July 01, 2010

helping those who help others: Bill 65 (Ontario Not-for-Profit Corp. Act, 2010) - McMillan note

Here is a note by Wayne D. Gray and Lydia Wakulowsky of McMillan on Bill 65, the Ontario Not-for-Profit Corporations Act, 2010.  It provides a short summary of the legislation.

http://www.mcmillan.ca/Upload/Publication/Bill65_HelpingOthers_0610.pdf

June 29, 2010

CNCA - Canada Not-for-profit Corporations Act - draft regulations and consultation on regulations

Industry Canada last week released draft regulations for the CNCA, the new Federal non-profit act.  There is also a “Notice from the Director — Consultation on proposed Canada Not-for-profit Corporations Regulations” dated June 25, 2010 which contains an explanatory note and a “Consultation on proposed Canada Not-for-profit Corporations Regulations”.  Industry Canada is launching a consultation on proposed
regulations under the Canada Not-for-profit Corporations Act.  Industry Canada has requested that comments on the Canada Not-for-profit Corporations Act (CNCA) be submitted by October 1, 2010.

Here is a Notice from the Director on the Consultation on draft Canada Not-for-profit Corporations Regulations
http://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs04589.html

Here is the explanatory note from Industry Canada:
http://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs04590.html

The draft regulations at:
http://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs04591.html

Here is a PDF of the draft regulations: http://www.ic.gc.ca/eic/site/cd-dgc.nsf/vwapj/Consultationdraft-BIL-170610.pdf/$FILE/Consultationdraft-BIL-170610.pdf

 

May 22, 2010

Official Notice of Fee Proposal For Services under the Canada Not-for-Profit Corporations Act (CNCA)

Here is the “Official Notice of Fee Proposal For Services under the Canada Not-for-Profit Corporations Act”.  This notice which is required under the User Fee Act gives the public and idea of what fees are proposed for the CNCA - these may or may not be the final .  Nothing looks too out of the ordinary.  Perhaps a $40 fee for non-electronic filing of the annual return is a little much - but then again I think the message these days is do it electronically.  One thing that this process raised for me - if you are a federal non-profit (whether charitable or not) you pay all these fees to Industry Canada for the benefit of having incorporated federal non-profit status but why is it that you don’t have to pay any fees to the Charities Directorate when you apply for charitable status or for almost any other services they provide? 

The US IRS charges $850 to apply for 501(c)(3) status which is similar to our registered charity status?  Most of the time when you don’t pay for something you don’t appreciate the value of it.  Perhaps charging a fee for charitable registration, like $200, would make some organizations think more carefully about applying and the obligations of being a registered charity.  Also the funds could be ploughed back into improving the operations of the Charities Directorate - everything from reviewing applications, having consultations and providing guidance on issues affecting charities, answering charity inquiries and going after scam charities, etc. 

http://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs04533.html

Notice from the Director - Official Notice of Fee Proposal
PDF version (13.8 KB, 1 page)
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May 10, 2010

Official Notice of Fee Proposal
For Services under the Canada Not-for-Profit Corporations Act

Corporations Canada wishes to inform you that the official notice on the fees proposed under the Canada Not-for-Profit Act (Bill C-4) and the associated service standards has been published in the Canada Gazette, Part 1 on May 8, 2010.

Bill C-4 received Royal Assent on June 23, 2009. Consultations on the proposed fees and services standards were held from January 4 to February 5, 2010. The Official Notice of Fee Proposal is a required step under the User Fees Act to allow stakeholders to submit official complaints. Complaints may be resolved by an independent review panel. Once all complaints are resolved, the proposed fees will be tabled in the House of Commons and Senate for 20 sitting days for review. Once the User Fees Act process is complete, the proposed regulations which include the fees will then go through the regulatory process. This process involves pre-publication of the proposed regulations in the Canada Gazette, Part I before final approval can be obtained from Treasury Board.

You can obtain the Official Notice of Fee Proposal for Services under the Canada Not-for-Profit Corporations Act :

•on the Corporations Canada’s Website under the heading “What’s New” in the left hand menu;
•on the Canada Gazette website at http://www.gazette.gc.ca
•by contacting Corporations Canada directly at 1-866-333-5556 to obtain a copy by mail.
Comments on the proposed fees or service standards may be submitted to Corporations Canada by May 28, 2010. For further information, call 1-866-333-5556 or send an e-mail to .(JavaScript must be enabled to view this email address).

Aissa Aomari
Acting Director General

—————-
http://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs04534.html

Official Notice of Fee Proposal For Services under the Canada Not-for-Profit Corporations Act
PDF version (31.79KB, 3 pages)

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May 8, 2010

Purpose
This Official Notice of Fee Proposal is one of the steps required by the User Fees Act in order to set fees for services under the new Canada Not-for-Profit Corporations Act. Interested persons have 20 days following the publication of this notice in the Canada Gazette, Part I, to make an official complaint regarding the proposed fees and service standards.

Background
The Canada Not-For-Profit Corporations Act received Royal Assent on June 23, 2009. This Act will replace the Canada Corporations Act and provides a modern corporate governance regime for federal not-for-profit corporations. Before the NFP Act can come into force, the fees have to be first established in accordance with the process set out in the User Fees Act after which the regulations must then be approved by the Governor-in-Council.

Consultations on the proposed fees were held from January 4 to February 5, 2010.  Two comments were received. The first one stated that the proposed fees, costing methodology and service standards were fair and reasonable. The second one also supported the fee proposal and service standards.

Proposed Fees and Service Standards
The fees below are proposed for the services under the new Canada Not-for-Profit Corporations Act.

Receipt, Acceptance, Examination, Issuance or Copying of any Document and Other Actions under the Canada Not-for-Profit Corporations Act
 

Fee
Service Standards
Application sent to the Director for the following documents:
 
 
(a) a certificate of incorporation under section 9:
 
 
i) if the application is made using Industry Canada’s online incorporation feature (when available)
$200
  24 hours
ii) if the application is made using any other means
$250
5 business days
(b) a certificate of amendment under section 201 or subsection 215 (5)
$200
5 business days
(c) a restated certificate of incorporation under subsection 203(3) (unless issued with a certificate of amendment)
$50
5 business days
(d) a certificate of amalgamation under subsection 208(4)
$200
5 business days
(e) a certificate of continuance under subsection 211(5) (unless subsection 212(6) applies)
$200
5 business days
(f) a document evidencing satisfaction of the Director, as required under subsection 213(1)
$200
5 business days
(g) a certificate of arrangement under subsection 216(6)
$200
5 business days
(h) a certificate of revival under subsection 219(3)
$200
5 business days
(i) a certificate of revocation of intent to dissolve under subsection 221(11)
$50
5 business days
(j) a corrected certificate under subsection 288
$200
20 business days
Application sent to the Director for issuance of a certificate of compliance under subsection 290(1)
$10
1 business day
Application sent to the Director for issuance of a certificate of existence under section 290
$10
1 business day
Receipt of an annual return sent to the Director under section 278:
 
 
(a) if the annual report is filed using Industry Canada’s online incorporation feature (when available)
$20
N/A
(b) if the annual return is filed using any other means
$40
N/A
Application for exemption sent to the Director under subsection 2(6), 25(1), 25(2), 104(3) or 171(2), or section 173 or 271
$250
30 days
Provision by the Director of copies of documents under subsection 279(2)
$1 per page
1 business day or 6 business days for inactive corporations
Provision by the Director of certified copies of documents under subsection 279(2), per document
$35
1 business day or 6 business days for inactive corporations

Notes:

1.No fee will be charged for an application for a certificate of amendment if the only purpose of the amendment is to add an English or French version to the corporation’s name, or to replace a corporate name that the Director has directed to be changed under subsection 13(2).
2.No fee will be charged for a certificate of dissolution issued under subsection 220(5) or 221(15) nor for a certificate of intent to dissolve issued under subsection 221(5)
3.No fee will be charged for a corrected certificate issued under section 288 where the correction is required solely as the result of an error made by the Director.
Official Notification Period
The period within which complaints may be submitted begins on May 8, 2010 and ends on May 28, 2010.

Complaint Process
An official complaint may be made to Corporations Canada by email, fax or mail. Corporations Canada will attempt to resolve any complaints received and provide a proposed resolution in writing. If a complaint cannot be resolved to the complainant’s satisfaction within 30 days of the expiry of Official Notification Period, the complainant may make a request in writing that Corporations Canada refer the complaint to an independent advisory panel.

The User Fees Act stipulates that the regulating authority and the complainant must each select one member to sit on the panel and those members must select a third member within 40 days of the expiry of the Official Notification Period. The panel must, within 30 days after all members have been selected, send a report in writing of its findings and recommendations for resolving the dispute to the regulating authority and the complainant.

The panel has the power to award costs of the proceedings, including the cost of the fees and expenses of panel members. If, in the opinion of the panel, a complaint is frivolous or vexatious, the complainant bears all the costs.

Contact Details
Corporations Canada
Jean Edmonds Towers South
365 Laurier Avenue West
Ottawa, ON K1A OC8
E-mail: .(JavaScript must be enabled to view this email address)
Fax : 613-941-5781

Supporting Documents
For more information on how the fees were determined, you may wish to refer to the consultation documents which are available on the Corporations Canada website at http://www.corporationscanada.ic.gc.ca.

It is also possible to obtain a paper copy by communicating with Corporations Canada at 1-866-333-5556.

Corporations Canada
Industry Canada

 

March 30, 2010

Objects and Activities of Canadian charities - CRA discusses importance when registering charity

The CRA discusses questions including 1.What is meant by broad and vague objects? 2.What is the problem with broad and vague objects? 3.Is there a way to keep our objects broad and still be eligible for registration as a charity? 4.What is the difference between purposes (or objects) and activities? 5.Why are purposes and activities important?  6.What is “sufficient” information?

http://www.cra-arc.gc.ca/chrts-gvng/chrts/pplyng/cpc/fq-eng.html
Questions and answers about objects and activities.  Note that the words purposes and objects are used interchangeably. Both refer to the goals, aims, or objectives of a charity.

1.What is meant by broad and vague objects?
2.What is the problem with broad and vague objects?
3.Is there a way to keep our objects broad and still be eligible for registration as a charity?
4.What is the difference between purposes (or objects) and activities?
5.Why are purposes and activities important?
6.What is “sufficient” information?

————————————————————————————————————————

1. What is meant by broad and vague objects?

Broad and vague objects may be unclear in their scope or in their intent.

Broad objects are often expansive and do not always express a direct or tangible charitable benefit. They can permit both charitable and non-charitable activities. Examples of broad objects are: “To foster an appreciation of the English language”; “To end homelessness”; and “To fight poverty.”

Vague objects are ambiguous and can be interpreted in many different ways. They leave us guessing about the true intentions of the organization. Examples of vague objects are: “To help the deserving”; “To encourage participation in the community”; and “To foster support of the challenged.”

2. What is the problem with broad and vague objects?

We cannot register an organization that has been established with vague objects, or with a mix of broad and vague objects, because it is impossible for us to determine if the organization is established for charitable purposes.

Many organizations state their objects in a way that will allow them the greatest degree of flexibility. However, to be eligible for registration as a charity, an organization must be established with objects that are restricted to the realm of charity as recognized by law. The objects must be expressed in clear terms that limit the scope of the organization’s activities.

3. Is there a way to keep our objects broad and still be eligible for registration as a charity?

Yes. In some cases, an object may be broadly worded but still restrict the applicant to charitable pursuits, for example, “To relieve poverty through charitable means.” In these cases, we can accept the object if the applicant has, in its application, provided us with a complete and clear statement of its current and proposed activities, and those activities are exclusively charitable. For more information on and examples of broad objects, see Policy Statement CPS-004, Applicants with Broad Object Clauses.

We have developed model objects that are acceptable for organizations seeking to become registered as charities. If you choose objects from this list, the activities of the organization must bear a relationship to the selected objects and be a reasonable means of achieving them.

4. What is the difference between purposes (or objects) and activities?

The difference between purposes and activities is often unclear.

A purpose or object is something that one strives toward or the reason that something exists. Dictionaries define purpose or object as intention, intent, goal, end, aim, or objective. To be eligible for registration, an organization must be established for a charitable purpose or purposes. Charitable purposes are those that are recognized by the courts as charitable. Examples of charitable purposes are: “To relieve conditions related to poverty”; “To educate children”; and “To advance the Christian faith.” For more information on and examples of acceptable purposes or objects, see Model objects.

An activity is defined as an action or a collection of actions. In terms of a charity, it is what a charity actually does day-to-day and over time. To be eligible for registration, an organization must carry on charitable activities that fulfill its charitable purpose(s) or object(s). Examples of charitable activities are: “Operating a food bank”; “Establishing and maintaining a school”; and “Building a church.”

5. Why are purposes and activities important?

When we review an application for registration, we look at the organization’s purposes and activities; both are equally important. An applicant with charitable purposes but lacking a clear description of its charitable activities will be denied registration. Similarly, an applicant with clearly charitable activities but that is not established for exclusively charitable purposes will also be denied. Furthermore, an applicant’s activities must relate to its purposes. If they do not relate, the application will be denied.

Many applicants for registration simply repeat their objects when they describe their activities. An applicant that simply re-states its purposes when describing its activities will have its application returned to it as incomplete. To be eligible for registration, an applicant must provide a thorough and complete description of its current and future activities (including income and expenses), showing what it will do, or what it hopes to do, to fulfill its charitable purposes. For more information, see Describing your activities.

6. What is “sufficient” information?

When we ask for “sufficient” information, we want a complete description of your organization and its activities. This detailed information allows us to properly evaluate your application and determine if your organization is eligible for registration. If an organization fails to provide sufficient information about itself, its registration may be denied.

Some applicants do not include enough information about how their organization is structured. Other applicants do not include a complete description of their current and planned activities or simply re-state the organization’s purposes instead of completely describing its activities. You should describe, in detail, the charitable activities your organization will carry on itself and/or provide details of the resources (financial, physical, or material) that it intends to make available to qualified donees to assist those organizations.

January 15, 2010

BC Society Act review in 2010 - comments requested by April 2010

Here is a link to a PDF document from the BC Ministry of Finance on the BC Society Act Review http://www.fin.gov.bc.ca/society_act_review.pdf  The document raises a number of important policy issues with non-profit corporate law that may be of interest to even those outside of BC.

Ministry of Finance   Office of the Deputy Minister   Society Act Review

December 2009
Message from the Deputy Minister of Finance
The Ministry of Finance is embarking upon a policy review of British Columbia’s Society Act, the statute that provides rules for the registration and corporate governance of not-for-profit entities.
The purpose of the Society Act review is to identify and address any legislative obstacles that may prevent societies from functioning fully and efficiently, and ensure that the public interest is being protected. We are seeking your input on any problems, gaps, inconsistencies or ambiguities in the Society Act and any reforms you would like considered.
This review forms part of the Ministry’s ongoing revision of important framework statutes in the corporate, commercial, real estate and financial services sectors. In recent years this process has resulted in several pieces of new or revised legislation.
There are over 26,000 societies registered in the province, ranging in size from small community-based organizations to large charitable foundations. Societies are engaged in a wide variety of endeavours. They are increasingly involved in providing social services, including medical services and housing, and are often the entity of choice for incorporated community groups, such as sports or cultural organizations.
Although the Society Act has occasionally been amended (most notably in 2004 to streamline filing requirements for societies), it is outdated and in need of revision. There has been no revision of the Society Act since 1977. Other corporate statutes, such as the Business Corporations Act (BCA), which governs companies, and the Cooperative Association Act (CAA), which governs cooperatives, have been completely rewritten within the last decade.
There is considerable interest in updating the legislation. The Ministry is indebted to the British Columbia Law Institute for its extensive work on this issue, which culminated in a 2008 report recommending a new Society Act modelled on the BCA. As well, there have been recent revision projects pertaining to not-for-profits in other Canadian jurisdictions, including the passage of new federal legislation just a few months ago.

The Issues
Two fundamental structural issues regarding the Act have already been raised. The first concerns the nature of the corporate model most appropriate for societies and whether a more sophisticated business law framework should be adopted.
The lack of up-to-date corporate governance rules has been identified as a barrier to the efficient functioning of societies. For example, societies are currently required to have three directors (one of whom must be resident in the province), and directors can only be indemnified with the approval of the court. While these extra controls may be appropriate for certain types of societies (e.g. charities), societies that are not recipients of public money perhaps need not be so constrained. Other corporate statutes have moved toward greater streamlining and flexibility in these areas. For example, the BCA requires only one director (with no residency requirement) and indemnification of BCA directors no longer requires a court order. As well, the BCA’s modern framework for corporate reorganizations and other fundamental changes is not available to societies.
One option would be to model a new Society Act after the BCA. The BCA corporate law framework is exhaustive and complex, and may be especially appropriate for larger, more sophisticated societies. However, many societies are community-based “grassroots” organizations that rely entirely on volunteer boards of directors for their administration. Given this context, an alternative approach might be to adopt more straightforward provisions akin to those in the CAA, or even to develop a new set of simplified rules specifically designed to meet the needs of societies. The Ministry is also aware that there have been calls for a whole new framework to enable a “hybrid” type of organization for not-for-profits engaged in socially-beneficial, profit-generating businesses.
The second fundamental issue concerns the extent to which the Act should contain regulatory provisions or other rules that constrain the operation of societies. Most corporate statutes are non-regulatory in nature—that is, they merely provide a framework for incorporation, governance and dissolution, and contain few, if any, provisions that purport to regulate or control the composition or activities of the corporations created. The Society Act, however, contains a number of regulatory provisions, including the following:
•tighter accountability controls—for example, a society must have three directors (as opposed to one director for private companies under the BCA) and must make its financial statements available to the public. There is no ability to waive financial statements (as there is for private companies under the BCA);
•provisions allowing the registrar to order a particular society (or class of society) to become a “reporting society”, which then triggers greater accountability requirements—for example, a reporting society must provide audited financial statements to its members;
•special rules regulating societies that exist for educational, religious, poverty-relief, community or other “charitable purposes”—a society with such purposes cannot abandon those purposes or convert to a company, and may not, on dissolution, distribute its assets to its members; and
•ministerial investigations of societies that do not act in the public interest.

One option would be a move away from government regulation of societies. The extra controls that apply to societies could be replaced with self-enforcement tools for members. This approach is consistent with the trend under other corporate statutes, and also with the 2004 amendments to the Society Act (removing both the Registrar’s responsibility to review submitted bylaws and societies’ obligation to file annual financial statements). With respect to societies obtaining public funds, it can be argued that there is already sufficient regulatory oversight provided by the federal government (through its charitable tax status requirements) and through the requirements imposed by government and other funders under grant application processes.
Another approach would be to maintain, or even enhance, strict regulatory controls for some types of societies, such as those that solicit public funds. In this area, it can be argued that tighter regulation—in particular in the area of financial disclosure and the reporting of directors’ conflicts of interest—and expanded government investigation powers, are justified.
In addition to the two fundamental structural issues discussed above, a number of other more specific issues have been identified for further analysis. These include improved dispute resolution processes for societies, new mechanisms to allow for electronic filings and communications for societies, and new rules respecting the personal liability of directors of societies. It is anticipated numerous further issues will be identified through this public consultation process, and your input in this area is expressly sought.

The Process
The Society Act review will likely consist of a number of consultation phases. In this first phase, our goal is to identify issues, priorities and objectives, and to explore possible structural frameworks. Following these initial consultations, it is anticipated that a discussion paper inviting more focussed public comment on specific issues and options will be published.
You are invited and encouraged to participate by commenting on the issues discussed above or other problems there may be with the current legislation. As our intention is to solicit as much input as possible, please invite others who may wish to contribute to do so. The deadline for feedback is April 1, 2010, to enable the Ministry to proceed with the next phase of the review.

Comments may be transmitted electronically to: .(JavaScript must be enabled to view this email address)
However, if you wish to send comments in paper format, please direct them to:
Financial and Corporate Sector Policy Branch
Ministry of Finance
PO Box 9418 Stn Prov Govt
Victoria BC V8W 9V1
(Phone 250-387-1269)
Please note that the Ministry will be sharing comments it receives with the Corporate Registry of the Ministry of Citizens’ Services, and others. Even where confidentiality is requested, freedom of information legislation may require the Ministry to make responses available to those requesting such access.
Thank you for your participation in this important review.
Sincerely,
Graham Whitmarsh
Deputy Minister

December 01, 2009

Transitioning from the Canada Corporations Act to the New Canada Not-for-profit Corporations Act

After the new Canada Not-for-profit Corporations Act comes into force (probably around 2011) Canadian federal charities under the Canada Corporations Act that wish to continue existing will have a further three years to continue (essentially to covert) under the new Canada Not-for-profit Corporations Act

For further information see a paper entitled Insight on C-4, the New Canada Not-for-profit Corporations Act By: Wayne Gray, Partner, McMillan LLP, Toronto. http://www.mcmillan.ca/waynegray

“VII.  TRANSITIONING TO THE NEW ACT
Once the New Act comes into force, it will no longer be possible to incorporate an NFP corporation under Part II of the CCA.  Rather, all new federal NFP corporations will be formed under the New Act.
If a body corporate governed by Part II of the CCA does not apply for a continuance within 3 years after s. 297(5) of the New Act comes into force, Corporations Canada may, upon first giving notice in writing to the body corporate and to each director, dissolve that body corporate.

To continue under the New Act, a CCA body corporate will need to file articles of continuance under s. 211.  The content of the articles of continuance parallels that of the articles of incorporation described at Part IV.1 above.  In addition, an NFP body corporate formed under provincial or territorial law may apply to Corporations Canada for a certificate of continuance under s. 211 if so authorized by the laws of its home jurisdiction.”

Can a Canadian charity under the new Canada Not-for-profit Corporations Act have no members?

No.  The new Canada Not-for-profit Corporations Act requires that corporations have members however the board of directors and the members can be identical as is often the case with Canadian charities.

For further information see a paper entitled Insight on C-4, the New Canada Not-for-profit Corporations Act By: Wayne Gray, Partner, McMillan LLP, Toronto. http://www.mcmillan.ca/waynegray

In that paper he discusses self-perpetuating boards

“Q8. Does the New Act Allow Self-Perpetuating Boards?  Answer:  Yes; but the New Act does not permit a CNCA corporation to entirely dispense with members.

To again underscore the flexibility of the New Act, it is clearly possible for a corporation to have a completely self-perpetuating board, i.e., a membership that consists entirely of board members.  First, the Act imposes no limits on who may be a member.  Second, s. 126(1) imposes limited qualifications on who can validly be a director.  Thus, a director must be an individual who is at least 18 years of age, not an undischarged bankrupt and not found by a court to be incapable.  Ergo, a director can be a member.  In effect, the same individual or small group of individuals may be both members and directors (provided that all individuals meet the limited directorship qualifications set out in s. 126(1)). 

This arrangement has the practical effect of obliterating the distinction between members and directors, except to the extent that corporate formalities (such as the approval of articles and certain by-law amendments) must be observed.  The same individuals can wear two different hats but will have to be mindful of which hat is worn at a particular meeting.  A director’s hat is inappropriate attire for a member’s meeting, and a member’s hat should not be worn at a board meeting.”

November 30, 2009

Will the New Canada Not-for-profit Corporations Act limit foreign activities by Canadian charities?

I am not even going to try to answer this issue.  I tried before to deal with Subsection 16(3) and got the answer wrong.  I am excerpting a piece from a paper entitled Insight on C-4, the New Canada Not-for-profit Corporations Act By: Wayne Gray, who is a partner at McMillan LLP, Toronto. http://www.mcmillan.ca/waynegray to answer the question.

“V.  FAQ
Q1: Is the New Act Effective to Abolish the Ultra Vires Doctrine?  Answer: Yes.

Subsection 16(3) of the New Act provides that:

A corporation has the capacity to carry on its activities, conduct its affairs and exercise its powers in a jurisdiction outside Canada to the extent that the laws of that jurisdiction permit.
Some have seen this provision as problematic for those federal NFP corporations operating in foreign countries.

However, the concern appears to be groundless.  Section 16 of the CNCA is identical to s. 15 of the CBCA.  Sections 15 and 16 of the Business Corporations Act (Ontario) (the “OBCA”) are to the same affect.  As well, s. 15 of the Saskatchewan Non-profit Corporations Act, 1995 (the “Saskatchewan Act”) is substantively to the same effect.  While the provision is new for federal NFP corporations, the same provision has existed for many years in the CBCA and all of the federal, provincial and territorial statutes modelled on the CBCA nary a hint of a problem.

The Dickerson Committee clearly intended to abolish the ultra vires doctrine through what ultimately became s. 15 of the CBCA.  Professor Peter Cumming (as he then was) intended the same in his 1973 Proposals for a New Not-for-profit Corporations Law for Canada.  Section 15 of the CBCA, and its OBCA counterpart, were considered by the Supreme Court of Canada in Communities Economic Development Fund v. Canadian Pickles Corp.,  where Iacobucci J., writing for a unanimous court, held that the ultra vires doctrine had been abolished by s. 15 for corporations that incorporate under the CBCA (and by ss. 15 and 16 for corporations that incorporate under the OBCA).  There was no suggestion in Canadian Pickles that s. 15(3) of the CBCA qualifies the abolition of the ultra vires doctrine in any way, keeping the doctrine alive for business or activities conducted outside of Canada or automatically transforming all corporate acts that breach a foreign law into an ultra vires act under domestic law.

The simple purpose of s. 16(3) is to codify cases such as Bonanza Creek Gold Mining Co. v. R.  In Bonanza Creek, the Judicial Committee of the Privy Council stated that, in the absence of express legislative restrictions, a provincially-incorporated corporation may accept powers and rights conferred on it by authorities outside of its incorporation jurisdiction.  Laws of a host foreign jurisdiction can always limit the powers exercisable in that jurisdiction by a federal, provincial or territorial corporation.  Extrapolating Bonanza Creek, a CBCA corporation or a CNCA corporation should be able to accept powers and rights conferred on it by authorities outside of Canada in the absence of express legislative restrictions to the contrary.

Even on a plain reading, s. 16(3) is enabling, not disabling.  It contains a positive statement of the corporation’s capacity to operate outside of Canada.  It does not in any way negate the capacity conferred by s. 16(1), which the Supreme Court has held to be sufficient to abrogate the ultra vires doctrine.  Despite s. 16(1) of the New Act, it is possible for a host foreign law to prohibit or restrict a federal NFP corporation from operating within the host jurisdiction.  Canadian corporate capacity cannot trump the application of foreign law.

By the same token, the ultra vires doctrine is purely a function of the domestic law that governs a corporation.  Foreign law can make a corporate act illegal but not ultra vires.

In any event, s. 17(3) of the New Act also has potential application.  It reinforces that the legislative intent of the New Act is enabling - specifically that a mere contravention of the New Act does not result in a declaration of invalidity.  The CBCA formulation for abolition of the ultra vires doctrine has withstood judicial scrutiny at the highest level.  It would have been counterproductive to undermine this certainty by tinkering with the legislative formulation for abolishing the ultra vires doctrine in the New Act.”

When will the new Canada Not-for-profit Corporations Act come into force and we can start using it?

The New Canada Not-for-profit Corporations Act while passed has not come into force yet.  The experts best guess (see Wayne Gray below) is early 2011 for it coming into force.

“The sector’s plea for a modern NFP corporate statute has finally been answered.  On June 23, 2009, Bill C-4, the Canada Not-for-profit Corporations Act (interchangeably, “New Act” or the “CNCA”), received Royal Assent.  The unofficial best estimate as to when the New Act will come into force is early 2011.  The coming into force of the New Act should be welcome news for the more than 17,000 federal NFP corporations that will soon be able to continue to the New Act and the many more provincial/territorial NFP corporations that will have the option of moving to the New Act under its voluntary continuance provisions.”  from a paper entitled Insight on C-4, the New Canada Not-for-profit Corporations Act By: Wayne Gray, Partner, McMillan LLP, Toronto. http://www.mcmillan.ca/waynegray

June 30, 2009

New Federal Canada Not-for-profit Corporations Act Receives Royal Assent June 23, 2009

The new Canada Not-for-profit Corporations Act has just received royal assent on June 23, 2009.  The act has yet to be proclaimed in force and it will come into force on a day or days to be fixed by order of the Governor in Council.  It is difficult to know when the bill will come into force. It could be 3-6 months or it could be a year or more.  Industry Canada will have a lot of work to do with the regulations, forms, fees etc.  Once the act comes into force current Canada Corporations Act corporations will have 3 years to continue into the new act assuming that no change or extension is made to the act.  There will be a lot of material prepared by non-profit associations as well as professional advisors and others to assist CCA corporations with the transition.  It makes little sense for most CCA non-profits to start worrying about this act until there is greater clarity and more time has elapsed. 

Also, as more material is prepared by Industry Canada, non-profit associations and others it will be easier to grapple with the issues.  If a CCA corporation is a charity and wants something to worry about now they may want to spend some time on the CRA website to try to understand whether the charity is complying with its obligations under the Income Tax Act.  Also you may find my article Top Ten Charity Law Issues helpful at http://www.globalphilanthropy.ca/images/uploads/Top_Ten_Canadian_charity_law_issues.pdf

Here is some information on the bill including the full text: http://www2.parl.gc.ca/Sites/LOP/LEGISINFO/index.asp?Language=E&query=5653&List=toc&Session=22