The new Canada Not-for-Profit Corporations Act (the "Act") replaces the existing Canada Corporations Act (CCA), which has not been substantially updated since 1917. The new legislation introduces rules and provisions for corporate governance that are already features of corporations legislation in comparable jurisdictions.
Note that every existing federally incorporated not-for-profit corporation will have to take action to make the transition to the new Act. This 'continuance' must be completed by October 17, 2014 in order to remain in good standing with CRA.
To assist with this activity, the CRA has produced a Continuance (transition) checklist, available at: http://www.cra-arc.gc.ca/chrts-gvng/chrts/prtng/nfpc/cntnnc-chcklst-eng.html
As well, Industry Canada has produced a Transition Guide3, available at: http://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/h_cs04954.html
You should act well in advance of the deadline, to ensure that the continuance is completed in time. Failure to continue the corporation by October 17, 2014 may result in the dissolution of the corporation.
Following are some of the key features of the Act, as described in the Legislative Summary:
- The Act gives not-for-profit corporations the rights to buy and sell property, make investments, borrow money and issue debt obligations.
- Procedures for amalgamation, continuance, liquidation and dissolution are set out in the Act.
- Bylaws and amendments must be submitted to Industry Canada after members have approved them. Industry Canada does not review or approve them, but simply acts as a repository.
- A non-soliciting corporation (a corporation that does not solicit donations from the public) is entitled to have as few as one director under the Act; soliciting corporations require a minimum of three directors, at least two of which are not officers or employees of the corporation or its affiliates.
- The Act specifies financial reporting requirements for not-for-profit corporations, depending on their status as either a soliciting or non-soliciting corporation and on the amount of revenue they earn:
- non-soliciting corporations with gross annual revenues higher than $1 million must be audited; where revenues are $1 million or less, a review engagement is required, unless the members resolve not to have one;
- soliciting corporations with gross annual revenues higher than $250,000 must be audited; where revenues are between $50,000 and $250,000, an audit is required, unless the members resolve to have a review engagement; where revenues are $50,000 or less, a review engagement is required, unless the members resolve not to have one;
- All not-for-profit corporations must make their financial statements available to their members, directors and officers, as well as to Industry Canada. Soliciting corporations must make all financial statements publicly available.
- Directors of not-for-profit corporations would be subject to the same duty and standard of care as directors of business corporations incorporated under the CBCA. Not-for-profit corporation directors would have an explicit duty to act honestly and in good faith with a view to the best interests of the corporation, and to exercise the care, diligence and skill of a reasonably prudent person. Failure to abide by this duty and standard could result in liability for negligence. The bill also provides directors with a "due diligence" defense against potential liabilities.
- Members would be permitted to examine and take extracts of corporate records (most importantly, the financial statements); access membership lists (subject to certain restrictions); and request a meeting and make proposals for discussion at the annual meeting.