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The Important Role of the Governor in the CFC.
(Last published in Toronto Chess News (TCN), Issue # 14-10, May 15, 2014)
(Updated article by Bob Armstrong, CFC Life Member, originally published on March 16, 2009 in Scarborough Community of Toronto Chess News & Views)
Last month, on April 26 in Ontario, the AGM for the Greater Toronto Chess League (GTCL) took place. At it, the GTA CFC members elected their 8 GTA CFC Governors (who will also then become Ontario Chess Association Governors). They will take office at the Incoming Governors CFC On-line AGM on Sunday, June 29. These types of elections will also be taking place in the rest of Ontario in the other Leagues and across the country over the next two months (they must be elected by the start of the CFC On-line AGM).
These elections are very important in the life of the CFC! The Governor plays a key role in the CFC.
It is important that all have an accurate understanding of the powers and role of the CFC Governor.
The article below deals with the governance of the CFC, including division of power between the Governors, and the Executive Committee they elect, including the President.
Though originally written some time ago now, the basic original article is still relevant, and speaks to this year’s CFC governor elections, though for the last time (explained below).
The opinions in the article are based on 20 years legal experience, though mainly as a litigation lawyer. But I have incorporated and done the bylaws for a number of community-based non-profits. Subsequent to the original article, I was involved in the revision of the Constitutions of the Ontario Chess Association and the Greater Toronto Chess League, and brought numerous amendment motions re the CFC Handbook. As well, I have been a CFC Governor from May 2009 to June 28, 2014, and during part of that period, the CFC Public Relations Coordinator.
The Important Role of the Governor in the CFC (Part I)
Provincial AGM’s & Governors
Each year, usually in mid-Spring, CFC Provincial Affiliates hold their Annual General Meeting (AGM). Members of the CFC have the opportunity at this meeting to elect their governors for the CFC. Is this important to CFC members? Should they come out and vote? Let’s take a look at what role the CFC Governors play, and whether CFC members should be concerned about these upcoming elections.
The Nature of CFC Governors
A pro-bono CFC lawyer stated some time ago, that the Governors (called “Special
Members” in the Bylaws) are similar to corporate shareholders, and not liable for their
actions. He stated:
“As a practicing lawyer I can advise that the CFC is a corporation and as such is a
separate legal entity. Shareholders of a corporation are not liable for the misdeeds of a
corporation. At the annual meeting Governors - who are the equivalent of shareholders elect an executive to manage the affairs of the corporation in the same way that business
corporations elect a board of directors. In the CFC's case the executive are the directors
and are registered as such with the appropriate government authority in the same way that
a business corporation registers its board of directors with the appropriate government
authority. The directors (i.e. the executive in the case of the CFC) of a corporation are
occasionally, though not usually, liable unless the acts that they do are themselves
unlawful. The directors are not usually personally liable if the corporation takes some
action which causes problems or losses to another individual. The corporation may in
some circumstances be liable but not the directors personally. This is one of the main
reasons why people incorporate. The situation is entirely different with a group of
individuals who are not incorporated as is often the case with community groups. “
Differences Of Governors From Shareholders
I, however, have a differing legal opinion and see significant differences between the "Special Members [which = Governors] " of the non-profit CFC corporation, and "shareholders" in a normal corporation.
Shareholders do not "govern" a corporation. They elect a Board of Directors to govern
the corporation for them, and the Board elects an Executive to carry out the day to day
running of the enterprise, and to bring matters of governance back to them for their
voting decision.
That is not the case in the CFC. Yes the Governors are members of the non-profit, but
they are "Special Members", representing the members in the provinces/territories. And
the Bylaws give them powers you don't see being given to shareholders. For example,
take Section 1 of CFC Bylaw # 2:
“BY-LAW NUMBER TWO OF THE CHESS FEDERATION OF CANADA
1. ASSEMBLY OF GOVERNORS
The Chess Federation of Canada shall be governed (my emphasis) by an Assembly of
Governors (hereinafter called the Assembly)...”
This is further emphasized in Section 7:
“7. POWERS OF THE ASSEMBLY OF GOVERNORS
The Assembly shall have plenary powers (my emphasis) to exercise in the name of the
Federation all powers that the Federation has accorded to it (my emphasis) by its
Constitution and the Canada Corporations Act (Part II).”
In fact certain critical powers are reserved exclusively to the Governors –
“8. MATTERS RESERVED EXCLUSIVELY TO THE ASSEMBLY OF
GOVERNORS
Final decisions in the following matters are reserved exclusively (my emphasis) to the
Assembly.
the formal recognition as an affiliate of any provincial association or interim provincial
association in Canada,
the appointment of an honourary patron and one or more presidents emeriti from time to
time,
the determination of the amount of fees for any class of membership as provided in these
by-laws,
the amending in any degree of the Constitution and By-Laws of the Federation,
the election or removal of a Director(s) or Officer(s), unless otherwise provided for in the
by-laws,
the changing of the titles, duties and responsibilities of the directors and officers,
the spending, transferring or otherwise disposing of a significant portion of the
Federation’s assets,
the appointment or removal of an auditor or auditors. “
The CFC “Board of Directors”
Furthermore, the Board of Directors of the CFC (= the Executive) is the creature of the
Governors. It is elected by the Governors. Its powers come from the Governors. And it
does not “govern” the corporation as a Board of Directors does in a regular corporation.
It is more like the Assembly of Governors’ Executive Committee. See Section 9 –
“9. DELEGATION OF POWERS
The Assembly may delegate any of its powers to the Board of Directors, or to the
President or other person or persons. Where a power is delegated to the Board of
Directors the Board may in turn delegate such power to the President or other member of
the Board of Directors and such delegation shall be deemed to have been made by the
Assembly.”
It is my understanding that the Governors have only delegated to the Board of Directors
the day-to-day operations of the CFC, and not all powers. Policy decisions and major
administrative decisions that are urgent, where there is no time to convene the Governors to vote in any way, are also delegated to the Executive. But otherwise all policy
decisions and major administrative decisions are to be made by the Governors wherever
possible. I have not found anything, however, that clearly shows this is CFC policy that the Governors are following. But this appears to be the actual practice of the Governors. They deal with major items by their own motions, and it seems they expect major items to be brought back to them by the Executive for decision.
So as I read it, the Governors are more like the Board of Directors of a corporation, than
like mere shareholders. The CFC Board of Directors (= Executive) are more like an “Executive Committee” and do the bidding of the Governors.
However, the CFC Executive are "the Board of Directors" legally, and registered as
Directors with the federal department (CFC is federally incorporated). Nevertheless, any thorough legal opinion, in my view, would quickly see through that as a complete sham, and could easily prove that the Governors run the CFC (or at least are supposed to). Bylaw # 2 of the CFC makes this clear, as does the practice of the Governors/Executive.
Liability of Governors
If the Governors have these decision-making powers, and exercise them, then can they be
liable for negligent exercise of these powers (or for failure to exercise them)? They are
expected by the membership to exercise their powers to the extent that any reasonable
person would do. If they don't, can they be liable?
It is true that in normal corporations, the individual directors are generally protected from
liability by the outer shell of the corporation. Negligent actions of the corporation may
lead to liability of the corporation, but not of the individual directors. And the directors,
in my opinion, run the corporation the same as the Governors run the CFC corporation.
So generally, I would expect that the Governors are shielded from liability generally, as
are directors generally.
But there has been a broadening of the liability of Directors in recent years, beyond
simply actions of illegality. This is why some corporations have now made it a practice to
have Directors’ Liability Insurance. It would be good for the CFC to be sure that they do
not need such insurance for the Executive/Governors ( I understand that Les Bunning, a
pro bono lawyer for CFC, has advised CFC it doesn’t need it ).
(Article continued in Part II below)
(Last published in Toronto Chess News (TCN), Issue # 14-10, May 15, 2014)
(Updated article by Bob Armstrong, CFC Life Member, originally published on March 16, 2009 in Scarborough Community of Toronto Chess News & Views)
Last month, on April 26 in Ontario, the AGM for the Greater Toronto Chess League (GTCL) took place. At it, the GTA CFC members elected their 8 GTA CFC Governors (who will also then become Ontario Chess Association Governors). They will take office at the Incoming Governors CFC On-line AGM on Sunday, June 29. These types of elections will also be taking place in the rest of Ontario in the other Leagues and across the country over the next two months (they must be elected by the start of the CFC On-line AGM).
These elections are very important in the life of the CFC! The Governor plays a key role in the CFC.
It is important that all have an accurate understanding of the powers and role of the CFC Governor.
The article below deals with the governance of the CFC, including division of power between the Governors, and the Executive Committee they elect, including the President.
Though originally written some time ago now, the basic original article is still relevant, and speaks to this year’s CFC governor elections, though for the last time (explained below).
The opinions in the article are based on 20 years legal experience, though mainly as a litigation lawyer. But I have incorporated and done the bylaws for a number of community-based non-profits. Subsequent to the original article, I was involved in the revision of the Constitutions of the Ontario Chess Association and the Greater Toronto Chess League, and brought numerous amendment motions re the CFC Handbook. As well, I have been a CFC Governor from May 2009 to June 28, 2014, and during part of that period, the CFC Public Relations Coordinator.
The Important Role of the Governor in the CFC (Part I)
Provincial AGM’s & Governors
Each year, usually in mid-Spring, CFC Provincial Affiliates hold their Annual General Meeting (AGM). Members of the CFC have the opportunity at this meeting to elect their governors for the CFC. Is this important to CFC members? Should they come out and vote? Let’s take a look at what role the CFC Governors play, and whether CFC members should be concerned about these upcoming elections.
The Nature of CFC Governors
A pro-bono CFC lawyer stated some time ago, that the Governors (called “Special
Members” in the Bylaws) are similar to corporate shareholders, and not liable for their
actions. He stated:
“As a practicing lawyer I can advise that the CFC is a corporation and as such is a
separate legal entity. Shareholders of a corporation are not liable for the misdeeds of a
corporation. At the annual meeting Governors - who are the equivalent of shareholders elect an executive to manage the affairs of the corporation in the same way that business
corporations elect a board of directors. In the CFC's case the executive are the directors
and are registered as such with the appropriate government authority in the same way that
a business corporation registers its board of directors with the appropriate government
authority. The directors (i.e. the executive in the case of the CFC) of a corporation are
occasionally, though not usually, liable unless the acts that they do are themselves
unlawful. The directors are not usually personally liable if the corporation takes some
action which causes problems or losses to another individual. The corporation may in
some circumstances be liable but not the directors personally. This is one of the main
reasons why people incorporate. The situation is entirely different with a group of
individuals who are not incorporated as is often the case with community groups. “
Differences Of Governors From Shareholders
I, however, have a differing legal opinion and see significant differences between the "Special Members [which = Governors] " of the non-profit CFC corporation, and "shareholders" in a normal corporation.
Shareholders do not "govern" a corporation. They elect a Board of Directors to govern
the corporation for them, and the Board elects an Executive to carry out the day to day
running of the enterprise, and to bring matters of governance back to them for their
voting decision.
That is not the case in the CFC. Yes the Governors are members of the non-profit, but
they are "Special Members", representing the members in the provinces/territories. And
the Bylaws give them powers you don't see being given to shareholders. For example,
take Section 1 of CFC Bylaw # 2:
“BY-LAW NUMBER TWO OF THE CHESS FEDERATION OF CANADA
1. ASSEMBLY OF GOVERNORS
The Chess Federation of Canada shall be governed (my emphasis) by an Assembly of
Governors (hereinafter called the Assembly)...”
This is further emphasized in Section 7:
“7. POWERS OF THE ASSEMBLY OF GOVERNORS
The Assembly shall have plenary powers (my emphasis) to exercise in the name of the
Federation all powers that the Federation has accorded to it (my emphasis) by its
Constitution and the Canada Corporations Act (Part II).”
In fact certain critical powers are reserved exclusively to the Governors –
“8. MATTERS RESERVED EXCLUSIVELY TO THE ASSEMBLY OF
GOVERNORS
Final decisions in the following matters are reserved exclusively (my emphasis) to the
Assembly.
the formal recognition as an affiliate of any provincial association or interim provincial
association in Canada,
the appointment of an honourary patron and one or more presidents emeriti from time to
time,
the determination of the amount of fees for any class of membership as provided in these
by-laws,
the amending in any degree of the Constitution and By-Laws of the Federation,
the election or removal of a Director(s) or Officer(s), unless otherwise provided for in the
by-laws,
the changing of the titles, duties and responsibilities of the directors and officers,
the spending, transferring or otherwise disposing of a significant portion of the
Federation’s assets,
the appointment or removal of an auditor or auditors. “
The CFC “Board of Directors”
Furthermore, the Board of Directors of the CFC (= the Executive) is the creature of the
Governors. It is elected by the Governors. Its powers come from the Governors. And it
does not “govern” the corporation as a Board of Directors does in a regular corporation.
It is more like the Assembly of Governors’ Executive Committee. See Section 9 –
“9. DELEGATION OF POWERS
The Assembly may delegate any of its powers to the Board of Directors, or to the
President or other person or persons. Where a power is delegated to the Board of
Directors the Board may in turn delegate such power to the President or other member of
the Board of Directors and such delegation shall be deemed to have been made by the
Assembly.”
It is my understanding that the Governors have only delegated to the Board of Directors
the day-to-day operations of the CFC, and not all powers. Policy decisions and major
administrative decisions that are urgent, where there is no time to convene the Governors to vote in any way, are also delegated to the Executive. But otherwise all policy
decisions and major administrative decisions are to be made by the Governors wherever
possible. I have not found anything, however, that clearly shows this is CFC policy that the Governors are following. But this appears to be the actual practice of the Governors. They deal with major items by their own motions, and it seems they expect major items to be brought back to them by the Executive for decision.
So as I read it, the Governors are more like the Board of Directors of a corporation, than
like mere shareholders. The CFC Board of Directors (= Executive) are more like an “Executive Committee” and do the bidding of the Governors.
However, the CFC Executive are "the Board of Directors" legally, and registered as
Directors with the federal department (CFC is federally incorporated). Nevertheless, any thorough legal opinion, in my view, would quickly see through that as a complete sham, and could easily prove that the Governors run the CFC (or at least are supposed to). Bylaw # 2 of the CFC makes this clear, as does the practice of the Governors/Executive.
Liability of Governors
If the Governors have these decision-making powers, and exercise them, then can they be
liable for negligent exercise of these powers (or for failure to exercise them)? They are
expected by the membership to exercise their powers to the extent that any reasonable
person would do. If they don't, can they be liable?
It is true that in normal corporations, the individual directors are generally protected from
liability by the outer shell of the corporation. Negligent actions of the corporation may
lead to liability of the corporation, but not of the individual directors. And the directors,
in my opinion, run the corporation the same as the Governors run the CFC corporation.
So generally, I would expect that the Governors are shielded from liability generally, as
are directors generally.
But there has been a broadening of the liability of Directors in recent years, beyond
simply actions of illegality. This is why some corporations have now made it a practice to
have Directors’ Liability Insurance. It would be good for the CFC to be sure that they do
not need such insurance for the Executive/Governors ( I understand that Les Bunning, a
pro bono lawyer for CFC, has advised CFC it doesn’t need it ).
(Article continued in Part II below)
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