Not for Profit Corporations in Canada
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Once continued under the new law, the Canada Revenue Agency requires registered charities to file a notice with it.

TRANSITION TO THE CANADA NOT-FOR-PROFIT CORPORATIONS ACT

Introduction

Federal not-for-profit corporations incorporated under the Old Act have three years to make the transition, or continue, to the NFP Act. If you are unsure whether this applies to your organization, click here to search the database of federal non share corporations.

Just to clarify, the NFP Act does not automatically apply to existing corporations; the rules of the Old Act will apply to corporations until they complete the transition process and obtain a Certificate of Continuance. This process entails replacing your corporation’s Letters Patent, Supplementary Letters Patent (if any) and by-laws with new governing documents.

Corporations incorporated under the Old Act, including those that are registered charities, will have until October 17, 2014 to “continue” under the NFP Act. After this date, corporations that have not completed the transition will be assumed to be inactive and will be dissolved. The steps below outline the transition process to the NFP Act.

Reviewing Your Letters Patent and By-laws

The first step in the transition process is to locate your Letters Patent, Supplementary Letters Patent (if any) and by-laws. These documents will likely be in your corporate minute book at your organization’s registered office. Should you have any difficulties locating these documents, we would be happy to help you obtain a copy.

Before filing any documents with Corporations Canada, we strongly recommend that you review (and revise) your existing by-laws to ensure that they are consistent with the rules of the NFP Act. There are many default rules in the NFP Act that will govern your corporation if you do not override them in your by-laws. In other words, the NFP Act will speak where your by-laws are silent. Below are but a handful of examples: 

  • There are no restrictions on directors’ borrowing powers;
  • Corporations must provide annual financial statements to members by mail;
  • Memberships may only be transferred to the corporation;
  • Participation at members’ meeting by electronic means is allowed;
  • Quorum is a majority of members entitled to vote at the meetings;

Considering that you may not like what the NFP Act has to say about your corporate governance, we advise that you customize your by-laws with a legal professional who can help you avoid the potential pitfalls of operating under the NFP Act. 

Depending on your situation, you may even want to make certain changes before continuing to the NFP Act because making these changes may prove to be more difficult, if not impossible, under the new regime. For example, a corporation will not be able to alter the rights or conditions of any class of members without the support of a two-thirds majority of that class. Therefore, under the NFP Act, the more classes of members you have, the more groups there will be who have an effective veto over fundamental changes that affect their membership class.

You have the option of submitting new by-laws when you apply to continue under the NFP Act or after you have already made the transition. If you choose to wait until after continuing, then you will need to submit your new by-laws within twelve months of them being approved by the members.

Preparing Articles

Articles of Continuance refer to the corporate documents that will replace your existing Letters Patent and Supplementary Letters Patent (if any). They must be submitted to Corporations Canada for certification.

Once submitted, Corporations Canada will attach your Articles to the Certificate of Continuance and these documents will form your organization’s new constituting documents. Given the importance of the documents, the process of continuing should be taken seriously with appropriate advice.