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CASUAL LEGAL: Perhaps There is Another Way to Accomplish Municipal Goals?

March 17, 2020

Attention: AMSC Members – Please distribute to all appropriate personnel

Perhaps There is Another Way to Accomplish Municipal Goals?

By Tamara Korassa

Reynolds Mirth Richards Farmer LLP

AMSC Casual Legal Service Provider

 

Municipalities as statutorily created corporations have similar rights to corporations – the right to own land, enter into contractual agreements and sue or be sued. However, there are differences in governance structures (councils as compared to board of directors) and functions (municipal purposes as compared to for the creation of profit). A corporation is owned by its shareholders whereas a municipality reports to and serves its citizens. The Municipal Government Act (“MGA”) allows municipalities to take some extraordinary actions that are not available to corporations including taxation of residents, expropriation, and enacting bylaws to apply within the municipal boundary.

However, a municipality’s goals may sometimes be better achieved using the flexibility of ownership and governance structures offered by a corporation. Further, a corporation provides a vehicle whereby profit can be generated and the only boundary for operations is based on the jurisdiction of incorporation or registration.  Part 3 Division 9 of the MGA allows a municipality to form a municipally controlled corporation (“MCC”) which can operate with a diverse board of directors, share ownership beyond the municipal boundary (provided that control is maintained by the municipality) and to generate profit.  The first limit is that council must be satisfied that (i) the MCC will carry on business solely for a municipal purpose (s. 3 of the MGA); (ii) provide a service or benefit to the residents of the municipal shareholder; and (iii) the profits and dividends earned from the MCC must directly benefit the residents of the municipal shareholder (MGA, s. 75.1(2)). Secondly, the MCC must also comply with the Municipally Controlled Corporation Regulation (“MCCR”) and the MGA requirements which include a requirement to prepare a business plan and unanimous shareholders agreement (MCCR, s.5), hold a public hearing (MGA, s. 75.3(3)), pass a resolution that authorizes the municipality to control the corporation and notify the minister of the resolution (MCCR, s. 2).   On an ongoing basis the MCC is required to submit financial statements to the council of the municipal shareholder(s) (MGA, s. 74.2 and 249) and to notify the residents of the municipal shareholders if there is a proposed change to the operations of the MCC (MGA s. 75.3, MCCR, s. 7).

A MCC may also be required to comply with other legislation that is applicable to municipalities. One example is the Freedom of Information and Privacy Act, which applies to a local government body, which is defined to include any corporation created or owned by a municipality (s. 1(i)(xii)).


To access AMSC’s Casual Legal Helpline, AUMA members can call toll-free to 1-800-661-7673 or email casuallegal@amsc.ca and reach the municipal legal experts at Reynolds Mirth Richards and Farmer LLP.  For more information on the Casual Legal Service, please contact Will Burtenshaw, Senior Director, Risk & Claims, at 780-431-4525, or toll-free at 310-AUMA (2862) or via email at wburtenshaw@auma.ca.  Any Regular or Associate member of the AUMA can access the Casual Legal Service. 

DISCLAIMER: This article is meant to provide information only and is not intended to provide legal advice. You should seek the advice of legal counsel to address your specific set of circumstances. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this article to be outdated.