On October 17, 2011, Canadian not-for-profit corporations (NFPs)
formed under Part II of the Canada Corporations Act (CCA) were
required to transition to the newly created Canada Not-for-Profit
Corporations Act (CNCA) by October 17, 2014. If the transition is
not completed in time, the NFP could be deemed inactive and
dissolved, resulting in serious repercussions on operations.
Although it sounds intimidating, once you understand the background
of this change, the transition to CNCA will appear easy and
beneficial to both management and members.
To understand this change, what is useful is to first draw a
comparison between the old CCA regime and the new CNCA. Since 1917,
the CCA has covered the formation of NFP corporations. While the
old act provides very clear rules for profit-oriented companies,
its rules were less clear with respect to NFPs. The CCA has clearly
defined rules regarding items such as governance and incorporation,
which also had to be addressed by NFPs in their by-laws. This meant
that NFP by-laws could be quite lengthy, detailed and substantially
different from one NFP to the next. NFP by-laws had to contain
information such as: procedures for member meetings, the manner of
electing and appointing directors, and the procedures for making,
amending and repealing by-laws.1 These by-laws were then
submitted to Corporations Canada for review and approval before
they could be adopted, making the process tedious and highly
Under the old regime, member's rights had to be defined in
the corporate by-laws. Under the CNCA, default rights are included
in the legislation. These default rights include enhanced voting
rights, the right to requisition meetings for specific purposes,
and access to corporate records.2
Furthermore, with the old process, the challenge was that as the
NFP evolved, if it was considering making changes to its
incorporation documents, it became very complicated and time
consuming. CNCA's goal is to simplify the incorporating process
as well as to standardize corporate governance by providing a clear
set of rules.
The CNCA reduces the need for complex and lengthy articles or
corporate by-laws, since many of its rules are standardized in the
act. NFPs can choose to include as much detail as is necessary in
their by-laws. Like for-profit organizations, a standard set of
by-laws are now adoptable, and can be modified to meet the specific
needs of the NFP. These by-laws can then be filed with Corporations
Canada without the need for government review and approval. The
required yearly corporate obligations, such as holding an annual
meeting of the board of directors, providing annual financial
statements for approval at the meeting, and filing an annual
information return, remain unchanged.
In order to transition to the CNCA, you must do the
Review your existing letters patent and by-laws. As mentioned,
because CNCA has standardized its governance, the articles and
by-laws may now be significantly shortened as many of the rules are
folded into the new act.
Prepare your articles of continuance, which are to be prepared
using Form 4031 – Articles of Continuance (transition). This
can be found on the Corporations Canada website.3
Revise your by-laws. Under the CNCA, all by-laws must have the
following two mandatory provisions:
Conditions required for membership
Notice of meetings to members who are entitled to vote
If there are no other provisions in your by-laws, the default
rules in the CNCA will apply.
Call a meeting of members to review and approve the articles of
continuance and submit them to Corporations Canada.
Prepare and submit Form 4002 – Initial Registered
Office Address and First Board of Directors, and a copy of the
revised by-laws. If the NFP intends to change its name on
transition, it must also file a copy of a NUANS Name Search
Report with Corporations Canada.
After you have completed the above steps, you will be in
compliance with the new act, and no longer run the risk of being
deemed inactive and dissolved.
Lastly, in going through this process, the NFP Corporation
should consider whether it is a soliciting or non-soliciting
corporation. This classification is defined in the CNCA and affects
the financial reporting requirements of the corporation.
For more information on transitioning, or questions on the
differences between the new and old acts and your financial
reporting requirements, do not hesitate to contact one of the
advisors at Crowe Soberman LLP.
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.
While most are well aware that the sale of a business is generally a complex process, even sophisticated business owners are surprised by just how much cost and effort is required to complete the sale.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).