The Ontario government has put forward a “Good Governance” bill - “The majority of the nearly 600 items included in the Good Government Act, 2009 were contributed to by 22 ministries and propose technical changes that would simplify government processes, update, language and clarify administrative processes. ” There are a number of changes including the repeal of the Charitable Gifts Act which had provided an Ontario charity may not own more than 10 per cent of an interest in a business. Ontario was the only province to have such a restriction and it applied to all charities. That is probably the most significant change. Although there were workarounds with trusts etc. such a restriction in my view never made much sense and with “registered charities” having to comply with the “unrelated business” rules under the Income Tax Act there is a system in place to regulate charities involvement with business.
Office of the Public Guardian and Trustee, which is part of the Ministry of the Attorney General has advised:
“I am pleased to be able to tell you that Bill 212, the Good Government Act, 2009 was introduced into the legislature on October 27, 2009. That bill contains a number of proposed amendments to
legislation affecting charities in Ontario. Here is a brief synopsis of the proposed changes. The bill can be found at http://www.ontla.on.ca/web/bills/bills_detail.do?locale=en&Intranet=&BillID=2235
Section 1 of Schedule 2 of the bill· would amend the Accumulations Act to exempt charities from the operation of that Act. Section 10 of Schedule 2 of the bill would repeal the Charitable Gifts Act. Section 11 of the same Schedule amends the Charities Accounting Act to amend the powers of the Public Guardian and Trustee and the Courts to investigate and make orders relating to any business in which a charity has a substantial interest. That section also deletes the definition of land currently contained in the Charities Accounting Act and amends section 8 of the Act to remove the requirement that charities hold land only for their actual use and occupation.; Section 65 of Schedule 2 would make consequential amendments to the Religious Organizations Land Act.”
HERE ARE SOME RELEVENT PROVISIONS:
Ministry of the Attorney General
1. The Accumulations Act is amended by adding the following section:
Rules as to accumulations not applicable to charitable purpose trusts
4. The rules of law and statutory enactments relating to accumulations do not apply and shall be deemed never to have applied to trusts created for a charitable purpose, as defined in section 7 of the Charities Accounting Act.
Charitable Gifts Act
10. The Charitable Gifts Act is repealed.
Charities Accounting Act
11. (1) Section 1.1 of the Charities Accounting Act is repealed.
(2) Section 2 of the Act is repealed and the following substituted:
Executor or trustee to provide information
2. An executor or trustee shall, if requested by the Public Guardian and Trustee, provide to the Public Guardian and Trustee particulars in writing respecting,
(a) the name and address of each executor or trustee of the estate or trust;
(b) the condition, disposition or other such particulars as requested of the property devised, bequeathed or given or which is in any way held by the executor or trustee; and
(c) any other matter relating to the administration or management of the estate or trust or any other property held by the executor or trustee, as requested.
(3) The Act is amended by adding the following section:
Information, documents respecting entities
4.1 (1) If an executor or trustee holds a substantial interest in an entity within the meaning of subsection (3), the Public Guardian and Trustee may inquire into the management or operation of the entity and into its relationship to the executor or trustee, and the entity or any director, officer, manager or trustee of the entity shall, if requested by the Public Guardian and Trustee, provide to the Public Guardian and Trustee such information or documents respecting the entity as the Public Guardian and Trustee specifies.
(2) Without limiting the generality of subsection (1), the Public Guardian and Trustee may make a request under that subsection for,
(a) business records of the entity;
(b) information respecting the assets and liabilities of the entity;
(c) accounts of income and expenses for the entity;
(d) financial statements of the entity, including any statements made by an auditor with respect to the financial statements; and
(e) the particulars of any fees, salary or other remuneration paid to any person by the entity.
(3) An executor or trustee holds a substantial interest in an entity if the following criteria are met:
1. In the case of an entity that is a corporation with share capital, the executor or trustee beneficially owns, controls or has direction over one of the following:
i. Shares of any class or series of voting shares of the corporation carrying more than 20 per cent of the voting rights attached to all of the outstanding voting shares of the corporation.
ii. Shares of the corporation representing more than 20 per cent of the shareholders’ equity of the corporation.
2. In the case of an entity that is a corporation without share capital, the executor or trustee beneficially owns, controls or has direction over membership in a class of membership of the corporation carrying more than 20 per cent of the voting rights attached to all of the outstanding voting membership interests of the corporation.
3. In the case of an entity that is a partnership, the executor or trustee beneficially owns, controls or has direction over a right to one of the following:
i. At least 20 per cent of the profits of the partnership.
ii. At least 20 per cent of the assets of the partnership on its dissolution.
4. In the case of an entity that is a trust, the executor or trustee beneficially holds an interest in the trust.
5. In the case of any other entity, the aggregate of any ownership interests into which the entity is divided, however designated, that are beneficially owned or controlled by the executor or trustee, or over which the executor or trustee exercises direction, exceeds 20 per cent of all the ownership interests into which the entity is divided.
(4) For the purposes of subsection (3), the ownership, control or direction over a thing by the executor or trustee may be,
(a) direct or indirect; or
(b) alone or through one or more persons, entities or both.
Application to court
(5) On application by the Public Guardian and Trustee, a judge of the Superior Court of Justice may,
(a) make any order that the judge considers necessary or proper to compel the provision of information or documents required to be provided to the Public Guardian and Trustee under subsection (1);
(b) fix the costs of the application and direct how and by whom they shall be payable;
(c) make any order relating to the management, operation, ownership or control of the entity that is in the best interest of the purpose for which the estate or trust is held, including an order,
(i) determining who owns, controls or has direction over the entity,
(ii) determining who controls the election of the directors of the entity,
(iii) ensuring that the ownership, control or direction of the entity is in the best interest of the purpose for which the estate or trust is held, including, if appropriate, requiring the executor or trustee to sell all or some of his or her interest in the entity,
(iv) ensuring the proper operation and management of the entity and its assets,
(v) protecting or preserving the assets or financial stability of the entity and the assets held by the executor or trustee relating to the entity,
(vi) selling some or all of the assets of the entity, or
(vii) distributing some or all of the profits of the entity.
(6) An application under subsection (5) shall be on notice to the entity, to the executor or trustee and to any other person that a judge directs.
(7) No person shall obstruct, hinder or interfere with an inquiry conducted under subsection (1), or withhold, conceal or destroy information or documents required to be provided to the Public Guardian and Trustee under that subsection.
Offence and penalty
(8) Every person who contravenes subsection (7) is guilty of an offence and on conviction is liable to a fine not exceeding $25,000.
(4) Subsection 5 (4) of the Act is amended by striking out “any such will or other instrument” and substituting “a will or other instrument described in subsection 1 (1)”.
(5) The definition of “land” in section 7 of the Act is repealed.
(6) Section 8 of the Act is repealed and the following substituted:
Limitation on use of property
8. A person who holds an interest in real or personal property for a charitable purpose shall use the property for the charitable purpose.
(7) The Act is amended by adding the following section:
Application of Trustee Act
10.1 Sections 27 to 31 of the Trustee Act apply to,
(a) an executor or trustee referred to in subsection 1 (1);
(b) a corporation that is deemed to be a trustee under subsection 1 (2); and
(c) a person referred to in section 8 who is not a person referred to in clause (a) or (b).
Religious Organizations’ Lands Act
65. (1) Subsection 10 (1) of the Religious Organizations’ Lands Act is amended by striking out “for one term of forty years or for more than one term of not more than forty years in all”.
(2) Clause 10 (2) (a) of the Act is amended by striking out “subject to the forty year maximum period specified in subsection (1)”.
(3) The following provisions of the Act are amended by striking out “Public Trustee” wherever it appears and substituting in each case “Public Guardian and Trustee”:
1. Subsection 23 (1).
2. Subsection 24 (2).
3. Subsections 25 (1) and (2).
Mark Blumberg is a lawyer at Blumberg Segal LLP in Toronto, Ontario. To find out more about legal services that Blumbergs provides to Canadian charities and non-profits please visit http://www.canadiancharitylaw.ca or http://www.globalphilanthropy.ca He can be contacted at or at 416-361-1982.
This article is for information purposes only. It is not intended to be legal advice. You should not act or abstain from acting based upon such information without first consulting a legal professional.
Do you require legal advice with respect to Canadian or Ontario non-profits or charities?
Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.