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Flash: New Canada Not-for-profit Corporations Act Proclaimed in Force

Download this publication October 20, 2011

On October 17, 2011, the Canada Not-for-profit Corporations Act (the "NFP Act") was proclaimed in force. The NFP Act will provide a federal not-for-profit corporation ("NFPC") with principles that are modern, flexible and more suited to the needs of the not-for-profit sector than the previous Canada Corporations Act, Part II (the "CCA").

The NFP Act includes

  1. a clear set of rules that govern the internal affairs of NFPCs;

  2. provisions permitting directors and members of NFPCs to transact business by written resolutions in lieu of holding meetings;

  3. more flexibility to make fundamental changes, such as amalgamations, that were not permitted under the CCA;

  4. an outline of directors’ duties and responsibilities;

  5. the establishment of an objective standard of care and a due diligence defence and other protections for directors and officers;

  6. an enhancement in the rights of members of NFPCs, including new access rights to financial records;

  7. classification of NFPCs as either soliciting corporations (those which solicit public donations or government funding) or non-soliciting corporations, with graduated levels of financial review being required based on an NFPC’s category and its gross annual revenue, to improve financial accountability; and

  8. requirements for NFPCs to make their financial statements available to members, directors and officers of the corporation.

NFPCs incorporated under the CCA are required to transition to the NFP Act by October 17, 2014. Until they have made the transition, the provisions of the CCA will continue to apply to them. Ultimately, the CCA will be repealed.

The NFP Act does not automatically apply to existing NFPCs and they must continue under the NFP Act by replacing their letters patent, supplementary letters patent (if any) and by-laws and filing with Industry Canada articles of continuance and new by-laws that comply with the NFP Act. The continuance of an NFPC under the NFP Act requires the approval of two-thirds of the votes cast by the members entitled to vote and who are in attendance at the meeting.

NFPCs that do not make the transition by the deadline will be assumed to be inactive and will be dissolved. For registered charities, dissolution could lead to the revocation of their registration as a charity, which may result in adverse tax consequences. Accordingly, NFPCs should take steps to continue under the NFP Act before the expiry of the transitional period.

If you have any questions regarding the foregoing, please contact Elie Roth (416.863.5587) or Michael Disney (416.863.5540) in our Toronto office, or Marie-Andrée Latreille (514.841.6405) in our Montréal office.

Davies Ward Phillips & Vineberg LLP is an integrated firm of more than 240 lawyers with offices in Toronto, Montréal and New York. The firm is focused on business law and is consistently at the heart of the largest and most complex commercial and financial matters on behalf of its clients, regardless of borders.

The information and comments herein are for the general information of the reader and are not intended as advice or opinions to be relied upon in relation to any particular circumstance. For particular applications of the law to specific situations, the reader should seek professional advice.

Expertise:
Taxation

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