In October 2021, the Not-for-Profit Corporations Act, 2010 ("ONCA") came into force. Not-for-profit corporations incorporated in Ontario will have a three year transition period to make changes to their governing documents to comply with the ONCA. Our ONCA Fast Facts series explores what is new and different in the ONCA. This week we talk about Public Benefit Corporations.
The concept of a Public Benefit Corporation is new in the ONCA. Public Benefit Corporations include all charitable corporations and some non-charitable corporations. A charitable corporation automatically meets the definition of a Public Benefit Corporation. A non-charitable corporation will be considered a Public Benefit Corporation if it receives more than $10,000 annually in the form of donations/gifts from persons who are not members, directors, officers or employees of the corporation, or in the form of government grants or financial assistance. A non-charitable corporation that is not a Public Benefit Corporation at the beginning of the financial year but meets the definition during the year will be deemed to be a Public Benefit Corporation in the next financial year as of the date of the annual meeting.
Under the ONCA certain rules apply specifically to Public Benefit Corporations that do not apply to other not-for-profit corporations. For example:
- Not more than one-third of the directors of a Public Benefit Corporation may be employees of the organization;
- Public Benefit Corporations have different audit and review engagement requirements. An audit is mandatory for Public Benefit Corporations with annual revenue of $500, 000 or more;
- Upon dissolution, Public Benefit Corporations must distribute assets to another charitable corporation with similar purposes (if a charitable corporation), to a Public Benefit Corporation with similar purposes (if a non-charitable corporation), to the Crown of Canada, Ontario or agency of either Crown, or a municipality in Canada.
Boards of Directors of organizations that meet the definition of Public Benefit Corporation should be aware of the enhanced obligations and ensure they are reflected in the corporation's governing documents and compliance review processes.
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.
