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After years of anticipation, the Canada Not-for-Profit
Corporations Act (the CNCA) was proclaimed in force on October
17, 2011. This means that corporations governed by the Canada
Corporations Act (CCA) will have three years – until
October 17, 2014 – to continue under the new Act. The
CNCA will not automatically apply. Every existing federally
incorporated not-for-profit corporation will need to take action to
make the transition. Much has been written about the lead up to the
new legislation and the many changes the CNCA will bring to the
governance landscape, including the voting rights for members
– even non-voting members in some circumstances
– the lack of recognition of ex officio directors, the
distinction between soliciting and non-soliciting corporations, the
codification of a standard of care for directors, and other modern
provisions.
SO, WHAT DOES A FEDERAL NOT-FOR-PROFIT HAVE TO DO?
CCA corporations will have to replace their letters patent and
by-laws with new charter documents by (a) submitting articles of
continuance to obtain a Certificate of Continuance and (b)
creating, approving and filing new by-laws. These will need to
comply with the CNCA.
Organizations should start the continuance process by conducting
a thorough review of their letters patent, supplementary letteres
patent, by-laws, policies and procedures to determine (a) what
needs to be changed to conform with the CNCA, (b) what is outdated,
inapplicable, etc; and (c) what the directors and/or members want
to have changed. It is an excellent time to think about where the
corporation is and where it would like to be. The corporation
should also consider things like: is it a member driven
organization? do the membership classes make sense in the current
environment? are all of those non-voting "members" really
members? does the board have ex officio directors? does it wish to
continue to do so? what type of funding does the organization get?
is it a soliciting corporation, receiving more than $10,000 from
public sources? This will help the corporation structure its new
documents.
The next step is to draft articles, which will be attached to
the Certificate of Continuance. Note that the articles are to be
set out in a form that is available on the government's very
helpful website. The articles must include: corporate name,
province or territory of the registered office; minimum and maximum
number of directors (or the fixed number); statement of purpose;
restrictions on the activities if any (which is likely); classes or
other groups of members; statement of distribution of property on
liquidation. The articles may include other information.
The corporation must also revise its by-laws. The CNCA does not
require the level of detail many organizations had in their
by-laws. There are only two by-law provisions that must be present:
conditions for membership and notice of meetings to members
entitled to vote at a meeting. There are a number of default rules
that will apply if they are not changed in the by-laws. These
include things like the manner of voting, electronic participation
(which is permitted unless restricted), entirely electronic
meetings (which are not permitted unless the by-law specifically
permits and standards are met) and quorum of members (which will be
a majority unless the by-laws provide differently).
The continuance documents need to be approved by the members.
This would be done in accordance with the existing documents,
keeping in mind that it is a two-thirds vote rather than a majority
vote that is needed.
The continuance documents are then filed. There is no filing fee
required. A form setting out the initial registered office address
and the first board of directors is to be filed as well. If the
corporation is changing its name, it would have to file a name
search report as well.
Throughout the transition process, the corporation would be
conducting business as usual. Once the Certificate of Continuance
is issued, the corporation would begin to hold its meetings and
conduct its business in accordance with the new documents and the
CNCA. There are a number of obligations under the CNCA around
record keeping and the like that the organization will need to keep
in mind. There are also many other things to consider –
such as members' rights, audit requirements, next steps.
It is an interesting time for federal not-for-profits and the
CNCA can be looked on as an opportunity to bring clarity to
organizations' governance documents.
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.
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