The federal government has passed the Canada Not-for-profit Corporations Act. The new law received royal assent in June 2009, but the government has not set a final date for the Act to come into force. What will this mean for you? According to the member of Parliament responsible for the bill, Diane Ablonczy:
“This new Act will bring the legislative framework governing not-for-profit organizations into the 21st century. It will promote modern standards of accountability, transparency and good corporate governance that will benefit the voluntary sector as it works to build a stronger Canada,” and “allow organizations to spend less time on paper burden and more time on what they do best which is delivering important services to Canadians.”
The new Act applies specifically to not-for-profit organizations incorporated under section II of the Canada Corporations Act, but provincially incorporated organizations may want to consider updating their status with Corporations Canada, as well.
The first step not-for-profits have to take is to officially confirm their incorporation to the federal government. This means filing “articles of continuance” with Corporations Canada within three years after the Act comes into force (in other words, now). This is because the new Act replaces section II of the Canada Corporations Act (which dealt with incorporating a not-for profit organization) and sets out new rules for the process. Existing organizations that wish to update their incorporation status will face no charge for doing so. If a corporation does not apply for a certificate of continuance within the time frame, the government may dissolve the organization.
Not-for-profit organizations that wish to incorporate must now do so under the new articles of incorporation rules rather than the previous letters patent system. This means that organizations don’t need to include with their applications draft bylaws, the powers of the organization or its purposes (although in the case of charities, it will remain a good idea to do so).
The new Act also means that, like their for-profit counterparts, not-for-profit corporations will now have the “capacity and, subject to this Act, the rights, powers and privileges of a natural person”. However, members of the organization may choose to limit its powers and activities via the articles of incorporation.
The Canada Not-for-profit Corporations Act contains far too many changes to outline here, but you can find numerous analyses online. You can read about the Regulations amending the Canada Corporations Act in the Canada Gazette. The new law won’t come into force until the associated regulations are ready, which probably won’t happen until sometime in 2011 or 2012. We’ll be sure to let you know when more information is available.
Adam Gorley
First Reference Human Resources, Internal Controls and Compliance Editor
Adam Gorley
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Thanks for the information Kevin.
Adam, the NPCA is currently having its regulations reviewed by Corporations Canada. (The deadline for feedback on the regulations was Oct 1st 2010). The Act cannot come into force without regulations. The NPCA is estimated to come into force in late 2011 or early 2012.
The Canada Not-for-profit Corporations Act only applies to federally incorporated institutions, meaning if an education institution were registered under the CNPCA, it would not be able to grant degrees. However, as I mentioned, most (or perhaps all—I don’t know) educational institutions are provincially incorporated or registered, and therefore they fall under their province’s legal regime. I’m not familiar with the provinces’ specific laws on this matter, so I can’t say whether they allow not-for-profit corporations to grant degrees or not.
For example, see Newfoundland and Labrador’s Memorial University Act, which makes that school a corporation and gives it degree-granting rights. The school operates at the whim of the legislature. I assume that any other institution that wished to offer degrees in that (or any) province would have to obtain similar approval. However, the MUA does make it clear that in NFLD, a corporation may grant degrees, but only with the explicit approval of the government.
Thanks for the response Adam.
I imagined ‘non-profit’ in the banking and education (degree granting )sector would be rare but wasn’t aware that such an operation is not legally allowed.
There are many charitable organizations that receive Govt funding to provide adult education (http://www.ed.gov.nl.ca/edu/adultlearning/abenonprofit.html). Would these lose the non-profit status if they were to start granting certificates, degrees or diplomas?
Thanks for the question Sujata. With respect to the quoted institutions, each type is governed by separate legislation, some at the federal level and some provincially. For example, banks are governed by the federal Bank Act. Degree-granting institutions are governed by special provincial legislation, as are credit unions and loan companies. Trade associations and professional regulatory bodies are usually governed by provincial labour relations statutes.
Also, I believe the clause you quote states that the institutions mentioned cannot operate as non-profit entities.
“The NPCA limits the type of businesses in which the corporations incorporated or continued under it can be involved. For example, NPCs cannot be banks or insurance, trust or loan companies. In addition, incorporation or continuation under the NPCA does not allow corporations to act as degree-granting institutions or to regulate trades or professions.”
If it is not NPCA or CBCA, what other act governs the non-profit entities in the exceptions above i.e., banks, degree-granting institutions etc.?