On October 19, 2010, the Ontario Government passed Bill 65, the
new Not-for-Profit Corporations Act, 2010 (the
NFPCA). The stated purpose of the NFPCA is to
modernize the legal framework for Ontario's 46,000 provincially
incorporated not-for-profit corporations (NFPs).
The new legislation follows the federal Not-for-profit Corporations
Act which made similar reforms to the legislative scheme applicable
to federally incorporated not-for-profit corporations.
The new NFPCA takes effect on a date to be named by
proclamation. Once the Act is proclaimed, it will remove NFPs from
the ambit of the present Ontario Corporations Act (the
OCA ). The NFPCA will affect every existing NFP in
Ontario. Directors, officers, and executives should start thinking
now about what actions they will need to take to ensure that their
organization's governance structure and documents comply with
the new legal framework.
This article provides a short synopsis of some of the main
features of the NFPCA that may be of interest to an existing
Ontario NFP and its directors, officers, and executives.
B. THE FIRST THREE OF OUR "TEN FEATURES OF THE
1. Continuing under the NFPCA
When the NFPCA is proclaimed in force, NFPs currently
incorporated under the OCA will have three years to file articles
of amendment to amend their letters patent, supplementary letters
patent, by-laws, or special resolutions to bring them into
conformity with the NFPCA. If no such action is taken after three
years, the necessary amendments will be deemed to have been
Failure to act and letting amendments be deemed to have been
made will inevitably lead to ambiguity and uncertainty. The
resulting questions, issues, and confusion may create more
headaches and work than if articles of amendment had been filed
properly within the three year window. Ontario NFPs would be wise
to undertake a proactive governance review to assess whether their
corporate governance documents and practices need to be updated or
changed in anticipation of the NFPCA coming into effect.
2. Commercial Activities
Commercial activities are now specifically permitted and the
ultra vires doctrine has been abolished. Currently, a NFP is
limited to acting within the "objects" set out in the
corporation's letters patent. Actions outside of these
boundaries may be found to be ultra vires by the courts and
declared null and void.
Under the NFPCA, NFPs will still be required to set out
"purposes" in their articles of incorporation.
Corporations will be permitted to have any purpose that is within
the province's legislative authority. If any of the purposes
are commercial in nature the articles must provide that these
purposes are to advance or support the corporation's non-profit
Additionally, under the NFPCA, a corporation's actions will
no longer be declared invalid (i.e. ultra vires) simply because
they are contrary to the NFPCA or the corporation's articles or
by-laws. For example, if a corporation enters into a transaction
that is contrary to the corporation's articles, the transaction
will no longer be declared invalid simply because it was contrary
to the articles.
3. Public Benefit Corporations
The NFPCA differentiates between public benefit corporations and
non-public benefit corporations.
A public benefit corporation is defined as (a) a charitable
corporation (a corporation incorporated for relief of poverty,
advancement of education, religion or other charitable purpose) or
(b) a non-charitable corporation that receives more than $10,000 in
a financial year either as donations/gifts from persons who are not
members, directors, officers, or employees of the corporation, or
as grants or similar forms of financial assistance from the federal
government or a provincial or municipal government or an agency of
any such government. As explained below, public benefit
corporations are treated differently with regards to, for example,
A non-public benefit corporation is any corporation that is not
a public benefit corporation.
Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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