Under New Management: Transitioning to the New Canada Not-for-profit Corporations Act and Ontario’s Not-For-Profit Corporations Act, 2010

By Sarah Farrell, J.D.

Do you know how the new not-for-profit corporation acts are going to affect your theatre company?  With new laws for both provincially-incorporated and federally-incorporated not-for-profits, theatres may find they need new letters patent and by-laws, and may have other significant administrative requirements to meet.  Learning about these changes can ease the transition process and help to ensure that your organization is fully compliant with either the new Federal or Ontario Act—while failure to comply could have significant impact on how your organization will operate: its governance, its charitable registration, or its activities.

The Canada Not-for-profit Corporations Act (the “Federal Act”) is a new law that came into force in October 2011.  The Federal Act is applicable to all Federal not-for-profit corporations previously incorporated under Part II of the Canada Corporations Act (the “Old Federal Act”), and to all Federal not-for-profit organizations looking to incorporate (together, “Federal NFPs.”)  All Federal NFPs previously incorporated under the Old Federal Act are required to transition to the new Federal Act by October 17, 2014.  Until they have made the transition, the Old Federal Act will continue to apply to such Federal NFPs.  Eventually, the Old Federal Act will be repealed and any Federal NFPs that have not transitioned will be dissolved (for registered charities, dissolution could further lead to the revocation of their registration as a charity.)

Ontario’s Not-for-Profit Corporations Act, 2010 (the "Ontario Act"), which is targeted to come into effect on or about January 1, 2014, will set out how Ontario not-for-profit corporations and charities (together, “Ontario NFPs”) are created, governed, and dissolved.  The Ontario Act will apply to every corporation without share capital incorporated under an act of the Ontario legislature (as well as some “social nature” share capital organizations), including those incorporated under Ontario’s current Corporations Act.  Existing Ontario NFPs will be required to update their incorporation and related documents in order to comply with the new Ontario Act, and will have three years to complete the transition once the Ontario Act comes into effect.  At the end of the three year transition period, any provision of an existing NFP’s letters patent, supplementary letters patent, by-law, or special resolution that still does not conform with the Ontario Act will be considered amended to the extent necessary to conform with the Ontario Act, or in some cases may be considered partly or completely ineffective—a state of uncertainty all Ontario NFPs will want to avoid.

The new Federal Act sets out rules that govern the internal affairs of Federal NFPs, simplified administrative processes, more flexibility to make fundamental changes, and a more objective standard for directors in carrying out their duties and responsibilities.  Federal NFPs, in order to avoid automatic dissolution, will be required among other things, to obtain a Certificate of Continuance and to create and file new by-laws that comply with the Federal Act, which may include replacement of their letters patent and supplementary letters patent (if any.)

The Ontario Act will make it simpler for Ontario NFPs to incorporate and will provide a framework for greater transparency and accountability in how Ontario NFPs are run.  In addition, the Ontario Act will clarify when Ontario NFPs can engage in commercial activities, allow Ontario NFPs to use a review engagement rather than an audit in some situations, enhance members’ rights, and provide members with greater access to financial records.  Among other things, Ontario NFPs will need to review, and may need to draft or update their articles of incorporation, by-laws, and/or letters patent and supplementary letters patent in order to comply with the new Ontario Act:

Join us on Tuesday, May 28 at 2pm for Theatre Ontario’s workshop “Under New Management: Transitioning to the New Canada Not-for-profit Corporations Act and Ontario’s Not-For-Profit Corporations Act, 2010” to learn more about complying with the new legislation.

Sarah Farrell (www.sarahfarrell-law.com) is a Toronto-based entertainment lawyer who focuses on the law affecting theatre practitioners in Ontario. The contents of this article do not constitute legal advice nor do they create a solicitor/client relationship between Sarah Farrell and the reader. Each individual and organization will have its own specific concerns and circumstances that it will need to address when dealing with the issues set out in this article. It is strongly recommended that the reader seek independent legal advice prior to following any course of action related to this article. This article is not an exhaustive review of the topic set out herein and only provides a snapshot overview of some of the issues surrounding that topic.  Sources: http://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/h_cs03925.html and http://www.sse.gov.on.ca/mcs/en/Pages/Not_For_Profit.aspx.