New Not-for-profit Corporations Act (Canada)

Changes are on the horizon for those operating in the “not-for-profit” sector in Canada.  Although the Canada Not-for-profit Corporations Act (the “CNCA”) received Royal Assent on June 23, 2009, it has not yet been proclaimed into force. The Government of Canada is currently engaged in a regulatory approval process regarding the implementation of the CNCA, with the anticipated introduction into force of the CNCA to take place in the Fall of 2011.  To ensure that your not-for-profit organization (“NPO”) is prepared for the CNCA, and that a timely and informed decision can be made regarding continuance under the CNCA, NPOs should be aware of the requirements for continuation under the CNCA.

A NPO may apply for a certificate of continuance if it is so authorized and if the NPO satisfies the requirements for incorporation under the CNCA.  In that regard, the following corporations may continue under the CNCA:

i)      corporations incorporated under Part II of the Canada Corporations Act (the “CCA”)[1];

ii)    Canadian Special Act Corporations; and,

iii)  corporations formed under provincial, territorial or foreign law (if so authorized by the laws of their jurisdiction).

If an NPO wishes to continue under the CNCA, without making any amendments to their charter[2], the NPO would require only the approval of its board of directors to apply for a certificate of continuance. A special resolution of members authorizing the directors to apply for a certificate of continuance will however be required where the NPO makes any further amendment to its charter that is permitted under the CNCA.

In addition to the articles of continuance, a NPO must file a notice of registered office and a notice of directors. There is no requirement to file the by-laws of the NPO with the articles of continuance and there will be no fee for filing the articles. On receipt of the articles of continuance, Corporations Canada will issue a certificate of continuance.

The information required in the articles of continuance, as set out below, mirrors that of the articles of incorporation:

i)      The name of the corporation;

ii)    The province where the registered office is to be situated;

iii)  The classes, or regional or other groups, of members that the corporation is authorized to establish and, if there are two or more classes or groups, any voting rights attaching to each of those classes or groups;

iv)   The number of directors or the minimum and maximum number of directors;

v)     Any restrictions on the activities that the corporation may carry on;

vi)   A statement of the purpose of the corporation; and

vii) A statement concerning the distribution of property remaining on dissolution.

While some NPOs will carry most of the content of their letters patent over to the articles of incorporation, others will want to take the opportunity to implement overdue corporate or governance changes.

It will also be necessary for the NPO to consider the classes, or regional or other groups of members of the NPO, the number of directors or the minimum and maximum number of directors of the CNCA corporation, as well as inclusion in their articles regarding limitations on the activities they may carry on for the purpose of evidencing their non-profit status or maintaining their charitable registration under the Income Tax Act (Canada), and revisions to their by-laws (although the bylaws will no longer to subject to ministerial approval).

With regard to the application of the Income Tax Act (Canada), CRA is expected to release a policy directive or other information to explain how the agency proposes to deal with federally incorporated entities continuing under the CNCA and what will be required of them in respect of the preparation and filing of their articles of continuance.

Once a NPO is continued under the CNCA, the articles of continuance will be deemed to be the articles of incorporation of the continued corporation and the certificate of continuance will replace the letters patent (or other form of charter or incorporation instrument). Thereafter, the NPO is subject to the CNCA as if it had been incorporated under the CNCA.

We would be happy to assist your NPOs transition from the CCA to the new CNCA.  If you require assistance in this regard, please feel free to contacts us to discuss your needs in further detail.