Canada has enacted new legislation to replace the Canada Corporations Act (CCA). This is the first substantial change to the existing federal non-share corporation legislation since 1917. This legislation was introduced into parliament several times since 2005 (Bill C-21, Bill C-62 and finally Bill C-4). Bill C-4 An Act respecting Not-For-Profit Corporations and Certain Other Corporations received royal assent on June 23, 2009. However, the new Canada Not-For-Profit Corporations Act (CNCA) is not in force yet. The statute will come into force on a day to be fixed by order of the Governor in Council. Industry Canada has indicated to us that it will likely be 12 months to 24 months before the CNCA is in force.
When the CNCA is in force all corporations incorporated under the CCA will have three years from that date to continue the corporation under the CNCA. If a corporation does not continue under the CNCA within the three year period it can be dissolved. Corporations incorporated by Special Act of Parliament can also elect to be continued under the CNCA, but there is no requirement to do so. Continuing corporations will have the ability to make some amendments to their structure on the continuance.
The government has stated it will not charge any fees to continuing corporations. We are also currently taking steps to help minimize the costs of preparing the necessary documents to complete this continuation. First, we recommend that most corporations take no action at this time. Given that the legislation is not expected to be in force for at least a year, there is a possibility that the legislation could be amended before it comes into force. Preparation of legal documents at this time is premature and may lead to additional legal fees if the legislation changes. Second, we will be preparing template documents to help clients reduce the costs of continuing under the new statute.
The CNCA differs greatly from the CCA. Under the CNCA a corporation will have the capacity, rights, powers and privileges of a natural person, subject to any restrictions included in the corporation’s articles of incorporation or continuance. The CNCA also removes the need for a corporate seal, specifically allows electronic meetings, written resolutions in lieu of meetings, and absentee voting and provides a standard of care for directors. The CNCA significantly increases members' rights and gives non-voting members the right to vote on some changes to the corporation. Granting voting rights to non-voting members will be problematic for some charities and we will address this issue in-depth in a future article.