Not-for-profit ("NFP") corporations in Canada have until October 17, 2014, to apply for a certificate of continuance required by the new Canada Not-for-profit Corporations Act (the "Act") before they become subject to administrative dissolution.
While all NFPs should plan accordingly to ensure the continuance process is completed in time, registered charities and other "qualified donees", as defined under the Income Tax Act, should be made aware that continuing under the Act as a corporation requires additional steps and may take more time to complete. For registered charities, failure to continue under the Act may result in the corporation being administratively dissolved and having its charitable status revoked by the Charities Directorate of Canada Revenue Agency ("CRA").
continuing under the Act – no substantive change to purpose
When a charity is continuing under the Act without making a change to its specific charitable purpose or purposes, item 6 of Form 4031 should be completed using the exact same language found in Article III of its Letters Patent issued under the Canada Corporations Act. However, under the Act, the powers of the corporation need no longer be stated in its articles.
continuing under the Act – substantively amending the purpose
When a charity is continuing under the Act and plans to amend or update its stated purpose, it is advisable to consult with CRA before applying for a certificate of continuance, to ensure the new or amended purposes are acceptable.
To assist charities with preparing new or amended purposes, CRA has developed a non-exhaustive list of purposes they already deem acceptable.
Regardless of whether a charity selects a model purpose from CRA's list or drafts its own, CRA requires a detailed statement of activities explaining how a charity will accomplish each new or amended purpose as part of the pre-approval process. This statement will be used by CRA to ascertain whether the charity's activities are consistent with its stated purpose, enabling it to continue to meet the legal requirements for charitable status.
CRA requires anywhere from 75-90 days to review new or amended purposes, which does not leave much time for some registered charities, whose members meet only once a year at an annual meeting, to receive pre-approval from CRA and apply for a certificate of continuance before the October 17, 2014 deadline. Approximately two weeks after submitting new or amended purposes to CRA for review, charities can contact CRA to request an estimate of how long the review process will take for their submission.
do not put amendment off until after the continuance process is complete
For any NFP corporation thinking about amending its purposes in the near future, but considering waiting until their continuance under the Act is complete, it bears keeping in mind that it costs nothing for a corporation to amend its purposes when continuing under the Act. Once the continuance process has been completed, amending a corporation's purposes requires a certificate of amendment from Corporations Canada, in respect of which there is a $200 filing fee.
advising CRA after continuing under the Act
Regardless of whether or not a charity has amended its statement of purpose, once a charity has completed the continuance process, the following documents must be filed with CRA:
- Copy of the Certificate of Continuance;
- Copy of Form 4031, Articles of Continuance (transition);
- Copy of Form 4002 (Initial Registered Office Address and First Board of Directors);
- Copy of the current by-laws, certified by 2 directors with an effective date; and
- Statement of current activities (if the purpose has changed and CRA has not provided advance review).
To ensure nothing is missing, CRA also encourages charities to complete its continuance checklist and include it with the documents you file with CRA.
Co-authored by Karen M. Ethier, law clerk and Timothy Cullen, student at law.