The new Canada Not-for-Profit Corporations Act came into force on October 17, 2011. Not-for-profit corporations incorporated under Part II of the Canada Corporations Act are required to make the transition to the new legislation by October 17, 2014.

BACKGROUND
• Virtually all existing federal not-for-profit corporations are incorporated under Part II of the Canada Corporations Act.
• This Act has not been significantly amended since 1917 and does not reflect modern standards regarding corporate operations and corporate governance.
• The current Act governs more than 19,000 diverse not-for-profit organizations, including 7,800 registered charities. All of which will be impacted by the new Act.

HIGHLIGHTS

• The Canada Not-for-Profit Corporations Act benefits not-for-profit corporations by providing:

- A clear set of procedural rules.
- Less red tape since Corporations Canada will no longer review and approve by-laws.
- More flexibility on making fundamental changes, such as amalgamations, which were not permitted under the old Act.
- A more objective standard for directors in carrying out their duties and responsibilities and a due diligence defence, which will reassure individuals who decide to sit on a board of directors.

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On May 12, 2010 the Ontario Ministry of Consumer Services introduced the Not-for-Profit Corporations Act, 2010.  The new Act received Royal Assent on October 25, 2010.  It is anticipated that it will be proclaimed into force in late 2012.

The Canada Not-for-Profit Corporations Act received Royal Assent in June, 2009 and is expected to be proclaimed into force this Spring. 

These two Acts include definitions to categorize not-for-profit corporations. 

In Ontario, certain not-for-profit corporations will be defined as Public Benefit Corporations.

Federally, there will be a distinction between Soliciting Corporations and Non-Soliciting Corporations.

ONTARIO – Public Benefit Corporations

 The new Ontario Act defines a public benefit corporation as a charitable corporation or a non-charitable corporation that receives financial benefits from people who are not members, directors, officers or employees, including government grants or similar financial assistance, that exceed $10,000 in a financial year.

Public benefit corporations will be held to a higher standard than non-public benefit corporations in terms of being accountable for their financial activities because they receive funding from non-members.
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Bill 65, the Ontario Not-for-Profit Corporations Act, 2010 (“ONCA”), is an Act to revise the law in respect of not-for-profit corporations. It is a government Bill. It was given First Reading on May 12, 2010 and Second Reading on June 2, 2010. We do not know when the Bill will be given Third Reading and Royal Assent.

ONCA is a stand-alone statute. The ONCA replaces Ontario’s current Corporations Act which now regulates not-for-profit corporations in Ontario. The ONCA will bring Ontario not-for-profit laws into conformity with other comparable statutes across Canada. The intention is to give not-for-profit corporations “a modern legal framework to enhance governance and accountability… to give more rights to members and better protect directors and officers from personal liability” (Extract, Ministry of Consumer Services Press Release May 12, 2010).

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We are often retained to assist clients incorporate not-for-profit corporations and apply for charitable status with Canada Revenue Agency (CRA).  Registration as a charity with CRA is required to permit the organization to issue tax receipts to donors.

These organizations frequently receive donations of cash or property (such as office equipment) prior to acquiring charitable status from CRA and we are asked whether a tax receipt can be issued for those early donations.  The short answer is a qualified yes for cash donations and a clear no for donations of property. Read the rest of this entry »

A director or trustee of a not-for-profit corporation can make a valuable contribution to your community. However, directors should be aware of their obligations and liabilities.

A Director must act in good faith and in the best interests of the corporation as a whole.
This obligation is key. If you represent a constituent group within the corporation, you must still act in the best interests of the corporation as a whole. Read the rest of this entry »