The federal government has proclaimed the Canada Not-for-profit Corporations Act (New Act) into force effective October 17, 2011. The following is a list of a few of the major differences between the New Act and the Canada Corporations Act (Old Act).
- Until an existing federal not-for-profit corporation (NFP Corporation) applies to Industry Canada to be continued (i.e. transferred) under the New Act, it will continue to be governed by the Old Act. As a result, it will be “business as usual” for each existing NFP Corporation until it makes that application or has its charter cancelled (see below).
- Existing NFP Corporations cannot continue under any legislation other than the New Act. If an existing NFP Corporation does not wish to be a federal NFP Corporation, it would first have to continue under the New Act and then continue a second time under the legislation of a province or other jurisdiction with continuance rights that are reciprocal to those in the New Act.
- There is a sunset date for operations under the Old Act. If an existing NFP Corporation does not apply for articles of continuance under the New Act on or before October 17, 2014, the federal government will cancel its charter with no opportunity for revival. It will then cease to exist. This is in contrast to the approach taken under the new Ontario Not-for-Profit Corporations Act, 2010 (New Ontario Act) which has been passed but not yet proclaimed in force. Once the New Ontario Act is proclaimed in force, it will immediately apply to all then existing Ontario not-for-profit corporations without any action being taken on their part.
- Industry Canada has provided forms for applications for articles of continuance. One of the mandatory requirements for articles of continuance will be a statement of “purposes” for the applying corporation. Although Canada Revenue Agency (CRA) has not provided any guidelines in this regard, it is anticipated that where an existing NFP Corporation is registered under the Income Tax Act (Canada) (ITA) as a charity, CRA will require it to submit a copy of its draft articles of continuance (or for a new entity, its draft articles of incorporation) under the New Act to permit CRA to satisfy itself that the “purposes” of the not-for-profit corporation meet the charitable purpose requirements of ITA and, for such corporations operating in Ontario, the requirements of the Charities Accounting Act.
- After continuance under the New Act, existing NFP Corporations will be subject to stricter audit and reporting obligations. This requirement is intended to create greater transparency and more fulsome disclosure to members, Industry Canada and CRA. As a result, existing NFP Corporations should budget additional funds for accounting expenses. It is possible in some cases that record-keeping procedures will have to be enhanced or modified to comply with applicable generally accepted accounting principles.