As Canada’s most connected event and association management company we are pleased to publish guest blogs by our partners. This post is written by Andrew Buck, a lawyer with Pitblado Law in Winnipeg, Manitoba.
So you want to continue under the Canada Not-for-profit Corporations Act
OK, let’s back up. First of all, it’s not really a question of “wanting” to continue under the Canada Not-for-profit Corporations Act (or, “CNCA”). The law requires that all not-for-profit corporations that were incorporated federally under the old Canada Corporations Act must be continued under the CNCA before October 17, 2014, or face dissolution by Corporations Canada.
Second, who really “wants” to go to the time and expense of hiring a lawyer to continue their non-profit corporation under the CNCA? By-laws can be dry, at the best of times, and popping the hood on your by-laws, letters patent and other key corporate documents may unearth latent governance deficiencies you’d rather not have to deal with.
Not to worry. Continuance doesn’t have to be a painful process. In fact, if managed properly, continuance under the CNCA provides an excellent opportunity to use the CNCA to update and improve your corporation’s governance practices.
The best way to manage a continuance is to start by setting aside time to consider a strategic plan. When we help our clients with their planning efforts, we share with them what we’ve learned as part of the many continuances we’ve been involved with. With that in mind, here is the first part of a two-part overview of our own CNCA continuance tips and traps:
Budget enough time: October 2014 might seem like a long way away, but it’s closer than you think. A continuance requires inward thinking and reflection about your governance practices. It requires the drafting and revision of several key documents. Then, it requires your board and your members to approve all of those documents. All of this takes time! If you haven’t started down the continuance road, you should, and soon.
Know your organization: If you choose to work with a lawyer, that lawyer is going to need to know the ins and outs of the way your corporation operates. The CNCA provides many opportunities for customization, so a strong working knowledge of your governance structure is an essential prerequisite. Even if you aren’t going to work with a lawyer, you still need to know where you want to end up, in order to get there through the continuance process.
Consider transition issues: Most continuances we work on adopt the following implementation process: the board passes the articles of continuance and revisions to the by-laws, and authorizes the continuance; the members confirm these documents and the continuance; then the corporation files for continuance. However, because the revised by-laws are designed to comply with the CNCA, chances are, they won’t comply with the old Canada Corporations Act, which will continue to apply to the corporation, in the bridge period between the meeting of the members where the continuance is approved and date the corporation receives its certificate of continuance. It is helpful to anticipate any transitional issues (such as whether the directors will be elected at the AGM in a manner that complies with both versions of the by-laws) and address them early in the process.
Which documents? Continuance requires your corporation to examine and amend its by-laws. It also requires the preparation of articles of continuance, which are similar to letters patent. When you work with your existing by-laws and letters patent, you’ll want to make sure you’re working with the current versions of both. Depending on the state of your corporate records, it may be necessary to request current versions from Corporations Canada (if your version is different than what Corporations Canada has on file, chances are, you’re not working with the current version!).
Financial review: Financial review under the CNCA is a bit of a moving target: the level of review that is required by the CNCA is dependent on a corporation’s gross annual revenues in the preceding year, as well as whether it is, at any given time, a “soliciting corporation” (corporations that receive more than $10,000 in annual government or private donor funding are soliciting corporations). Layered on top of these two variables is the ability, in some cases, to opt out of the statutory default review level, with member approval. Given all of these variables, you may find it simpler to include broad, permissive wording in your by-laws: that way, the given facts of any particular year can be analyzed to determine what level of financial review is required.
Andrew Buck is a lawyer at Pitblado Law. He advises not-for-profit organizations about corporate governance issues and has guided many federally incorporated not-for-profit corporations through continuance under the Canada not-for-profit Corporations Act.
The information contained herein is for informational purposes and should not be construed as legal advice.