The Canada Not-for-Profit Corporations Act (“CNCA”) was proclaimed into force on October 17, 2011, succeeding the Canada Corporations Act (“CCA”) as the legislation governing Canadian not-for-profit corporations that are federally incorporated. Existing CCA corporations have until October 17, 2014 to continue under the CNCA or face the prospect of dissolution.
As part of the continuance process under the CNCA, existing CCA corporations will also need to bring their bylaws up to date to meet the requirements of the CNCA. As well, charities should obtain CRA’s approval if they are planning to make any changes to their existing charitable objects.
Thousands of affected corporations yet to file
Industry Canada reports that as of December 16, just under 2500 not-for-profit corporations incorporated under the CCA had applied for continuance under the CNCA. Industry Canada estimates that roughly 17,000 corporations will need to continue under the CNCA by October 17, 2014, although only 13,000 regularly file annual summaries each year with Industry Canada. This leaves some 14,500 CCA corporations with 10 months to continue before the deadline.
Corporations with a large membership base will normally obtain the necessary membership approval to continue under the CNCA at their annual general meeting (“AGM”). Although membership approval could also be obtained at a special membership meeting, most not-for-profit corporations with a large membership base will prefer not to put their membership to the trouble of having to participate in a special membership meeting unnecessarily.
To avoid having to seek membership approval at an AGM or special members’ meeting at the last minute prior to the looming deadline date of October 17, 2014, federal corporations under the CCA should begin their continuance process as soon as possible by preparing the necessary CNCA continuance documents for membership approval.
Consider membership classes carefully
The CNCA will give members of all classes, including non-voting members, a right of veto concerning certain fundamental changes, including continuance. Corporations may therefore wish to change their membership structure before continuing under the CNCA so that there is only one class of members. One option is to restructure secondary membership classes into “supporters,” “associates,” “fellows” or other similar terminology to avoid classifying them as members. However, a change in membership structure would need to be done at a members’ meeting held before a members’ meeting to proceed with continuance under the CNCA.
The continuance process requires the preparation of articles of continuance and a new by-law which complies with the CNCA. Drafting these documents and having them approved by the board and the members at meetings called for that purpose before filing with Industry Canada can take a number of months, subject to the governance process and polity of the organization.
There is no requirement that a lawyer be retained to assist in this process because there are a number of self-help tools available on Industry Canada’s website. However, because of some of the complexities surrounding the CNCA, it is generally advisable to obtain assistance from a lawyer who is knowledgeable concerning the CNCA and experienced in charity and not-for profit law matters to ensure that the new articles and by-law are compliant with the detailed rules in the CNCA.
Terrance S. Carter, B.A., LL.B., TEP, Trade-mark Agent, is managing partner of Carters Professional Corporation, practicing charity and not-for-profit law, and is editor of www.charitylaw.ca.