Transitioning Your Federal Not-For-Profit

The Canada Not-for-profit Corporations Act, SC 2009, c 23 (“NFP Act”) came into force October 17, 2011 and replaces Part II of the Canada Corporations Act, RSC 1970, c C-32 (“CCA”). To avoid dissolution, all federally incorporated not-for-profits (“NFPs”) will have to transition to the NFP Act prior to October 17, 2014. Until this transition is made, the relevant provisions of the CCA will continue to apply to federally incorporated NFPs.

The NFP Act provides a new set of rules which govern federally incorporated NFPs. Some of the new changes include a codification of the rules that govern the internal affairs of federal NFP corporations, providing federal NFPs with the option of adopting the default rules; permitting fundamental changes, such as amalgamations; and an improved objective standard regarding liability and duties of directors.

All federally incorporated NFPs wishing to continue operating as such an entity after October 17, 2014, must undergo a transition prior to this date. Transitioning under the NFP Act can take time as it requires corporations to:

(1) Review current letters patent, supplementary letters patent, and by-laws.

(2) Prepare the articles of continuance. The articles of continuance will be attached to the Certificate of Continuance, replacing the letters patent.

(3) Revise articles and by-laws to comply with the NFP Act. At a minimum, by-laws must set out the conditions required for being a member of the corporation (NFP Act, s 154(1)) as well as notice of meetings to members who are entitled to vote at the meeting (NFP Act, s 162).

(4) Obtain requisite member approval. Note that NFP Act requires that the articles of continuance be approved by a two-thirds majority of eligible member voters (NFP Act, s 212).

(5) File required documents with Industry Canada to obtain a Certificate of Continuance. The documents that must be filed include: Form 4031 – Articles of Continuance (transition); Form 4002 – Initial Registered Office Address and First Board of Directors, and NUANS Name Search Report, if the corporate name is changing on continuance. Note that corporate by-laws may either be filed at this time or may be filled within 12 months after receiving member approval. There is no fee to obtain a Certificate of Continuance.

It is also important to note that if a transitioning NFP corporation is a Registered Charity, as defined in the Income Tax Act, then special steps must be taken to ensure that the corporation retains its charitable status after the transition. After undergoing the transition process, there are also additional filing requirements for Registered Charities with the Canada Revenue Agency.

Starting from the date the NFP Act came into force, federally incorporated NFPs are given three years to undergo the transition described above. For more information on this process, see Industry Canada’s Transition Guide for Federal Not-for-profit Corporations or get in touch.

This blog and the contents herein are for informational purposes only and do not constitute legal advice. Readers are advised to seek legal counsel prior to acting on any matter discussed herein. I take no responsibility for any third-party sites linked, nor is the presence or absence of a link an indication of my endorsement of views expressed.