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The Canada Not-for-profit Corporations Act
The new Canada Not-for-profit Corporations Act (NFP Act) establishes a new set of rules for federally incorporated not-for-profit corporations in Canada. These new rules will replace Part II of the Canada Corporations Act (old Act), the law that has governed federal corporations for nearly a century. The rules under the NFP Act are modern, flexible and more suited to the needs of the not-for-profit sector.
What are the benefits of the Not-for-profit Act?
Federal not-for-profit corporations benefit from:
- A clear set of rules that govern the internal affairs of federal not-for-profit corporations
- Less red tape with simplified processes
- More flexibility to make fundamental changes, such as amalgamations, that were not permitted under the old Act
- A more objective standard for directors in carrying out their duties and responsibilities that will reassure individuals who decide to be on a board of directors.
Do these new rules apply immediately?
No. The NFP Act does not automatically apply to existing corporations. Instead, every existing federally incorporated not-for-profit corporation will have to take action to make the transition to the NFP Act. Until that transition is made, the rules under the old Act still apply.
What is the transition process?
The corporation must replace its letters patent, supplementary letters patent (if any) and by-laws with new charter documents. This means that you need to submit articles of continuance to obtain a Certificate of Continuance as well as create and file new by-laws. The articles and by-laws must comply with the NFP Act. These charter documents set out the primary rules governing the corporation.
This guide will assist you in making the transition.
Will the transition affect the registered charity status of my corporation?
Possibly. If your corporation is or intends to become a registered charity under the Income Tax Act, it is strongly recommended that you consult the Charities Directorate of the Canada Revenue Agency (CRA) during the transition process (go to www.cra-arc.gc.ca/charities or call 613-954-0410 or toll free at 1-800-267-2384). The Charities Directorate will provide you with valuable information about the transition that is specific to registered charities, particularly with respect to:
- the statement of purpose
- requirements for the number of directors
- non-profit clauses and clauses related to the remuneration of directors
- the requirement to file documents with CRA after the transition process is complete.
Consulting with the Charities Directorate in advance will help ensure that your corporation maintains its registered charity status.
Are there fees?
No. Corporations Canada does not charge a fee to apply for a Certificate of Continuance and to file by-laws.
Is there a deadline for making the transition?
A not-for-profit corporation must make the transition by October 17, 2014.
What happens if a corporation does not make the transition?
Corporations that do not make the transition by the deadline will be assumed to be inactive and will be dissolved. For registered charities, dissolution could lead to the revocation of their registration as a charity, which would result in the corporation having to pay revocation tax equal to 100% of the value of their remaining assets.
Any information provided by Corporations Canada, including this guide, is not intended to be a substitute for legal advice. Not-for-profit corporations are encouraged to seek professional advice if they have any concerns.
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