NOT-FOR-PROFIT
CORPOR ATIONS
Governing Legislation
Modernized
The Canada Not-For-Profit Corporations Act (“CNCA”) received Royal Assent on June 23, 2009 and was proclaimed in force on October 17,
2011. This statute replaces Part II of the
Canada Corporations Act (“CCA”). In
Ontario, the Not-For-Profit Corporations
Act, 2010 (“ONCA”) received Royal
Assent on October 25, 2010. It is
contemplated that draft regulations will
be released in the near future and that
the ONCA will be proclaimed in force
by the end of 2012. The ONCA replaces
the Corporations Act (Ontario)
(“OCA”). Both the CNCA and the
ONCA herald the modernization of the
governance rules for no share capital
corporations and provide a regulatory
framework similar to for-profit
corporations. The following is a brief
high level summary of key features of
the new statutes.
The Canada Not-for-Profit
Corporations Act
Existing federal not-for-profit
corporations governed by the CCA will
have three years from the date of
proclamation (ie until October 14,
2014) to amend their constating
documents to conform with the CNCA
and apply for a certificate of continuance
to avoid dissolution. The application
for continuance must include an
officer’s certificate certifying that the
members have adopted a new bylaw
which conforms to the requirements of
the CNCA. The CCA will continue to
apply to such corporations until they
are continued.
Terminology
The CNCA contains a number of
unique terms that are relevant to its
understanding, including the following:
“soliciting corporation” being a
corporation which received in excess of
a prescribed amount of $10,000, during
a prescribed period of three years, in
the form of donations from third
parties, grants or financial assistance
from the federal, provincial or municipal
government or any of their agencies, or
donations from other soliciting
corporations; and
“non-soliciting corporation” being
a corporation which is not a soliciting
corporation.
The characterization of a federal
not-for-profit corporation as either a
“soliciting corporation” or a “non-
soliciting corporation” has a number of
implications, including those relating to
the composition of its board; whether
the corporation is able to enter into a
unanimous member agreement; and
the extent of its financial disclosure and
financial review requirements. Soliciting
corporations will be subject to stricter
obligations
than
non-soliciting
corporations.
Incorporation of a corporation will
be “as of right” and it will no longer be
necessary to submit a draft form of the
by-laws with the application. A
minimum of one incorporator will be
required, either a person or a “body
corporate”. There is no requirement
M. Elena Hoffstein,
Fasken Martineau DuMoulin LLP
that the incorporator become a member
of the corporation.
There will no longer be a
requirement to set out “objects”
although if the corporation is a charity,
it will likely continue to be desirable to
set out the purpose of the corporation
in a manner akin to objects in order to
demonstrate compliance with the
requirements under the Income Tax Act
(Canada) that all resources of the
charity are expended on its charitable
objects. As well, it will no longer be
necessary to list the powers of the
corporation, although it will be
permissible to include them and any
others permitted to be set out in the
by-laws of the corporation.
A capacity corporation incorporated
under the CNCA has the capacity,
rights, powers and privileges of a
natural person, like corporations
incorporated under the Canada
Business Corporations Act (“CBCA”)
although the activities it can carry on
and powers it can exercise can be
restricted by the members.
Pre-incorporation contracts which
are contracts entered into by a person
on behalf of a corporation before it
comes into existence are recognized.
The CNCA provides that once the
corporation comes into existence, it
may adopt such a contract, at which
point the corporation is bound by it
and the original party is released.
(continued on page 28)
