This article provides an update on new legislation affecting charities and not-for-profit corporations incorporated under the Federal Canada Corporations Act and the Ontario Corporations Act.
1. Corporations Incorporated under the Federal Canada Corporations Act
Corporations established under Part II of the federal
Canada Corporations Act ("CCA"), which includes many
charities and not-for-profit corporations, must take affirmative
steps to formally transition (i.e., continue) under the new
Canada Not-for-Profit Corporations Act
("CNCA") by October 17, 2014. A failure to continue by
this deadline will result in the automatic dissolution of the
corporation.
The CNCA is a modern corporate statute with certain rules and
restrictions that are very different from those contained in the
CCA. Accordingly, and depending on the corporation's existing
membership and governance structures, a continuance could
potentially raise significant and complex issues that should be
addressed well before the continuance deadline.
In this respect, it is reasonable to anticipate a significant
increase in the coming months in the number of applications by
corporations seeking to continue under the CNCA, which could strain
governmental resources and delay the processing of applications.
The government will soon begin sending reminder notices to affected
corporations. All corporations that are required to continue under
the CNCA are urged to initiate the continuance process as soon as
possible.
The CNCA does not apply to unincorporated entities or to
provincially-incorporated charities and not-for-profit
corporations. While there is no requirement for such entities and
corporations to continue under the CNCA, it may be beneficial in
certain circumstances to do so.
2. Corporations Incorporated under the Ontario Corporations Act
Ontario has its own legislation that allows for the
incorporation of charities and not-for-profit corporations, the
Ontario Corporations Act ("OCA"), which is
currently undergoing a "modernization" process similar to
that described above in respect of the CCA and CNCA.
In this respect, Ontario has proposed replacing the OCA with a new
statute, the Ontario Not-for-Profit Corporations Act
("ONCA"). It is anticipated that the new statute will
have significant impact on the governance of such
provincially-incorporated entities. At this stage, the ONCA in not
anticipated to come into force prior to 2016 and there remains some
measure of uncertainty regarding its final form. Once enacted, it
is expected that charities and not-for-profit corporations
incorporated under the OCA will have three years (subject to some
exceptions) to make the necessary amendments to their constating
documents and governance procedures to bring them into conformity
with the ONCA. Such corporations should start considering in the
near future the options that may be available in their particular
circumstances, including alternatives for achieving compliance with
the proposed ONCA as well as potentially continuing under the new
federal CNCA.
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.