After years of anticipation, the Canada Not-for-Profit Corporations Act (the CNCA) was proclaimed in force on October 17, 2011. This means that corporations governed by the Canada Corporations Act (CCA) will have three years – until October 17, 2014 – to continue under the new Act. The CNCA will not automatically apply. Every existing federally incorporated not-for-profit corporation will need to take action to make the transition. Much has been written about the lead up to the new legislation and the many changes the CNCA will bring to the governance landscape, including the voting rights for members – even non-voting members in some circumstances – the lack of recognition of ex officio directors, the distinction between soliciting and non-soliciting corporations, the codification of a standard of care for directors, and other modern provisions.
SO, WHAT DOES A FEDERAL NOT-FOR-PROFIT HAVE TO DO?
CCA corporations will have to replace their letters patent and by-laws with new charter documents by (a) submitting articles of continuance to obtain a Certificate of Continuance and (b) creating, approving and filing new by-laws. These will need to comply with the CNCA.
Organizations should start the continuance process by conducting a thorough review of their letters patent, supplementary letteres patent, by-laws, policies and procedures to determine (a) what needs to be changed to conform with the CNCA, (b) what is outdated, inapplicable, etc; and (c) what the directors and/or members want to have changed. It is an excellent time to think about where the corporation is and where it would like to be. The corporation should also consider things like: is it a member driven organization? do the membership classes make sense in the current environment? are all of those non-voting “members” really members? does the board have ex officio directors? does it wish to continue to do so? what type of funding does the organization get? is it a soliciting corporation, receiving more than $10,000 from public sources? This will help the corporation structure its new documents.
The next step is to draft articles, which will be attached to the Certificate of Continuance. Note that the articles are to be set out in a form that is available on the government’s very helpful website. The articles must include: corporate name, province or territory of the registered office; minimum and maximum number of directors (or the fixed number); statement of purpose; restrictions on the activities if any (which is likely); classes or other groups of members; statement of distribution of property on liquidation. The articles may include other information.
The corporation must also revise its by-laws. The CNCA does not require the level of detail many organizations had in their by-laws. There are only two by-law provisions that must be present: conditions for membership and notice of meetings to members entitled to vote at a meeting. There are a number of default rules that will apply if they are not changed in the by-laws. These include things like the manner of voting, electronic participation (which is permitted unless restricted), entirely electronic meetings (which are not permitted unless the by-law specifically permits and standards are met) and quorum of members (which will be a majority unless the by-laws provide differently).
The continuance documents need to be approved by the members. This would be done in accordance with the existing documents, keeping in mind that it is a two-thirds vote rather than a majority vote that is needed.
The continuance documents are then filed. There is no filing fee required. A form setting out the initial registered office address and the first board of directors is to be filed as well. If the corporation is changing its name, it would have to file a name search report as well.
Throughout the transition process, the corporation would be conducting business as usual. Once the Certificate of Continuance is issued, the corporation would begin to hold its meetings and conduct its business in accordance with the new documents and the CNCA. There are a number of obligations under the CNCA around record keeping and the like that the organization will need to keep in mind. There are also many other things to consider – such as members’ rights, audit requirements, next steps.
It is an interesting time for federal not-for-profits and the CNCA can be looked on as an opportunity to bring clarity to organizations’ governance documents.