Removing a not-for-profit director mid-term without losing the funder

The situation

Marcia called us on a Tuesday morning, and she opened with the sentence that told us most of what we needed to know: 'They think because they have more lawyers, they get to decide how our organization runs.' She was a pharmacist by day and a board member, on evenings and weekends, of a not-for-profit in New Liskeard that ran a regional program in partnership with a much larger organization based further south. The program had grown to an annual budget of roughly fifteen million dollars, split between government grants and money that flowed through the partnership, and the partnership had brought funding and reach the local board could not have built alone. For several years it had worked well.

The trouble started when the board split over where the organization's next phase of growth should go. Roya, one of the directors and a sales director by profession outside the board, had been pushing to align the organization's strategy more closely with the priorities of the larger partner organization, arguing it was the only realistic path to sustained funding. Reza and the rest of the board, including Marcia, wanted to keep the organization's original community focus intact even if it meant slower, smaller growth. The disagreement had been building for months in board meetings, but it came to a head when Roya began communicating directly with the larger partner about changes to the program's direction without bringing those conversations back to the full board first.

The board concluded that Roya was no longer acting as an independent director representing the organization's interests, but as a conduit for the partner organization's preferences. That is a serious thing to conclude about a colleague, and the board did not reach it quickly or lightly. But once they did, they faced a genuinely difficult problem: removing a sitting director mid-term, in a not-for-profit corporation, with the partner organization's own legal team already signalling it would treat a removal as a hostile act against the partnership itself.

The larger organization had made its position known early and directly. It had far more legal and financial resources than the New Liskeard board, and it was not shy about pointing that out. Marcia told us later that the message, delivered politely but unmistakably, was that a fight over this would be expensive and drawn out, and the local organization should think carefully about whether it could sustain that. The board wanted to proceed anyway. What they needed was a process that could not be picked apart later, because they knew it would be tested.

Where it went wrong

The friction had been building long before it became a legal problem. Roya's early conversations with the larger partner had not been secretive exactly, but they had not been transparent either. She would mention in board meetings that she had 'been in touch' about program direction, without disclosing the substance of those conversations or bringing proposals back for the board to consider as a group. By the time the rest of the board pieced together how far those side conversations had gone, the partner organization already understood Roya's position as representing where the New Liskeard board was heading, when in fact the board had not agreed to anything of the sort.

That mismatch between what the partner believed and what the board had actually decided is what turned a strategy disagreement into a governance crisis. Not-for-profit corporations in Ontario are run by their boards collectively, and individual directors, however well-connected or well-intentioned, do not have authority to commit the organization to a direction on their own. Roya's conduct had blurred that line, and the partner organization, whether by design or by genuine misunderstanding, had let the blurring work in its favour.

The board's early attempts to address it directly made things worse rather than better. A board meeting where members confronted Roya about the side conversations turned into a standoff, with Roya arguing she was simply doing the relationship-building work no one else on the board was equipped to do, and the rest of the board feeling that framing minimized what had actually happened. Positions hardened on both sides before anyone had asked what a lawful, defensible removal process would even require.

By the time the board called us, the relationship with the larger partner had already cooled, and the partner's legal team had sent a letter suggesting that any removal of Roya would be viewed as evidence the local board was retreating from the partnership itself, potentially putting funding commitments at risk. That letter was not a legal threat exactly, but it was designed to make the board hesitate, and it very nearly worked.

What made the board hesitate longest was not the substance of the letter but its tone. It read as reasonable and collegial on its face, expressing concern for the partnership rather than issuing an ultimatum, which made it harder for individual directors to point to any one line and say this is pressure we should resist. Marcia said it took a full week of back-and-forth among board members before anyone was willing to say plainly that the letter, however politely worded, was an attempt to influence an internal governance decision the partner had no role in making.

What we did

1. Reviewed the corporation's governing documents before anything else. Not-for-profit corporations set out how directors can be removed in their articles and bylaws, and those provisions vary. We confirmed exactly what process the organization's own documents required, including notice periods and whether removal needed a members' vote or could be handled by the board alone, so nothing in the process could later be challenged as procedurally invalid.
2. Separated the governance question from the partnership question. The larger organization's letter had deliberately conflated the two, suggesting that removing Roya meant rejecting the partnership. We advised the board to respond to the partner directly and in writing, making clear the organization remained committed to the partnership while reserving its own authority over who sat on its board, a distinction the partner had no legal standing to override.
3. Built a clean evidentiary record of the conduct at issue. Rather than relitigating the strategy disagreement itself, which was a legitimate difference of opinion the board was entitled to have, we focused the record on the undisclosed side conversations and the mismatch between what Roya had represented to the partner and what the board had actually approved. That distinction mattered, because directors are removable for breaching their duties to the organization, not for holding an unpopular view.
4. Gave Roya proper notice and a real opportunity to respond. Even where a board has grounds to remove a director, cutting corners on notice or a fair hearing invites a challenge that can succeed on process alone, regardless of the underlying merits. We prepared formal notice of the proposed removal, set out the concerns in writing, and ensured Roya had a genuine chance to address the board before any vote was taken.
5. Prepared the board for a members' vote where the bylaws required one. The organization's bylaws called for removal to go to a vote of the members rather than the board alone. We prepared clear, neutral materials explaining the governance concern to the membership without turning the meeting into a referendum on the underlying strategy dispute, which kept the vote focused on conduct rather than opinion.
6. Anticipated the partner organization's next move and prepared for it. Given how directly the partner had already intervened, we assumed it might attempt further pressure once the removal was underway, whether through funding conditions or public statements. We prepared a short factual statement the board could issue if needed, sticking strictly to the governance facts and avoiding any escalation that would give the partner a stronger position to react against.
7. Coached the board on responding to the partner without conceding the governance point. We drafted talking points the board chair could use in conversations with the partner's staff, acknowledging the partnership's value while being unambiguous that board composition was not a negotiable term of that relationship. Keeping that message consistent across every director who spoke to the partner prevented the kind of mixed signals that had let Roya's side conversations create confusion in the first place.

The outcome

The members' vote removed Roya from the board by a clear margin, following a process that matched the organization's bylaws step for step. No procedural challenge followed, because there was no procedural gap left to challenge. The partner organization made one more attempt to raise concerns about the decision, framed around the health of the partnership, but did not follow through on any suggestion of withdrawing funding once it became clear the board's process had been sound and well documented.

The disagreement over strategy did not disappear just because Roya was no longer in the room. The board still had to decide, on its own, how closely to align with the partner's priorities going forward, and it did so through the normal give and take of board discussion rather than through one director acting as an unofficial back channel. Marcia told us the difference was less about the outcome of any one decision and more about knowing the board, not any single member's private relationships, was actually making them.

The partnership itself survived, on terms the board had chosen rather than terms the partner had tried to impose through pressure. Nothing about the resolution required conceding ground on funding or program direction to secure it, which is not always how these disputes end when one side has significantly more resources than the other. The board's insistence on a clean process, rather than a quick or informal one, is what held up once it was tested.

A year later, the organization's funding from the partner had not been reduced, and the board had gone through a full budget cycle without another instance of a director negotiating program direction outside the room. Marcia said the clearest sign the process had worked was how unremarkable board meetings became afterward, no side conversations to untangle, no one arriving with a partner's position already half-decided before the board had discussed anything itself.

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