Parliament Passes Canada Not-For-Profit Corporations Act
2009-09-04(July 14, 2009) The Canada Not-for-profit Corporations Act, which may force many charities to change their governance structure and documents, received Royal Assent on June 23, 2009.
Bill C-4 repeals the Canada Corporations Act and replaces it with a modern corporate governance regime for corporations covered by its provisions, which include:
- introducing a new process for the federal incorporation of not-for-profit, or no share capital, corporations; and
- providing for the continuance of share corporations that were created by Special Acts of Parliament and that are currently subject to Part IV of the Canada Corporations Act into the Canada Business Corporations Act. Information for these corporations is available in a separate notice.
A background paper is available here.
According to Corporations Canada, most of the bill will not be in effect until it is proclaimed into force by an Order-in-Council because the regulations, including the service fees, must first be approved. It will take a considerable amount time to complete the process to approve new service fees under the User Fees Act and to complete the regulatory approval process.
Corporations Canada will make more information available as these steps are completed.
AFP submitted comments to the Minister of Industry in 2005 regarding the Canada Not-for-profit Corporations Act. AFP appreciated the concept of the bill but had the following concerns:
- For soliciting nonprofit corporations (corporations that solicit donations from the public), audits were mandatory for those nonprofit corporations earning more than $250,000 gross revenue. AFP urged the Ministry to set that threshold higher (at $1,000,000).
- Soliciting corporations were required to have three or more directors (a seemingly arbitrary number that creates an imposition on smaller organizations).
- The legislation referenced potential user fees that nonprofit corporations would have to pay. AFP argued that any fees essentially act as a tax on nonprofit corporations and that the lack of clarity concerning the potential size of the fees was troubling.
Unfortunately, the recently passed bill retains those problematic provisions.
Once the bill and proposed regulations come into force, every not-for-profit corporation currently governed by Part II of the Canada Corporations Act will have three years to formally make the transition to the new Act. After that time, any corporation that has not made the transition will be dissolved. Further information on how to make the transition will be made available once the bill comes into force.
Copies of the bill are available from the Parliament of Canada website at www.parl.gc.ca. A background paper on the provisions of the bill affecting corporations without share capital is also available on the Corporations Canada's website (www.corporationscanada.ic.gc.ca) or from Corporations Canada directly at 1-866-333-5556.
AFP is in the process of analyzing the bill and will provide more information to members in the near future.