Advisory from Blumbergs– it is best not to incorporate a charity under the Ontario Corp. Act

October 19, 2013 | By: .(JavaScript must be enabled to view this email address) Mark Blumberg
Topics: News, Canadian Charity Law, New corporate non-profit acts

It looks like the new Ontario Not-for-Profit Corporations Act, 2010 (“ONCA”) will not come into force until July 2014 or perhaps in 2015.  If one is considering establishing a new charity today and you are based in Ontario we would strongly encourage you to use a Federal corporation under the Canada Not-for-profit Corporations Act (CNCA) and avoid using the old Ontario Corporations Act (OCA).  Otherwise, you will establish an Ontario corporation and you will probably have to make changes to bring it into compliance with the new ONCA in a year or two or three.  For most, save the aggravation and double work and start off Federal.

Another good reason to establish a Federal corporation is that unfortunately Ontario corporations under the OCA or ONCA are subject to additional and arguably unnecessary corporate/charity regulatory approvals.  Registered charities should consult with CRA if they want to change their objects.  It is hard enough for registered charities to deal with the Charities Directorate when it comes to corporate changes but the unfortunate Ontario corporations must also get approval from the Ontario Public Guardian and Trustee for changes after they are incorporated.  This adds to the costs and potentially significant time (2-3 months).  CRA and PGT have very different systems, require different information and being accepted by the PGT does not guarantee at all that CRA will not require changes to your governing documents.  Once CRA provides approval it takes 5 business days to change a CNCA corporation and 2-3 months to change an Ontario corporation assuming you get all the necessary additional approvals. 

There are many other advantages to setting up a Federal corporation in addition to those mentioned above:

1) If you are conducting national activities and you may have board members from different provinces it is more likely they will be familiar with the Federal CNCA than an Ontario piece of legislation.  Not to mention that people in Alberta or Quebec may not like the idea of serving on an “Ontario” corporation. 

2) The Ontario database system and document storage system is a mess.  Much of the information is very dated and if you want copies of your corporate documents then welcome to the world of microfiche and microfiche reader/printers.  In comparison with a Federal corporation you can obtain, usually within 24 hours, from Industry Canada nice scanned versions of your corporate documents. 

3) There is still some uncertainty as to what the ONCA will provide and when it will come into effect.  The draft regulations have not yet been released, the Ontario government is unfortunately considering changes to the legislation before it is even brought into force and some of the changes being proposed are ill considered. 

4) With the new Federal CNCA you get all the advantages of a modern act including electronic filing which makes things so much easier. 

If you are unsure about what is right for your organization consider obtaining legal advice.

Do you require legal advice with respect to Canadian or Ontario non-profits or charities?

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Charity Lawyer Mark Blumberg

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.

mark@blumbergs.ca
416.361.1982
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