publication date: Oct 25, 2011
author/source: Joel Secter
after the Canada Not-for-profit
(CNCA) received Royal Assent, Ontario's Not-for-profit Corporations Act, 2010
was given Royal Assent as well. Like the CNCA, the ONCA will modernize the
provincial not-for-profit sector by enhancing corporate governance, giving more
rights to members and affording greater protections to directors and officers
of non-share capital corporations.
ONCA draws extensively on the CNCA, there are material differences between the
two statutes, and they cannot be approached as one and the same.
ONCA blesses commercial activities
known as Bill 65, the ONCA will replace Part III of the Corporations Act
which was first enacted in 1907 and has not been
substantially updated since 1953. It will affect approximately 46,000 non-share
corporations and almost 8 million volunteers around the province.
other key features highlighted below, the ONCA will allow non-share
corporations to engage in commercial activities where the revenues are
reinvested in the corporation's not-for-profit purposes. If any of the purposes
of a corporation are of a commercial nature, the articles must state that the
commercial purpose is intended only to advance or support one or more of the
non-profit purposes of the corporation. Nevertheless, despite the new corporate
structure, the usual impediments to business operation by not-for-profits still
exist in the Federal Income Tax Act.
Incorporation fast-tracked, members' rights
will change the legal framework for non-share corporations in many ways. For
starters, the current incorporation process is lengthy, normally taking six to
eight weeks. Under the new legislation, incorporation could take under a week.
addition, by providing a statutory duty of care for directors, as well as
specific protection from liability, the ONCA is expected to enhance corporate
governance and accountability. The ONCA will also enhance members' rights by
including remedies for members of the corporation to pursue when they feel that
either the interests of the corporation or their interests as members are not
New vocabulary - know where you fit
full survey of the changes that will affect Ontario's non-share corporations is
beyond the scope of this article, it is important for organizations and
practitioners to become acquainted with the new terminology. The ONCA
differentiates between "charitable" and "non-charitable corporations" and "public
benefit corporations" (PBCs) and "non-public benefit corporations" (Non-PBCs).
to the ONCA, "charitable corporation" means a corporation incorporated for the
relief of poverty, the advancement of education, the advancement of religion or
other charitable purpose, and "non-charitable corporation" means a corporation
that is not a charitable corporation.
benefit corporation" describes two very different kinds of organizations: a
charitable corporation; or a non-charitable corporation receiving over $10,000
in a fiscal year, either as donations or gifts from persons who are not its members,
directors, officers or employees, or as grants or similar financial assistance
from any level of government or a government agency.
can summarize that there are three types of corporations under the ONCA:
Charitable public benefit
Non-charitable public benefit
Non-public benefit corporations
In order to
ensure greater accountability, PBCs will be more tightly regulated than non-PBCs.
The test for determining the type of corporation is applied at the end of each
financial year (for the current financial period) and takes effect as of the
date of the first annual meeting of members in the next financial year. The
test must be applied annually.
If incorporating, choose carefully
whether to incorporate under the CNCA or ONCA will depend on many factors, such
as the size of the organization and geographical scope of its activities. While
national organizations that carry on interprovincial activities may prefer the
CNCA, smaller organizations that are regionally focused may prefer the ONCA.
It is important
to note that under the ONCA, there are no requirements to file by-laws, annual
returns or financial statements. Furthermore, the ONCA has less onerous
requirements to waive the appointment of a public accountant and have an audit.
Lengthy compliance period
anticipated that the ONCA will not come into force until late 2012, as time is
required to develop regulations and prepare for the changes. Existing
not-for-profit corporations will have three years after the ONCA comes into
force to amend their letters patent and by-laws to conform to the new
CNCA, the ONCA does not require existing non-share corporations to file
articles of continuance. In the meantime, organizations not currently
incorporated may choose to incorporate provincially under the current
legislation or wait until the ONCA comes into force.
is a lawyer with Drache Aptowitzer LLP
in Ottawa. He is a graduate of the University of Ottawa and has previous
experience in dealing with tax and charity matters. Contact him.