The Canada Not-for-profit Corporations Act (the Act) came into force on October 17, 2011. The Act was highly anticipated by the not-for-profit sector, but according to sources at Industry Canada, less than 10% of federal not-for-profit corporations (NFPs) have continued under the new Act. An NFP that is not continued under the new Act by October 17, 2014 may be dissolved.
In order to continue under the Act, each NFP will be required to submit articles of continuance, which are required to contain certain prescribed information, including the NFP's name, the classes and voting rights of members, the number of directors (or a minimum and maximum number of directors), and a statement of purpose. Once the articles of continuance have been prepared, they will need to be approved by the NFP's members before submitting them to Corporations Canada. In addition, the articles of continuance of a registered charity must be reviewed by the Canada Revenue Agency (CRA) if a charity is changing its objects (now purposes). In such instances, we recommend that such review takes place prior to submission to Corporations Canada in order to avoid having to amend the articles of continuance (and the possibility of requiring further member approval) if the CRA is dissatisfied with the purposes set out in the articles.
While an NFP is preparing its articles of continuance, it should also draft a new by-law that complies with, and takes advantage of the benefits of, the Act. NFPs should be aware that the Act contains some provisions that must be included in the by-laws; in addition, certain provisions of the Act will apply by default if not addressed in the NFP's by-laws or articles.
Given that most NFPs hold only one members' meeting each year, NFPs that have not commenced their governance review should do so as soon as possible in order to meet the October 17, 2014 deadline.