We are asked from time to time to assist with the dissolution of
an existing registered charity. However, often we suggest to
our clients that it might be better for them to either amalgamate
the existing charity into another charity or keep it in existence
There are various reasons why charities
wish to dissolve. Sometimes the problem that they were
established to address has been solved. Sometimes there is no
leadership left to govern or manage the charity. Other times
the work once done by the charity has been taken over by another
When a charity is formally dissolved as
a matter of corporate law or trust law, generally speaking, it must
confirm that it has no liabilities and must then distribute its
remaining assets to other qualified donees. It then notifies
the Canada Revenue Agency ("CRA") and files a final tax
return confirming it has dealt with its remaining assets as
required. Most liabilities end with dissolution.
Bequests that come in after dissolution are either given to other
similar charities (if a court determines that the deceased had a
general charitable intent) or are distributed to other
beneficiaries if a court decides that the deceased had only a
specific intent to benefit the particular dissolved charity.
A charity that is no longer needed in
the future should perhaps not be dissolved if there is a likelihood
of future bequests that might otherwise be lost. Instead, the
charity that is considering dissolution should consider either
maintaining itself in an inactive state or merging. Remaining
in existence but inactive will require, at minimum, an annual
meeting and the filing of an annual tax return. It will also
require that a board of directors remain in place.
Another option is to amalgamate the no
longer required charity into another charity. This will
result in bequests to the predecessor charities going to the
amalgamated successor. This will also result in the
liabilities of the predecessors becoming liabilities of the
amalgamated charity. Therefore this option should not be used if
the inactive predecessor has a real possibility of having known or
unknown but possible tort liabilities that could come to light
A final option for a charity that seems
superfluous is to turn control over to another group that may be
able to use it. There is no principled legal reason to
prevent a charity from changing its mission and governance and
effectively becoming another kind of charity. Given how
long it takes to register a new charity, making an existing
registered charity available to a new group can be a valuable gift
to them. That being said, CRA has serious concerns about the
sale or other transfer of charitable registrations so transfers
should only be done with careful consideration and expert
Charities wishing to dissolve should consider whether
dissolution is the right option or whether some other option may
better serve the public interest. Miller Thomson LLP's
charity specialists have significant experience assisting our
clients to cease operations in a careful and cautious way so as to
maximize the public value of the charity being closed.
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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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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