The Canada Not-for-profit Corporations Act (the “Act”) governs federally incorporated not-for-profit corporations.
Not-for-profit corporations are defined as either soliciting or non-soliciting corporations under the Act.
A soliciting corporation is one that has received more than $10,000 in income from public sources in a single financial year. Public sources include gifts or donations from non-members, grants from government and funds from another corporation that also received income from public sources.
Since soliciting corporations receive public funds, they must meet additional requirements to ensure sufficient transparency and accountability for that income.
Where a soliciting corporation has over $250,000 gross annual revenues, the Act requires that the corporation must have an audit.
There is an option of applying to Corporations Canada to be deemed a “non-soliciting” corporation. Section 190 of the Act provides a process whereby a corporation may apply to have its Gross Annual Revenue (“GAR”) deemed to be a lower amount so that a review engagement may be conducted rather than an audit.
The Director under the Act has the power to deem the GAR to be equal to or less than a specific amount as long as it would not be prejudicial to the public interest. The question is: “Would the persons or groups who would ordinarily benefit from the level of financial review imposed on a soliciting corporation be prejudiced if that level was lowered for that financial year?”
Given the Act is still relatively new, very few applications have been made. One example of a corporation meeting the test to be deemed a non-soliciting corporation is where the donations made which increased the GAR to over $250,000 came from a member of the corporation who would therefore be well informed about the financial affairs so neither the member nor the corporation would be prejudiced if the request to not undergo an audit was granted.
The application would have to set out which persons or groups normally benefit from the requirements and why those persons or groups will not be adversely affected by lowering the level of those requirements.
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