Deadline to file for Continuance under the Canada Not-for-Profit Corporations Act is Fast Approaching
Aug 19, 2013
The deadline for any federal not-for-profit corporation to file for continuance under the new Canada Not-for-Profit Corporations Act (the “Act”) is October 17, 2014. Any federally incorporated not-for-profit corporation that has not yet received a Certificate of Continuance from Corporations Canada (or is not already involved in the process) should consider commencing the process in the near future.
Failure by any not-for-profit corporation to continue under the Act by October 17, 2014 will result in the dissolution of the corporation by Corporations Canada. While dissolution would give rise to problems for any not-for-profit corporation, registered charities must be particularly careful as dissolution will lead to the revocation of their charitable status by the Charities Directorate of the Canada Revenue Agency. This revocation would result in the charity owing a revocation tax equal to the value of their remaining assets.
Although the abovementioned process will require input by the not-for-profit corporation’s board of directors, with proper guidance, the process can be fairly simple and straightforward. Namely, the process for any federal not-for-profit corporation to continue under the new Act involves the following steps:
- Conduct a Review of the Current Letters Patent and By-Laws: During this initial phase, the existing by-laws and letters patent must be reviewed to determine the current operation of the organization in comparison to the requirements established by the Act. In addition, a review of the corporate information on file with Industry Canada should be undertaken to determine whether any discrepancies exist between the information on file and the current operating procedures of the corporation which may require attention prior to continuance.
- Draft Articles of Continuance and By-Laws: A new set of by-laws should be drafted in accordance with the Act. During this step, each provision in the current by-laws should be examined and revised to fit the corporation’s governance structure and ensure compliance with the new Act. The new by-laws must at a minimum, contain the required provisions concerning the corporation’s conditions of membership and the notice of a meeting of the members to each member entitled to vote. In addition, the Articles of Continuance and a resolution of the board of directors to approve the new by-laws should be drafted.
It is recommended that any registered charities have any new purpose or substantial changes pre-approved by the Charities Directorate prior to submitting their Articles of Continuance to Corporations Canada. The risk of not gaining preapproval is that the Charities Directorate may revoke the corporation's registered charity status if the purpose is no longer deemed to be charitable.
- Meeting of the Members: Once in final form, the corporation must present the Articles of Continuance and the revised by-laws at the annual meeting of the members (or a special meeting of the members called for this purpose). The meeting must be held in accordance with the existing by-laws however, the Act requires that approval of the Articles of Continuance be gained by two-thirds of the votes cast by those members who are entitled to vote.
- Submit the Documents to Corporations Canada: During this final step the corporation must file the Articles of Continuance along with the Initial Registered Office Address and First Board of Directors form with Corporations Canada. The documents are then reviewed and a Certificate of Continuance should follow shortly thereafter. Although the submission of by-laws is not required for 12 months post member approval, we recommend that the by-laws be submitted in conjunction with the aforementioned documents to ensure a smooth and simple transition process.
At the time of writing, only a very small percentage of federal not-for-profit corporations have received a Certificate of Continuance by Corporations Canada. In other words, one can anticipate that Corporations Canada and the Charities Directorate will face a substantial backlog of applications prior to the October 17, 2014 deadline. In order to avoid dissolution and substantial wait times, this process should be commenced in the near future.