transitioning under the canada not-for-profit corporations act – 10 frequently asked questions

Dentons Canada LLP

Transitioning under the Canada Not-for-Profit Corporations Act

10 frequently asked questions

6 September 2013

2Dentons Canada LLP

Transitioning under the CNCA

6 September 2013

Since 2011, we have assisted associations, charities, and other organizations with their successful transitions under the Canada Not-for-profit Corporations Act (the CNCA).

Here are some of the frequently asked questions we have fielded to date, with short answers.

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10 FAQ about transition

6 September 2013

1. How long do we have to transition our organization?

2. Who should be involved in the process?

3. What are the steps (the “critical path”)?

4. Can we keep our current by-laws?

5. Should we adopt short by-laws, and use the new Act as our rule book?

6. Will our Letters Patent change?

7. What is a “soliciting corporation” and how do we know if we are one?

8. Will our Board membership or responsibilities change?

9. What will the new “Members’ rights” mean for us?

10. Any changes to our books and records?


1. How long do we have to transition our organization?

6 September 2013

• Organizations that are incorporated under Part II of the Canada Corporations Act must transition by October 17, 2014.

• Start early to ensure you have enough time to proceed through all the steps required (see FAQ #3).


2. Who should be involved in the process?

6 September 2013

• In some organizations, the Chief Operating Officer, the Chief Executive Officer, or other senior officer leads the process.

• The Governance Committee, Executive Committee or an Ad Hoc committee is often mandated to act as the “transition committee”.

• It is also useful to involve the manager or member who prepares agendas, keeps minutes, and organizes meetings for the organization.

• Many organizations seek advice from their legal counsel and their accountant on transition and compliance issues under the CNCA.


3. What are the steps (the “critical path”)?

6 September 2013

The following are the key formal steps.

The first two are the most time-intensive, as they require the most careful review of options and compliance issues.

1. Prepare Articles of Continuance (Transition)

2. Prepare revised or new by-laws

3. Obtain Board and Member Approval

4. File with Industry Canada• Articles of Continuance (Transition)• Registered office address and “First” Board of Directors• Amended by-laws (Industry Canada approval not required)


4. Can we keep our current by-laws?

6 September 2013

You may wish to revise your existing by-laws if, for example:• you recently revised them extensively as part of a governance review;

• they are significantly tailored to “fit” your organization; or

• they are very familiar as a “rule book” to your management and Board.

However, you should consider that:• revising existing by-laws for compliance under the new Act and Regulations is a

detailed process, and will require legal review; and

• a new by-law that is compliant with the Act and Regulations can be adapted to reflect your organization’s structure and operations.


5. Should we adopt short by-laws, and use the new Act as our rule book?

6 September 2013

Your organization’s by-laws must contain at a minimum:

1. Conditions required for membership; and

2. Notice of meetings to members who are entitled to vote at the meeting.

Default rules apply if you have no other by-law provisions. Therefore, your by-laws could be extremely short, and you would consult CASL and its Regulations for the various requirements applicable to your organization.

However, you should consider that:

• CASL and its Regulations are long and detailed, and can be challenging to interpret

• You and your Board may be better served with by-laws that set out key rules, processes, and requirements


6. Will our Letters Patent change?

6 September 2013

• Under the CNCA, not-for-profit corporations will have Articles instead of Letters Patent.

• Your Articles of Continuance (transition) will set out: • Corporate name

• Province or territory where the registered office is located

• Minimum and maximum number of directors, or a fixed number of directors

• Statement of the purpose of the corporation

• Restrictions on the activities that the corporation may carry on, if any

• The classes of members that the corporation is authorized to establish

• A statement regarding the distribution of property remaining on liquidation

• Any additional provisions that the corporation may want in its articles


7. What is a “soliciting corporation” and how do we know if we are one?

6 September 2013

“Soliciting corporations” are defined under the CNCA, and are subject to certain accounting and disclosure rules, among other things.

A soliciting corporation:• receives more than $10,000 in a financial year, in the form of:

• third-party donations, government grants, financial assistance, or donations or gifts from another soliciting corporation

The above does not generally include membership dues, or fees the corporation receives for products or services it provides.

Soliciting corporation status:

• can change from financial year to financial year; and

• once attained, lasts for three years


8. Will our Board membership or responsibilities change?

6 September 2013

The following are three key changes for your Board under the CNCA.

1. Elimination of Ex Officio Directors• Does your Board include ex officio directors representing regions, industry sectors, or

other groups?• Under the CNCA, all directors must be elected; no one may be a director by virtue of

his or her office• Either eliminate these positions or elect them (e.g. by a relevant membership class)

2. Directors’ terms may not exceed four years, but there is no limit on the number of terms served

3. Directors will need to understand and respect new Members’ Rights (see FAQ #9)


9. What will the new “Members’ rights” mean for us?

6 September 2013

The following are three enhanced members’ rights under the CNCA.

1. Meetings and Voting• Members with 5% of votes may requisition a meeting

• Voting members may submit notice of a proposal of a matter to raise at a members’ meeting

• Class voting, including votes by non-voting members on matters that impact their rights

2. Unanimous Member Agreement (UMA)• Non-soliciting corporations only

• Restricts the Board’s powers to manage or supervise the corporation’s activities and affairs

3. Remedies to Enforce Member Rights• Court-ordered investigations

• Compliance orders

• “Business-style” derivative action and oppression remedies


10. Any changes to our books and records?

6 September 2013

• The following records must be maintained at your registered office (or another location chosen by the Board), under the CNCA:1. Articles, by-laws, unanimous member agreements;

2. Minutes of meetings and resolutions adopted by members and committees of members;

3. Registers of directors, officers and members.

• The CNCA sets out when and how to make these available to members and directors.

• You must also maintain minutes of meetings and resolutions adopted by the directors and committees, and make these available to directors.

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A final word

6 September 2013

Start your transition process soon: your organization must transition by October 17, 2014


Thank you.

6 September 2013

More questions?

Margot Patterson

Counsel

(613) 783 9693 [email protected]

Before joining Dentons, Margot was General Counsel for the Canadian Association of Broadcasters. Margot advises industry associations and other not-for-profit organizations across Canada on their transition under the Canada Not-for-Profit Corporations Act. She also advises businesses and not-for-profit organizations on compliance with Canada's Anti-Spam (CASL) and Privacy laws, and on licensing and protecting intellectual property.

mailto:[email protected]

Dentons Canada LLP Document reference # 1600 Month 2013

This presentation contains examples of the kinds of issues that not-for-profit corporations could face. If you are faced with one of these issues, please retain professional assistance as each situation is unique.