Canadian non-profits that do NOT have charitable status have their own legal requirements, which are different from those of registered charities. Such non-profits generally have greater flexibility in terms of activities, however, they do not have some of the advantages of registered charity status, such as the ability to issue tax receipts.
May 06, 2007
For Canadian Federal Non-profits that are NOT registered in Canada as charities (with the Charities Directorate of the Canada Revenue Agency) the following legal requirements should be met in order to keep the Corporation in good standing.
All corporations, both large and small, must hold at least one annual meeting of members every calendar year and not more than 15 months after its previous annual meeting. While any topic affecting the corporation can be discussed, the annual meeting must at least address the following:
The directors may also call special general meetings of members for example if one wanted to change the by-laws of the corporation.
ANNUAL FINANCIAL STATEMENTS
Each Federal corporation is required to prepare annual financial statements for examination by the auditor. These statements will be presented to the members at the annual meeting along with the report of the auditor. Unlike for profits with federal non-profits there is no ability to exempt from audit requirements.
All Federal non-share capital corporations are required to have an auditor. The auditor must be appointed by the members at each annual meeting. Unless all of the members agree otherwise, the auditor must be independent of the corporation and therefore cannot be a director, an officer or an employee of the corporation or any of its affiliates.
The auditor is required to make an examination of the accounting records and the financial statements. The auditor must report to the members on the examination at the annual meeting. The auditor must state whether the financial statements fairly present the financial position of the corporation and the results of its operations during the past year.
Once incorporated, a Federal not-for-profit corporation must file an Form 3 -Annual Summary, along with the $30 filing fee, with Corporations Canada of Industry Canada. It must be filed between March 31st and June 1st of each year, containing information regarding the corporation as of March 31st in the same year. Failure to file for two consecutive years can result in the dissolution of the corporation under the Canada Corporations Act.
Failure to submit the $30 filing fee will result in a notation being placed on Corporations Canada’s website indicating that the Annual Summary for the particular year was filed without the fee. Corporations Canada will also forward a Notice of Default to you stating that until you pay the filing fee, the corporation has not fulfilled its obligation. Failure to file and/or to pay the filing fee for two consecutive years can result in the dissolution of the corporation.
FILING A CORPORATE INCOME TAX RETURN (T2)
The T4012 CRA Income Tax Guide dealing with T2 Corporation Tax Return discusses the requirements for a non-profit to file the T2 Return. Also Interpretation Bulletin IT-83 Non-Profit Organizations - Taxation of Income From Property may be helpful.
FILING OF ANNUAL NON-PROFIT INFORMATION RETURN (T1044)
Under subsection 149(12) of the Income Tax Act (Canada), an organization may have to file a Form T1044, Non-Profit Organization (NPO) Information Return for a fiscal period, if it is:
However, the organization will only have to file a NPO Information Return if:
Some corporations operating exclusively to provide low-cost housing for the aged are not required to file the NPO Information Return if no part of the income was payable to or available for the personal benefit of any proprietor, member or shareholder.
Registered charities, registered Canadian amateur athletic associations, and registered national arts service organizations do not have to file the NPO Information Return.
When calculating whether or not you have to file the NPO return, you should only include the actual amount of taxable dividends that the organization received or was entitled to receive.
Once an organization has filed a NPO information return for a fiscal period, it must file an information return for all subsequent fiscal periods, as long as it remains an NPO and regardless of the dollar value of its revenues or the book value of its assets in those later years.
There are substantial penalties for late filing of the NPO Information Return. For further information on the T1044 see the CRA guide entitled T4117.
The corporation is to keep the following records in the custody of the secretary or another officer specially charged with that duty (sections 109 and 112 of the CCA):
The corporation is also required to keep adequate accounting records at its head office (section 117 of the CCA).
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.