In one of our recent posts, we discussed the consequences for directors who fail to take the mandatory condo director training within the allotted time. A few readers wondered whether they had found a loophole around this obligation. Today, we thought we’d share it with you.
Our readers are already familiar with the mandatory condo director training imposed on all new directors. The training is given by the CAO, online and free of charge. Any director having been appointed or elected on or after November 1, 2017 must take this training within 6 month. Failure to take that training within the allotted time automatically disqualifies the director. You can read more about this here.
Not that anyone is attempting to look for a loophole around apple pie, but a few readers have suggested that nothing prevents a corporation from re-appointing a director the day after he or she is disqualified for failure to take the mandatory training. This, they said, would allow a corporation to avoid the mandatory training by perpetually repeating 6-month terms.
For example, the director elected on November 1st would be disqualified on May 1st if he failed to take the training. The remaining board would then re-appoint him on May 2nd, giving him another 6 months to do (or to avoid doing) the training. This strategy would require a rinse-and-repeat cycle at the following AGM.
Simple, right? Not so fast.
The CAO’s position on this
The Condo Authority of Ontario seems to have picked up on this possible scheme. On their page discussing mandatory training, they indicate that immediate action is required on a corporation’s part if one of its directors is disqualified as a result of his failure to complete the training in time. The CAO’s website goes on to say:
The board can appoint a new director who has completed the CAO Director Training Program at the next board meeting until an election by the owners is held. Before appointing the new director, the board can request a copy of the candidate’s certificate of training completion.
So, can a board re-appoint the same delinquent director or must it appoint a director who has already completed the training?
Our answer: neither.
A newly appointed director need not already have completed the training
Whenever there is a vacancy on the board (whether it is because a director was disqualified having failed to take the training or for any other reason), the remaining board (if it still has quorum) can appoint a new director until the next owners’ meeting.
In our view, however, when the board appoints such a new director, the person being appointed does not have to already have taken the training. That new board member still has 6 months to take the training.
Indeed, having completed the training is not one of the prerequisite listed under section 29 of the Condo Act. Moreover, section 11.7(4) of the regulation provides that the mandatory training must be taken within 6 months of the election or appointment, failing which the director is disqualified.
So, no need to have already taken the course to be appointed.
A disqualified director cannot be re-appointed
However, at the risk of disappointing any Desperados out there, section 11.7(4) of the Regulations prevents a corporation from re-appointing the same disqualified director (at least until he/she takes the required training). This section reads as follows:
(4) For the purpose of clause 29 (2) (e) of the Act, a person shall complete the training courses within six months of the earlier of the day that the person is elected or appointed to the board …
In our view, this specific wording prevents an elected but later disqualified director from being re-appointed without having first completed the course. Indeed, such a director must take the course within 6 months of the earliest of his election or appointment.
While there may be an argument that there is a reset button at an election by owners allowing a delinquent director to run again (giving him another six months to take the training), I prefer to read s. 11(7)(4) as providing each person with a one-time 6 months grace period. If you don’t take the training within that time frame, you can neither be elected, nor be appointed as you are disqualified. To be able to serve again, you must first take the training. While this is my preferred reading of this section, it is not necessarily the right one. This section of the regulation may be further clarified by adding the word “first”. The section could then read “within six months of the earlier of the day that the person is FIRST elected or appointed to the board”.
Moral of the story: no loophole. Get your training.
Thanks Murray for the great blog idea!