While charities can work closely with other entities there must always be appropriate separation

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There are many organizations, enterprises or groups that have a multiple entity structure, meaning that they are made up of for-profit corporations, not-for-profit corporations and registered charities and even multiples of each.

There are numerous reasons why an organization may want to have different corporate entities, such as a registered charity and a not-for-profit corporation. If the organization is large enough, and plans to do many different types of activities, this model provides flexibility in carrying out their activities, as different entities each have their own advantages and disadvantages.

However, if an organization plans to have multiple corporate entities, and especially if one of them is a registered charity, it is vital that the organization ensures that there is sufficient separation between the registered charity and other entities. Charities are governed by many rules and restrictions, especially when it comes to charitable resources (that is, money and other assets that comes into a charity’s possession), and the organization needs to ensure that they are complying with these rules so that they do not lose its registered charity status.

How can you show separation? How much separation is needed? This course will assist you in understanding the importance of separation, how to determine separation vs. overlap/integration and whether further separation is required.

There is a continuum between total overlap and complete separation on the extremes. The Canada Revenue Agency (CRA) does not require that registered charities operate in isolation but if it is hard for the public and the regulator to separate out the entities then this could be a significant compliance problem.

While some may think it is a good idea to have a seamless “one organization” approach with branding, governance and operations, it will be a huge problem from a legal perspective in Canada because the benefits of being a “registered charity” do not apply to that “one organization”, the resources of the registered charity can only be used for the purposes and activities of the registered charity, and there needs to be a clear separation/distinction between the registered charity and the other groups that are not registered charity (“non-qualified donees”)

It is vitally important that not only an appropriate structure is put in place, but also that the way the organization is described both verbally and in writing, both privately and publicly, is with accurate and consistent language. It is a good idea to have standard wording to describe the relationship that we can review.

Here is an overview of the course:

  • Why separation is an issue?
  • Charity Commission of England and Wales
  • Connections between charities and others
  • Long term and close relationships
  • When is separation relevant?
  • Why multiple related structures may be helpful and appropriate
  • Issues to consider when establishing an entity
  • Key features of a separate entity
  • Examples of connected organisations
  • Keep the charity separate – don’t blur the boundaries
  • Branding and Communication and Shared Names and Shared Communications
  • Separation Checklist and adequate separation
  • CRA Revocation Letters
  • Conclusion

This course will be of interest to:

  • staff and volunteers at registered charities responsible for governance, financial management and compliance issues;
  • professional advisors such as lawyers, accountants, investment advisors who advise registered charities and other entities that have relationships with registered charities; and
  • board members of Canadian registered charities.