In our December 2009 edition (pg.4), we informed you of the passing of a new statute, the Canada Not-for-Profit Corporations Act (the "Act"), by the federal Parliament, to replace Part II of the Canada Corporations Act (the "CCA"). Since then, the necessary regulations have been enacted and the Act along with the regulations have been put into force on October 17, 2011 by a governmental decree.
To take advantage of this new and more modern legislation, not-for-profit organizations ("NFPs") subject to Part II of the CCA must be continued under the Act because it does not automatically apply to them. NFPs that do not make this transition by October 17, 2014 at the latest will be dissolved.
The first step in the process of continuing an NFP is to review its letters patent and supplementary letters patent; a copy can be obtained from Corporations Canada. Then, articles of continuance must be prepared in the form provided by Corporations Canada. They contain information comparable to the information contained in the articles of incorporation of a corporation, but with a few additions specific to the regime governing NFPs, like the statement of the purpose of the corporation in which the objects of the organization must be described, and the statement concerning the distribution of the property remaining at the time of liquidation in which it must be clearly stated how such distribution will be made. An NFP may take the opportunity during the course of the transition to change its name and may even use a designating number provided, however, that the number assigned by Corporations Canada is followed by the word "Canada" and the term "Association", "Centre", "Foundation" or "Institute". If an NFP has the status of registered charity ("RC"), it is strongly recommended to consult the Charities Directorate at the time of the transition process, to avoid having to file amendments afterwards or, even worse, compromising its tax status as an RC.
The by-laws of the NFP must also be reviewed to determine whether they are compatible with the provisions of the Act and be amended, if necessary. It is imperative that the by-laws, as provided under the Act, contain:
- the conditions for being a member of the NFP; and
- the rules respecting the giving of notice to meetings of the members.
In addition, the by-laws can modify certain rules set out in the Act. Indeed, it affords an NFP a certain flexibility to adapt those rules to its own reality.
A meeting of the members must be then called and held in accordance with the rules of the CCA and the current by-laws of the NFP, in order to approve the articles of continuance. During that meeting, the current general by-laws may be repealed and replaced by new by-laws that will come into force on the date of continuance. The articles of continuance and the by-laws must be approved by a special majority (2/3).
Once the members have given their approval, a director or officer signs and files the articles of continuance. Following the filing of the articles of continuance, accompanied by the form setting out the initial address of the registered office and the names of the members of the first board of directors, a certificate of continuance will be issued by Corporations Canada. From then on, the NFP is governed by the Act.
Note: There is no longer a need to have the by-laws approved by the Minister of Industry, but they must be filed within the twelve (12) months following their approval by the members.
NFPs subject to the Act respecting the legal publicity of enterprises (Quebec) shall complete the transition process by notifying the enterprise registrar of their continuance by filing an updating declaration.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
