{"id":20352,"date":"2025-04-11T16:00:16","date_gmt":"2025-04-11T20:00:16","guid":{"rendered":"https:\/\/www.bernierfournieravocats.com\/?p=20352"},"modified":"2025-06-26T15:34:26","modified_gmt":"2025-06-26T19:34:26","slug":"dissolution-of-a-non-profit-organization-transparency-required","status":"publish","type":"post","link":"https:\/\/www.bernierfournieravocats.com\/en\/publications\/2025\/04\/11\/dissolution-of-a-non-profit-organization-transparency-required\/","title":{"rendered":"Dissolution of a Non-Profit Organization: Transparency Required"},"content":{"rendered":"

The recent decision of the Quebec Superior Court in the case of Montour <\/em>c. Fortin<\/em>1<\/sup> provides crucial insight into the responsibilities of directors of non-profit organizations<\/a> (NPOs) upon dissolution, as well as the possibility for third parties to initiate a derivative action to protect the interests of the organization. This case, which involves the NPO Faubourg Mena’sen, raises fundamental questions about governance, transparency, and the protection of stakeholders.<\/p>\n

Background to the Case: Contested Dissolution<\/h3>\n

Faubourg Mena\u2019sen<\/em> was a non-profit organization (NPO) whose mission was to provide affordable housing. In 2022, the directors of Mena\u2019sen decided to sell the organization\u2019s buildings. Following the sale, they distributed the proceeds among themselves and dissolved the non-profit organization. This dissolution was challenged by a former member of the organization and a tenant, who filed a derivative action, alleging that the directors had acted abusively and in breach of their fiduciary duties.<\/strong><\/p>\n

Legal Issues Raised<\/h3>\n

This case raises several important legal questions. First, a derivative action allows, in exceptional circumstances, \u201ca shareholder to sue on behalf of the corporation to seek redress for harm caused to it\u201d2<\/sup>. However, the Companies Act<\/em><\/a>3<\/sup>, does not explicitly provide the possibility of derivative actions in the context of non-profit organizations. The question, therefore, was whether the general principles of Quebec law could be used to fill this gap.<\/p>\n

Furthermore, for a derivative action to be admissible, the plaintiffs must demonstrate that they have a sufficient interest to act on behalf of the organization. The Court therefore had to determine whether the former member and the tenant had the legal standing to bring the action.<\/p>\n

Decision of the Superior Court<\/h3>\n

The Court concluded that, although the Companies Act<\/em> doesn\u2019t explicitly provide for it, the general principles of the Civil Code of Quebec<\/em><\/a> and the Code of Civil Procedure<\/em><\/a> allow a derivate action to be brought on behalf of an NPO. The Court emphasized that the absence of such a remedy could leave NPOs, and the various actors surrounding them, vulnerable to abuse of power.<\/p>\n

The court then recognized that the tenant had standing to sue because she had a reasonable expectation that the NPO would continue its mission of providing affordable housing. The former member, on the other hand, was not recognized as having sufficient interest.<\/p>\n

Moreover, the Court criticized the way Mena’sen was dissolved, highlighting the lack of transparency and failure to comply with the requirements of the Entreprise Register<\/a>. It particularly noted that the dissolution had been announced under a different name (L’Orientation \u00c9ph\u00e9m\u00e8re<\/em>), which made it difficult for stakeholders to oppose it.<\/p>\n

Consequently, in order to allow the derivative action to proceed, the Court cancelled Mena’sen\u2019s dissolution. It found that it was essential to restore the legal existence of the organization to allow the plaintiffs to assert their rights.<\/p>\n

Awaiting the Court of Appeal’s Decision<\/h3>\n

Unsatisfied with the Superior Court’s findings, the directors of the NPO filed an application for leave to appeal to the Quebec Court of Appeal. The Court granted the application, thereby suspending the proceedings in first instance until a decision is rendered on the merits4<\/sup>. It will therefore be particularly interesting to follow this legal saga to discover how the Court of Appeal will interpret the legislative gap surrounding derivative actions in the specific context of a non-profit organization.<\/p>\n

Implication for Members of the Business Community<\/h3>\n

This decision has important implications for NPOs and the business community<\/a>. It reminds NPO directors of the importance of adhering to the principles of good governance, transparency, and accountability. Directors must always act with diligence, loyalty, and in the best interests of the organization.<\/p>\n

If the decision is not overturned by the Court of Appeal, the Superior Court’s conclusion would also confirm that courts can take action to protect the interests of individuals affected by an NPO’s mission, even in the absence of specific legislative provisions. Tenants, members, donors, and other stakeholders would then have the right to expect NPOs to be managed responsibly and transparently.<\/p>\n

It is not unlikely that this decision will encourage derivative actions against NPOs, particularly in cases involving allegations of mismanagement, abuse of power, or breaches of fiduciary duties. This highlights, for the business community, the need to ensure that decisions are made in accordance with the law and the interests of the parties concerned.<\/p>\n

If you have any questions regarding NPO governance, derivative actions, or other matters related to corporate law, feel free to contact our team<\/a> of legal professionals who are committed to protecting your interests. Our firm has the experience and versatility to meet your needs, regardless of the scale of your projects or ambitions.<\/p>\n

 <\/p>\n

Written with the collaboration of Laury-Ann Bernier, Law Lecturer.<\/em><\/p>\n

1<\/sup>2024 QCCS 4448<\/a>.
\n2<\/sup>Id.<\/em>, par. 34.
\n3<\/sup>Companies Act<\/em>, RLRQ, c. C-38.
\n4<\/sup>Fortin <\/em>c.\u00a0Montour<\/em>,\u00a02025 QCCA 126<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"The recent decision of the Quebec Superior Court in the case of Montour c. Fortin1 provides crucial insight into the responsibilities of directors of non-profit organizations (NPOs) upon dissolution, as well as the possibility for third parties to initiate a derivative action to protect the interests of the organization. This case, which involves the NPO… View Article<\/a>","protected":false},"author":33,"featured_media":20174,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[56],"tags":[],"class_list":["post-20352","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-publications"],"acf":[],"yoast_head":"\nDissolution of a Non-Profit Organization: Transparency Required - Bernier Fournier Inc. - Drummondville Lawyers<\/title>\n<meta name=\"description\" content=\"The Superior Court confirms the possibility of bringing a derivative action on behalf of a NPO, even after its dissolution.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.bernierfournieravocats.com\/en\/publications\/2025\/04\/11\/dissolution-of-a-non-profit-organization-transparency-required\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Dissolution of a Non-Profit Organization: Transparency Required - 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