When was the last time your Canadian registered charity reviewed its legal objects? Some employees and even directors of a Canadian registered charity have never even seen their legal objects! Some think that their mission statement on their website is their legal objects, although it typically is not. One of the biggest differences between a for-profit corporation and a charity is that a charity must have exclusively legal objects and those objects are the scope of the charitable activities that a charity can conduct.
We encourage charities to review their objects every few years, or sooner if there is a major change in the charity. Are the objects still appropriate and will they be appropriate in the foreseeable future. We don't encourage charities to take changing their objects lightly - it requires interacting with at least one charity regulator (CRA) and should be handled carefully and professionally.
Changing objects can certainly be done, but it is generally not simple or quick. The CRA has several requirements with on how legal objects are to be drafted. They have a guidance on this topic entitled Guidance CG-019, How to Draft Purposes for Charitable Registration. As well, the CRA also has numerous guidance products dealing with specific areas of charitable activity that can be relevant to drafting objects and the nature of activities that charities can undertake.
If the charity is a corporation, then changes to the corporation’s objects necessitate filing a request with the CRA with the new proposed objects with a detailed statement of activities for each object. It also requires a member's meeting to approve those changes.
When writing to CRA you can send completely new objects in which case, each of the objects needs to be justified with activities under each object. Although it is not as clean and consistent, it is sometimes better to just add new objects. This generally focuses CRA inquiries on the new objects and not objects that had previously received CRA’s approval.
Having narrow objects limits the discretion of the board as to which activities it can undertake, where they can be undertaken and with which partners the charity can deal. There is nothing more frustrating for a charity to have a funder offer millions of dollars for an important initiative that they want to conduct but the historical wording of your objects is too narrow to allow for the implementation of the project.
If you expand your objects there is no requirement that you actually conduct activities under those new objects in the future. In other words, having broader objects or more objects provides greater flexibility. It is the board of directors which will decide if they are ever to actually fund activities under those objects.
CRA is backlogged in dealing with client requests. It can easily take 8-12 months for CRA to review such requests. Once CRA has provided approval for the expanded objects, the Corporation will need to file Articles of Amendment or Supplementary Letters Patent, which will need to be approved by the members. Corporations Canada generally takes approximately five days to issue the Certificate of Amendment with the revised objects. In the case of Ontario non-profit corporations that are charities, there is also a process for the Ontario Public Guardian and Trustee (PGT) to review the objects, which can add a few months in addition to CRA's review of the objects.
Having objects that are appropriate for the mission of the organization is one of the most obvious tasks of a charity board. With the delays at CRA and elsewhere it makes sense for charities to think at least 1-2 years ahead in terms of whether object changes would be helpful. The timing issue is key. If objects could be changed in one month then I would say deal with it as you need. With the significant delays charities need to be planning for the future well ahead of time. For Ontario corporations planning on staying under the Ontario Not-For-Profit Corporations (ONCA) when it comes into effect, if your objects are outdated you might want apply for CRA approval today so that you will receive permission in a year or two and you can utilize those updated objects when you are preparing documents under ONCA. When ONCA does come into effect I am worried that the CRA delay is going to increase tremendously when as many as 10 - 20,000 Ontario charitable corporations could be asking CRA for approval of changes. For Ontario corporations wanting to make changes now they should review our recent article Fed up with ONCA yet? Consider skipping it altogether and moving to the Federal CNCA.
If you need assistance with object changes you can contact us.
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.