F.
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---
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:::info
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This section covers what Ontario law actually requires under the Co-operative Corporations Act (CCA), and how it connects with the governance structures from Session 5. The goal is to make sure the governance you're designing will hold up when the CCA eventually asks to see it on paper.
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:::
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## You need at least three people
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The CCA requires three or more people 18 or older to incorporate a worker co-op in Ontario. A two-person studio *cannot* incorporate as a worker co-op here. If you're a duo, you'll either need to add a third member-owner before incorporation or pick a different legal structure for now.
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## The 75/75 rule defines you as a worker co-op
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Ontario's CCA says a worker co-op has to keep at least 75% of its employees as members and at least 75% of its members as employees. This is the test that distinguishes a worker co-op from other co-op types. You have to keep the math working as you start bringing on contractors, part-timers, or someone in a probationary period. You probably won't bump up against this early on, but the membership pathway you design in Session 5 should be built with this rule in mind so it doesn't surprise you later.
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## One-member-one-vote is *law*
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Under the CCA, every member of a co-op gets equal voting power for formal member decisions (elections, bylaw approvals, resolutions) regardless of how much they've invested. It's part of the legal definition of operating on a "co-operative basis" in Ontario. The consent and consensus models from this program are ways of *practicing* democratic governance day-to-day.
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## Bylaws are required
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Ontario co-ops must have bylaws. At minimum they need to address how people become and stop being members, how members vote and meet, how directors are elected and replaced, how meetings are run, and how surplus flows back to members. For worker co-ops specifically, the bylaws also need to speak to the relationship between membership and employment. The governance processes you're building in this program (how to make decisions, who has voice, how to handle disagreement) eventually get written into these bylaws.
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It's okay to take a plain-language first pass at your bylaws. When you're ready to incorporate, a co-op lawyer can translate it into the formal document.
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## Member admission, withdrawal, and expulsion
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The CCA expects bylaws to set out the conditions under which a member can join, leave, or be removed, and gives an expelled member the right to appeal to the membership at a general meeting. This is the legal version of the conversation we nudge you toward in Session 5 (the uncomfortable one about removing members). Whatever process you design has to be writeable, fair, and appealable. If your draft can't survive that test, it's not finished.
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## You have to hold an AGM
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The CCA requires a first annual general meeting (AGM) within 18 months of incorporation, and at least one AGM every fiscal year after that, with statutory notice periods. The AGM is where members elect directors, approve financials, and pass any bylaw changes. This is not optional. Put it on your calendar early.
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## Audits are required by default, but small co-ops can opt out
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The CCA requires co-ops to appoint an auditor and have their annual financial statements audited by default. For many small co-ops that have not raised investment under an offering statement and don't have government grants that require an audit, members can pass the necessary resolutions each year to exempt the co-op from the audit provisions for that financial year, instead of paying for a full audit. In a 3–5 person studio, this usually just means making an annual "audit exemption" resolution a standing AGM item or getting everyone's written consent ahead of time. You can still choose to ask an accountant for a lighter-touch review of your finances, but that's a governance choice and not required.
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## Virtual and hybrid meetings are permanently allowed
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Since the October 2023 amendments, Ontario co-ops can hold meetings virtually or in hybrid format as long as their bylaws don't expressly forbid it. This was part of the 2020-2023 modernization package that also made electronic notice and electronic participation easier. If your studio is distributed or your team works across cities, this matters. Formal governance doesn't require everyone in the same room, but your bylaws do need to leave the door open.
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## Dual status: director and employee
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In a worker co-op, you can be both a director and an employee. Most small studios (3-5 people) will have all members serving as both, but the roles come with different legal obligations. Director duties include fiduciary duty, duty of care, and a statutory obligation to disclose conflicts of interest in writing and recuse from related decisions (this is at the federal level). Employee rights fall under the Employment Standards Act. It's worth separating governance work (board decisions, AGMs, strategic direction) from production work (making games) early on, before incorporation.
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The conflict-of-interest part is awkward in a 4-person studio where every member is also a director and the "interested party" in a contract decision is sitting at the same table. The CCA still expects the disclosure to happen and to be minuted. Build the habit early. It's a good way to keep governance visible.
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## Member loans and offering statements
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If your studio raises money from members beyond basic membership shares (for example, member loans to fund a project or preference shares), the CCA's offering-statement rules may apply once you move past the built-in "small raise" exemptions or start selling to more than a few dozen people. There are exemptions for small, member-only raises, but a co-op that doesn't know the rules exist can accidentally create a lot of extra legal work. Because the thresholds and exemptions are technical and have shifted over time, check FSRA's current ["Offering Statements"](https://www.fsrao.ca/industry/co-operative-corporations/what-offering-statement) guidance and talk to a co-op lawyer before you accept money in any form other than wages or basic membership shares.
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## Records, minute books, and the FSRA annual return
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The CCA requires you to keep specific records at your registered office: the member register, minutes of member and director meetings, articles, bylaws, and financial records. You also have to file an annual return with FSRA and keep your information current. It's a quick filing, but skipping it can throw you offside. Set a recurring reminder.
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---
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## Additional resources
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* [FSRA Co-operative Corporations](https://www.fsrao.ca/industry/co-operative-corporations-0)
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* [Co-operative Corporations Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-c35/latest/rso-1990-c-c35.html)
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* [OCA resources](https://www.ontario.coop/training-and-resources/start-a-co-operative)
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* [FSRA legislative changes](https://www.fsrao.ca/industry/co-operative-corporations/legislative-and-regulatory-changes-co-operatives-ontario)
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* [Canadian Worker Co-op Federation: Incorporating in Ontario](https://canadianworker.coop/wp-content/uploads/2020/10/Incorporating-a-Co-operative-in-Ontario-Without-Share-Capital.pdf)
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