Why wait – Part I? Should your Ontario charitable corporation think about continuing under the new federal act now?

With the proclamation into force of the new Canada Not-for-profit Corporations Act last month (the " CNCA "), charitable corporations formed under the Part III of the Ontario Corporations Act (the " OCA ") now have a choice of whether to continue under the CNCA or to wait for the new Ontario Not-for-Profit Corporations Act, 2010 (the " ONCA ") to be proclaimed into force late in 2012.

Some Ontario corporations may not want to wait. They may want to look at the new federal option now. The OCA permits a Part III corporation to continue to the CNCA.

There are many factors to consider in deciding whether to continue as a federal corporation, and the relevancy and weight to be given to each of the various factors will vary from organization to organization. Nevertheless, some general observations can be made.

is there a choice?

In many cases, there will not be a choice. For example, universities, colleges, professional governing bodies and most hospitals must be incorporated under provincial law. In other cases, the primary funding agent may dictate the choice of incorporation jurisdiction.

For those that have a choice of incorporation jurisdiction (including existing OCA charitable corporations that for the first time will have the right to continue between to the federal jurisdiction), the factors differ depending on whether the corporation is, or will be, a public benefit corporation (i.e., generally, a corporation that is a registered charity under the Income Tax Act (Canada) (the " Tax Act ") or that receives > $10,000 a year in government grants or from donors who are not members, directors, officers or employees) or a mutual benefit corporation (i.e., all other corporations). To simplify the analysis that follows, a "PBC" means a soliciting corporation under the CNCA or a charitable corporation under the ONCA.

CNCA v. ONCA choice for a charitable corporation

Click here to see table

conclusion

We expect that, in the fullness of time, the CNCA should attract a disproportionate number of large national charitable organizations. The ONCA should appeal mainly to small, local charitable corporations operating in Ontario. Given that the CNCA is a reality and the ONCA has been passed (but not yet proclaimed), OCA charitable corporations should consider which regime is optimal for them now rather than delaying the decision for a year.