Not-for-profits and registered charities incorporated
federally under Part II of the Canada
("CCA") have until October 17, 2014 to continue under the
new Canada Not-for-Profit Corporations
("NFP Act"). Arguably the most challenging aspect of continuance for
non-share corporations is going to be reaching agreement among the members on a
new general by-law for the corporation. (Invariably by-laws created under the
CCA will not comply with the NFP Act.)
While the corporation does not need to submit by-laws in
order to obtain a Certificate of Continuance, we recommend that they be
contemplated prior to filing Articles of Continuance with Corporations Canada
, as they will be required within a year of
receiving member approval. The conundrum for many organizations will be whether
to amend the corporation's existing general by-law or to adopt an entirely new
one. The best approach may prove to be a combination of the two.
Make sure you're
reviewing by-laws you filed
Now that the NFP Act is in force, continuing under the new
federal law is a topic being discussed by boards across the country. According
to the Transition
Guide for federal not-for-profit corporations
, the first step to
continuance is reviewing the corporation's letters patent and by-laws.
For most organizations, locating these documents will be as
easy as looking in the minute book of the corporation. For others, it may prove
to be more difficult. Regardless, it would be a good idea to request a copy of
the corporation's by-laws from Corporations Canada in order to ensure that the
version being reviewed actually received ministerial approval. Requests for
copies of governing documents including by-laws can be sent by email
Depending on the number of pages, there may be a nominal fee.
Non-share corporations sometimes operate with dated or
unapproved by-laws. Continuance affords these organizations an excellent
opportunity to replace the corporation's general by-law with a completely new
one. While Corporations Canada provides model by-laws
as guidance to "typical" not-for-profit corporations, these and other tools
available to do-it-yourself ("DIY") applicants are not intended to be a
substitute for legal advice.
DIYers should be advised that there are many default
provisions in the NFP Act that will apply unless overridden by the
corporation's articles or by-laws. Some default provisions in the legislation
can only be overridden in the Articles and others cannot be overridden at all. Thus,
one of the main benefits of creating a customized by-law is to override the
provisions of the NFP Act that could lead to untoward consequences for the corporation.
Can an organization
keep its by-laws?
Non-share corporations may be very attached to their current
by-laws. They likely spent considerable time and effort formulating them and,
for practical reasons, would prefer to maintain the status quo. While adapting
an existing set of by-laws to comply with the NFP Act is laudable, bear in mind
that it may take longer and cost more to review the corporation's existing
by-laws because each paragraph will have to be analyzed to ensure it does not
conflict with the law and regulations.
While such a review will be straightforward for "typical"
not-for-profit corporations, it will undoubtedly be more complicated for
corporations with more complex governance structures. Nevertheless, considering
the potential drawbacks associated with starting from scratch, proceeding this
way may be the path of least resistance for many corporations.
How to merge current
and new by-laws
Recognizing that one size does not fit all, it may make
sense to take a hybrid approach and merge the corporation's current general
by-law with a new one. For example, the corporation could identify the
provisions in its by-laws that it would most like to preserve and bring these
to the attention of their lawyer. In turn, the lawyer could incorporate these
provisions into a new document that is already tailored to suit the NFP Act.
By carving out the areas in the corporation's by-laws that
would be best left alone - and leaving the rest up to counsel - the organization
could save time and money. Moreover, it will be able to keep entrenched
organizational practices while ensuring compliance with the NFP Act.
File by-laws with
Articles of Continuance
While the new or amended by-laws do not need to be submitted
with the Articles for Continuance, they will need to be filed with Corporations
Canada within twelve months of being approved by the members.
Depending on the circumstances, we recommend filing all
documents together. Articles and by-laws are complementary documents and some
provisions can only be included in one or the other. Preparing and approving
them in tandem will reduce the likelihood of making errors and omissions.
In addition, a corporation that does not submit by-laws with
its Articles of Continuance will be without a general by-law for the interim
period and, as a result, be governed by the default rules of the NFP Act. This
could result in unforeseen problems for the corporation, considering that
members and other complainants now have remedies under the NFP Act.
In summary, I hope that federally incorporated
not-for-profits and registered charities take advantage of the New Year to
conduct a by-law review with an eye to continuing under the NFP Act. As
outlined above, the by-law conundrum is whether to adopt a new general by-law
or adapt the existing one.
Adopting a new one may be appropriate for "typical"
not-for-profit corporations with model by-laws. It will also be suitable for
corporations that have by-laws that are dated or no longer meet their
The upside to amending the current by-laws is, to the extent
possible, maintaining the status quo. The downside is that it may take longer
and cost more depending on the level of complexity. Either way, I recommend
consulting someone knowledgeable in the area to ensure that the corporation is
operating in compliance with the NFP Act and not inadvertently exposed to its
Joel Secter is a lawyer with Drache Aptowitzer
LLP in Ottawa. He can be reached by email.