Canada Not-For-Profit Corporations Act

All Not-for-Profit (“NFP”) organizations incorporated under the Canada Corporations Act, part II, must transition to the Not-for-Profit Corporations Act (“NFP ACT”) by October 17, 2014. Those NFP’s created after October 17, 2011 would have already been formed under the new NFP Act and no further action will be required. If a NFP, formed before October 17, 2011 does not transition to the NFP Act by October 17, 2014, Corporations Canada will, upon first giving written notice to the NFP and to each of its directors, dissolve that entity. Readers are encouraged to consult legal advice on the conversion process and the specific regulations under the NFP Act.

Financial Reporting Considerations

Under the NFP Act, each NFP will be classified as either, soliciting or non-soliciting. A soliciting NFP would have received more than 10,000 from public sources, including public donations, federal or provincial governments, or other conduit entities in its last financial year.

For financial reporting purposes, the NFP Act further separates NFP’s into two categories. Designated NFP’s are those with gross annual revenues for its last financial year that is no more than $50,000 and non-soliciting NFP’s with gross annual revenues for its last completed financial year that is equal to or less than $1 million thresholds.

	Soliciting			Non-Soliciting
Annual Revenue for last financial year	Designated with revenues of $50,000 or less	Non-designated with revenues of more than $50,000 and up to $250,000	Non-Designated with revenues of more than $250,000	Designated with revenues of $1 Million or less	Non-designated with revenues of more than $1 million
Level of financial review	A review engagement unless a unanimous resolution has been passed requiring a compilation or an ordinary resolution for an audit	Must have an audit unless a special resolution has been passed to require a review engagement	Must have an audit engagement	A review engagement unless a unanimous resolution has been passed requiring a compilation or an or an ordinary resolution for an audit engagement	Must have an audit engagement

General Outline of steps involved in the conversion to the Canada Not-for-Profit corporations Act:

•        Review of the NFP’s existing letters patent and by-laws by the board members. These documents will have to be reviewed by the board of directors to insure they are in compliance with the NFP Act. Copies of the NFP’s existing documents are also available from corporations Canada if the NFP is not able to locate them.

• Prepare articles for continuance – These articles will be attached to the certificate of continuance that is issued to the NFP by Corporations Canada. Existing federally incorporated NFP’s do not have to pay a filing fee to obtain a Certificate of Continuance.

• Update by-laws – As a result of the extreme regulation of the NFP Act, there are only two by-law provisions that are mandatory under the NFP Act. At a minimum, NFP’s by-laws need to address the conditions required for memberships and notice of meetings to members who are entitled to vote at the meeting.

• Get members approval – A meeting of members will generally need to be held as part of the transition process. The NFP Act requires that the Articles of Continuance be approved by a special resolution of members, which is a resolution that is passed by at least two-thirds of the votes cast at a meeting.

This informational piece has been brought with acknowledgement to the Williams and Partners Newsletter, Summer 2014