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Tips for Renewable Energy Co-operatives Relating to Articles of Incorporation and Amendment

On September 9, 2009, the Green Energy and Green Economy Act, 2009, amended the Co-operative Corporations Act (the CCA) by providing for renewable energy co-operatives. The changes are applicable only to renewable energy co-operatives as defined in section 2 of the amended CCA.
 
While the legal requirements for the contents and filing of Articles of Incorporation and Amendment are set out in the CCA, here’s some tips on preparing these documents for submission to Financial Services Commission of Ontario (FSCO).
 
Definition of a Renewable Energy Co-operative
 
In the cover letter enclosed with your application materials, please indicate if the Articles of Incorporation or Amendment are to establish a renewable energy co-operative (as defined in section 2 of the amended CCA).
 
A renewable energy co-operative restricts its business to:
 
  • generating (i.e. , producing) electricity from renewable energy sources; and
  • selling that electricity as a generator.
The co-operative's articles must expressly set out these restrictions. However, as part of that business, the co-operative can also:
 
  • Establish or develop renewable energy generating facilities.
  • Promote buying renewable energy generated electricity.
These terms are as defined in the amended Electricity Act, 1998 (the EA). Under the EA, renewable energy includes wind, water, biomass, biogas, biofuel, solar energy, geothermal energy and tidal forces.
 
To be a generator, the co-operative must own or operate the generating facility and be licensed by the Ontario Energy Board as a generator. However, the co-operative does not need to meet these requirements at the time of incorporation.
 
Articles of Incorporation to Incorporate a Renewable Energy Co-operative
 
If your Articles of Incorporation are to incorporate a renewable energy co-operative:
 
  • Article 7 must specify the restriction on the business of a renewable energy co-operative, as set out in section 2 of the CCA (i.e. , business restricted to generating electricity from renewable energy sources and, as a generator, selling that electricity). Articles of Incorporation that do not set out such restrictions will be returned, as the co-operative will not qualify as a renewable energy co-operative.
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  • For a co-operative with share capital, Article 9 must set out the rights, conditions and restrictions etc. attached to any class of preference shares. Note that section 32(1)(b)(i) of the CCA – which allows a co-operative to redeem shares without the member's consent if the member has not done business with the co-operative for two years – does not apply to renewable energy co-operatives. Therefore, this condition should not be included in the Articles of Incorporation.
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  • For a co-operative without share capital, section 49(3) of the CCA – which allows a co-operative to terminate membership and repay applicable loans if the member has not transacted business with the co-operative for two years – does not apply to renewable energy co-operatives. Therefore, this condition should not be included in the Articles of Incorporation.
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  • A membership fee can still be required of members, and in the case of co-operatives without share capital, is set out in Article 10. Note that section 144 of the CCA – which authorizes regulatory action if a co-operative conducts a certain percentage of its business with non-members over a three year period – does not apply to renewable energy co-operatives.
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  • Any special provisions not covered elsewhere can be added in Article 15. (e.g. , this is where the co-operative can provide for distribution of surplus in the event of the co-operative's dissolution, in accordance with section 162(2) of the CCA. ) FSCO suggests that you set up a special provision in the Articles of Incorporation regarding the dissolution of the co-operative. In the case of renewable energy co-operatives this is not expected to be based on patronage returns.
 
Articles of Amendment to Change to a Renewable Energy Co-operative
 
If your Articles of Amendment are to change an existing co-operative into a renewable energy co-operative:
 
  • Amend Article 7 of the Articles of Incorporation to restrict the co-operative's business (as set out in section 2 of the CCA), to generating electricity from renewable energy sources and selling that electricity as a generator.
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  • Amend the share conditions in Article 9 of the Articles of Incorporation, if they contain the redemption provision in section 32(1)(b) of the CCA – which allows the co-operative to redeem shares without the member's consent if the member has not done business with the co-operative for two years – by removing the provision.
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  • For a co-operative without share capital, delete any provision in the Articles of Incorporation that allows the co-operative (in accordance with section 49(3) of the CCA), to terminate membership and repay applicable loans, if the member has not transacted business with the co-operative for two years.
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  • Review and amend (as applicable), the provision in Article 15 of the Articles of Incorporation that deals with the distribution of surplus in the event of the co-operative's dissolution.
Once these steps have been completed, you must:
 
  • Ensure the special resolution has been passed by the co-operative's directors.
  • Have the Articles of Amendment approved by the co-operative's members.
  • Provide FSCO with two certified copies of the resolution. Please note that both copies must be signed by an officer or director of the co-operative, and include the position of the individual (e.g. , President).
When you complete the Articles of Amendment form:
 
For Article 1, which states: "the following is a certified copy of the resolution amending the articles of the co-operative”, make sure you set out the resolution to amend the articles. They must:
 
  • identify the information that will be replaced in the Articles of Incorporation; and
  • specify the specific paragraph number from the Articles of Incorporation that you want changed or replaced.
For Article 2, which states: "the above amendment has been duly authorized as required by subsection 151(1), (2), (3) or (4) of the Co-operative Corporations Act", make sure:
 
  • the amendment is authorized under subsections 151(1), (2), (2.1), (3) or (4);
  • you indicate each of the applicable subsections;
  • you review the subsections and take the necessary steps to have the amendment approved by the co-operative's directors, and its members and shareholders (if applicable).
For Article 3, which states: "the resolution authorizing the amendment was confirmed by the members of the co-operative on (date)", make sure you insert the date the resolution was approved by the members and shareholders (if applicable).
 
  • Ensure the Articles of Amendment, along with the special resolution that was passed by the co-operative's board and approved by its members, are filed within six months of the resolution's effective date.
Steps After Incorporation
 
Once your renewable energy co-operative is incorporated, the CCA requires that you create by-laws governing how the co-operative will allocate, credit or pay members any surplus that arises from the business. Like any other by-laws, these by-laws need to be confirmed by at least two-thirds of your members' votes. (The only exception is if your Articles require a greater proportion of votes.)
 
If you plan to submit a proposed offering statement that needs to be issued a receipt after your Articles of Incorporation have been approved, please refer to the Offering Statement Tips for Renewable Energy Co-operatives, which will be posted online following proclamation.
 
General requirements for all submissions:
 
  • Make sure you submit only final, typed versions of documents.
  • Review all names (which should be written in full, not initials) and addresses to ensure they are complete and accurate.
  • Include your e-mail address if one is available.
  • Ensure that all documents include original signatures.
  • Include duplicate copies of all filed documents.
  • Respond quickly to any inquiry from FSCO.
  • Identify and explain any critical requirement relating to dates or timing issues when you submit a document. FSCO will attempt to accommodate timing requirements when possible.
  • Include payment when your documents are submitted to FSCO.
  • Make your payment out to the Minister of Finance.
FSCO will:
 
  • Send you an acknowledgement letter or e-mail to confirm that your document has been received.
  • Send you a letter or e-mail if minor additional material is needed.
  • Return your documents if the information is considered incomplete or inaccurate.
  • Expedite your filed documents, provided that prompt responses are provided to any follow-up questions.
  • Review your documents before a certificate is issued. (Keep in mind that FSCO will require more time to review complex matters or documents.)
As FSCO identifies other helpful suggestions, they will be added to this tips document.