Engineering Society, Incorporated?

Individuals would no longer be held personally liable if EngSoc became a corporation, vice-president (operations) says

Students walk by the Engineering Society office in the Integrated Learning Centre in Beamish-Munro Hall.
Students walk by the Engineering Society office in the Integrated Learning Centre in Beamish-Munro Hall.

The Engineering Society has been thinking about becoming a corporation for the past several years, said EngSoc Vice-President (Operations) Rob Macnamara.

In December, Macnamara released a report on Clark Hall Pub recommending new staffing, accountability and safety policies for the pub, as well as a plan for its initial re-opening.

The report also recommends EngSoc incorporate.

The report says the decision to incorporate would be a decision “to either remain a part of the AMS or exist as a separate entity.” It says the decision must be made by the EngSoc Board of Directors and the dean of the Faculty of Applied Science, with input from AMS and EngSoc executives. It also recommends EngSoc President Charlie Scott and the EngSoc executive make a decision this month.

Scott told the Journal the recommendations are just ideas and Macnamara’s report isn’t binding.

“We are just weighing the options at this point and we’re gathering information,” he said. “It’s still like an idea floating around.”

Macnamara said the advantage of incorporating is student volunteers aren’t liable anymore if something goes wrong.

“People don’t suffer personal liabilities but rather liabilities with the company,” he said, adding that liability is a concern because EngSoc has been operating six services—Clark Hall Pub, Golden Words, SciCons, the Tearoom, Campus Equipment Outfitters and Science Quest—on a large budget.

Macnamara said EngSoc has an operating budget of $160,000 and with its services, EngSoc operates with more than $1 million.

The society hasn’t decided what to include if they incorporate, Macnamara said.

“The AMS only has its services incorporated and the government [side] is not necessarily incorporated,” he said. “We’d have to look at our constitution and bylaws and see if they are in line with those that are legally required by a corporation.”

Macnamara said the idea has been discussed at council and it’s now in their hands. He said they’ll meet to discuss Clark Hall Pub and incorporation during the first two weeks of February, although the report recommended a decision to be made in January.

EngSoc spoke with a corporate lawyer who Macnamara said supported the idea of incorporation.

“[The lawyer] is advocating the advantages of removing liability from EngSoc members and placing it into a name of a corporation,” Macnamara said, adding that nothing has been discussed in detail yet.

“We would have to look into if or how this would change any previous relationships,” he said.

But because EngSoc is a student faculty, he said they would probably remain part of the AMS Assembly.

“That depends what parts we incorporate or not and it also depends on … how we want to see the relationship [with the AMS] go forward.”

EngSoc Director of External Communications Jon Hordo has been consulting with engineering societies across Canada to learn how they’re structured. Hordo said engineering societies at the University of Regina and the University of Toronto are incorporated.

Peter Kissick, Queen’s School of Business adjunct professor of business law and ethics, said becoming a corporation would entail a change in legal status.

“A corporation is actually a legal person, meaning it can sue or be sued. If you don’t have that corporation entity, you’re just a group of individuals,” he said.

He said the benefit of incorporating is that liabilities such as contracts, fines, and legal issues remain in the corporate entity, so individuals who are part of a corporation are better protected.

Kissick said it’s also easier to obtain insurance and loans as a corporate entity.

“The lender might see you as less of a risk because you are a collection and therefore likely bigger,” he said, adding that a loan for an association would have to be taken out in the name of individuals.

Kissick said EngSoc will probably incorporate as a not-for-profit corporation.

“I’m assuming that EngSoc’s goal in life is to run certain services for its constituents and make enough money to be able to do it again next year,” he said.

“When incorporating you put everything under that one corporate umbrella and there are directors who are responsible for overseeing all those activities,” Kissick said, adding that EngSoc could decide to run certain services independent of the corporation if they don’t want to centralize everything. Because it would be run the same way it is now, there wouldn’t be many downsides to putting all of its business into a corporation.

“If the Engineering Society executive has overseen all of these businesses, now it would be no different if they put them into a corporation and the Engineering Society were the directors of the corporation.”

Kissick said as a corporate lawyer he typically tells a client incorporating is a preferable legal option.

“Certainly there are certain incremental costs in doing this … but on the whole I don’t see there being a whole lot of downside,” he said.

“Given what these societies are doing now … they’re businesses, and I would typically encourage a business to incorporate.”

He said incorporation shouldn’t affect EngSoc’s relationship with the AMS.

“It would be like having a company having … a government regulator. EngSoc would still be subject to AMS rules, whether it’s incorporated or not,” he said.

AMS Board of Directors Chair Adam Say said it’s hard to comment on how the relationship between the AMS and EngSoc would change if they were to incorporate.

“It would depend on what the people from EngSoc would do with the proposal,” he said.

Say said EngSoc may not fall under the AMS insurance policy if they incorporate.

AMS General Manager Claude Sherren said most student governments have been corporations since the 1960s when student governments began to own property.

“If you’re dealing with a corporation … the accountability is clearer and the documentation is clearer.”

He said one of the negative sides to incorporation is it imposes a degree of discipline on the business, including bylaws, a board and financial statements. For a group to incorporate, it has to have a mandate declaring what it intends to contribute to society at large.

Because none of the other faculty societies are incorporated, Sherren said, it’s hard to say what the process would be if EngSoc were to incorporate.

“The constitution doesn’t even address it and Assembly would have to decide … and seek legal opinion to determine whether an incorporated member of the society needs to be treated differently, or if they have provisions for that.”

What’s a corporation?

  • For-profit corporation—shareholders own shares in the company and any liability lies with the corporation.
  • Not-for-profit corporation—members control the corporation and liability stays with the company.
  • Corporations must incorporate under the Ministry of Consumer and Commercial Relations by filling out the necessary forms.
  • They file forms with the provincial government on an annual basis saying who its directors are and where the registered office is.
  • They’re taxable entities that must register with the Canada Revenue Agency and file a tax return.
  • Corporations require a sales tax licence and a GST licence.
  • Corporations must file financial statements—balance sheets and income statements—annually.
Source: Peter Kissick, Queen’s School of Business adjunct professor

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