Article by Roger E Holland and Alana M Dale-Johnson
In October 2011, Canada’s Not-For-Profit Corporations Act (NPCA) came into force, replacing Part II of the Canada Corporations Act. This new legislation brought welcome changes to the way that a federally incorporated non-profit corporation (FNP) is regulated, structured, and incorporated. However, the NPCA also includes strict rules about how and when existing FNPs must transition to the new Act.
By October 17, 2014, all existing FNPs must be incorporated under the NPCA. Any FNP that fails to do this will be deemed inactive and dissolved. Aside from the obvious inconvenience of such a dissolution, there may also be significant tax consequences. It is important that FNPs complete these transition requirements in advance because the transition can require significant preparation as well as approval by their members.
To make the transition under the Act, FNPs have to replace their existing incorporation documents, including their letters patent and bylaws. They have three requirements to comply with. The letters patent must be replaced with articles of incorporation or of continuance and new bylaws must be approved. Both of these must be then submitted to Corporations Canada.
If Corporations Canada approves the new articles (and supporting documents), it will issue a Certificate of Continuance to the FNP to signify a successful transition to the NPCA.
The changes brought about by the new Act will necessitate a careful review of an FNP’s bylaws. In particular, the NPCA requires that the bylaws, at a minimum, include provisions respecting the conditions of membership and how notice of meetings will be given to voting members. Aside from these two requirements, FNPs should consider whether they wish to include additional bylaws specific to their organization’s needs. Without such provisions, the NPCA’s default rules will effectively become the bylaws. For obvious reasons, all FNPs should review the NPCA in advance of their transition.
In summary, existing FNPs should take the time now to properly understand the Not-For-Profit Corporations Act and its transition provisions. A proactive approach will prevent unnecessary complications in the future, especially with respect to the transition process. In doing so, all FNPs should be alert to the unique needs of their organizations and ensure directors and officers are familiar with the NPCA and its Regulations.
Although the above information only addresses federal not-for-profit corporations, we also remind British Columbia societies to ensure their organizations follow British Columbia’s Society Act and embrace good governance practices.
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Raylene Smith, Articled Student, assisted with researching and writing this article.