The Canada Not-for-Profit Corporations Act
(CNFPCA) received Royal Assent on June 23, 2009, but will
not be proclaimed in force until such time as regulations and forms
for use with it have been developed and settled, likely in 2010.
Industry Canada is advising that Proclamation could be anywhere
between 12 and 24 months.
The CNFPCA will significantly overhaul and modernize
the Canadian federal not-for-profit legislation. Once in force, it
will replace Part II of the Canada Corporations Act
(CCA), which will continue to govern federal
not-for-profit corporations until then. The CCA has
remained largely unaltered since 1917; it has not kept up with
modern corporate governance mechanisms and has imposed
administrative and financial burdens on organizations incorporated
The federal government expects that the CNFPCA will
"promote accountability, transparency and good corporate
governance for not-for-profit organizations," and has
indicated that the purpose of the CNFPCA is to provide a
modern governance framework for the volunteer sector and to provide
the Canadian public with the means to ensure that monies raised are
utilized in an appropriate and responsible manner that will
"boost Canadians' level of trust in not-for-profit
The CNFPCA is modelled on the corporate governance
provisions contained in the Canada Business Corporations
Act (CBCA), the statute that governs federally
incorporated for-profit business corporations. Once the
CNFPCA and its proposed regulations come into force,
organizations governed by Part II of the CCA will have
three years to transition under the CNFPCA before the
Director takes steps (described below) to dissolve them. This is
reminiscent of the continuance process in the 1970s, when
for-profit corporations had to continue from Part I of the
CCA under the CBCA.
Highlights of the CNFPCA include:
The legislation confirms the role of "Director" under
Industry Canada, who will not only act as a public registrar for
non-profit corporations, but will also exercise regulatory,
administrative and investigatory powers.
Incorporation under the CNFPCA is by way of right and
there is no need for Ministerial approval of letters patent as
there is under the CCA. As long as the statutory
requirements for incorporation are followed, incorporation is
automatic. Further, documents may be filed electronically. Bylaws
need only be submitted within 12 months of incorporation. Industry
Canada will no longer approve the bylaws, but will act as a
repository for them.
Under the CNFPCA, a non-profit corporation has the
capacity and powers of a natural person. As long as its articles of
incorporation permit, a non-profit corporation assumes the broader
powers of a corporate legal entity. Therefore objects clauses
formerly required in letters patent for non-profit organizations
under the CCA will no longer be needed.
The CNFPCA sets out procedures for amalgamation,
continuance, liquidation and dissolution.
The CNFPCA recognizes two types of not-for-profit
corporations, namely soliciting and non-soliciting
Soliciting corporations will be
required to make their financial statements available to the
public. Soliciting corporations are non-profit corporations that
receive at least $10,000 of income in the form of donations, gifts
and grants in its last three years. Because they are operated for
public benefit and must distribute their property to a qualified
donee under the Income Tax Act (Canada), e.g., a
charity, the requirements respecting soliciting corporations under
the CNFPCA are more stringent.
There are different and more onerous
corporate governance and financial accountability requirements for
soliciting corporations than there are for non-soliciting
corporations — non-soliciting corporations do not solicit
money from the public. For example, non-soliciting corporations may
have a minimum of one director on the board, however, soliciting
corporations must have at least three directors. Further, there are
different financial reporting requirements for soliciting and
non-soliciting corporations, depending on their revenue. For
example, soliciting corporations with high revenue must be audited,
as must non-soliciting corporations with an annual revenue greater
than $1 million, but soliciting corporations with medium revenue
may resolve to have a review engagement instead of an audit.
Under the CNFPCA, members' rights will have to be
detailed in the articles of the corporation rather than its bylaws,
as has been the case under the CCA. Members have rights
with regard to voting and attendance at meetings, and can vote by
proxy, mailed-in ballots, telephone or electronically. Further,
members have rights to utilize the derivative action remedy and the
oppression remedy to address a wrong committed against the
corporation or a member.
Directors under the CNFPCA have the duty to act
honestly and in good faith in the best interests of the non-profit
corporation, and to exercise the care, diligence and skill of a
reasonably prudent person. This duty and standard of care is akin
to that required under the CBCA. Under the
CNFPCA, directors have a "due diligence" defence
against liability for negligence.
It will be possible for members to enter into a unanimous
members' agreement and withdraw to themselves some or all of
the powers of the board of directors, much like the process of
unanimous shareholder agreements under the CBCA.
Corporations requiring assistance to continue from Part II of
the CCA under the CNFPCA in the three-year period
after proclamation of the CNFPCA should contact legal
counsel for assistance in dealing with the procedures for
continuance and in updating their corporate records and
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.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
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.
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).