Canada’s New Not-for-Profit Corporations Act

January 6, 2012

Is your organization a Not-For-Profit (NFP) corporation created under Part II of the Canada Corporations Act (Canada)?

If so, it needs to transition to the new Canada Not-for-Profit Corporations Act (the NFP Act) or Corporations Canada will dissolve your NFP. NFPs have until October 18, 2014 to transition under the NFP Act.

What is the NFP Act?

The NFP Act came into force October 17, 2011, and establishes a new regime for federally incorporated NFP corporations in Canada. This new regime completely replaces Part II of the Canada Corporations Act (the Old Act), which has governed federal not-for-profit corporations for over 90 years. The regime under the NFP Act introduces new rules that are more flexible and better suited to meet the needs of the modern NFP corporation.

What does the NFP Act do?

The NFP Act provides for the incorporation of NFP corporations “as of right,” meaning that a certificate of incorporation must be issued if the relevant documents are completed and filed with Corporations Canada. Under the Old Act, Corporations Canada had the discretion to issue letters patent.

The NFP Act eliminates the ultra vires doctrine. This means that the NFP’s activities are not restricted unless it expressly chooses to do so in its incorporation documents. Please note that an organization which intends to obtain or maintain charitable status may be required to impose certain restrictions on its permitted activities.

The NFP Act establishes standards for directors in carrying out their duties and responsibilities. Directors have a duty to exercise the care, diligence and skill of a reasonably prudent person and to always act in the best interests of the NFP.

The NFP Act provides more simplified and streamlined corporate processes than currently exist under the Old Act. For example, there are no resident Canadian director requirements and directors can now pass written resolutions in lieu of meetings.

What is the transition process?

An NFP which was created under the Old Act needs to replace its current incorporation documents (letters patent, supplementary letters patent (if applicable) and by-laws) by submitting articles of continuance to Corporations Canada. A certificate of continuance will be issued by Corporations Canada once the articles of continuance are complete and approved by the corporation’s members. The articles of continuance need to contain:

  1. The name of the NFP and the province or territory of its registered office;
  2. The number of directors or the minimum and maximum number of directors;
  3. A statement of the purpose of the NFP and the restrictions, if any, on its permitted  activities;
  4. The classes of members and voting rights; and
  5. An outline of property distribution upon the dissolution or liquidation of the NFP.

Corporations Canada does not charge a fee to apply for a certificate of continuance.

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