New federal non-profit corporation bill tabled

Community Action, Nov 22, 2004

OTTAWA -- The Canada Not-For-Profit Corporations Act will simplify and streamline the regulatory burden on groups seeking or operating a federal incorporation, industry minister David L. Emerson said as he introduced the bill in Parliament. "The law will be flexible enough to meet the needs of large and small organizations while providing the accountability and transparency necessary to maintain public trust and confidence in the not-for-profit sector."

Some 18,000 not-for-profit corporations and corporations without share capital are incorporated federally. Among the features of the new legislation are:

* replacement of the "letters patent" system with incorporation "as of right", eliminating the ministerial review of all "applications; filing of by-laws and amendments no longer ministerial approval;

* two types of non-profit corporations: "soliciting corporation" that solicits public donations or receive government funding and "non-soliciting corporation".

For financial reporting purposes, three situations are permitted:

* low revenue soliciting corporations would not be required to provide a full audit but a "review engagement";

* medium revenue soliciting corporations would be required to have an audit unless two-thirds of the members resolve not to and choose a review engagement;

* high revenue soliciting corporations would be required to have an audit conducted.

Soliciting corporations would be required to file their financial statements with a government official responsible for the administration of the Act, who would make these documents available to the public.

The new Act will have an explicit standard of care, which clarifies the director's role. It will also set clear rules for the protection of directors from liability by a "due diligence" defense. Members' rights will be enhanced and protected, including access to records, request for meetings and legal procedures to enforce members' rights. However, in a religious organization member's rights to legal action may be restricted by religious doctrines and tenets of faith.

Existing non-profit corporations, chartered under the current Canada Corporations Act. must apply for incorporation under the new Act within three years.