NFP Act is on the Way

Published June 2, 2010

In 2009, the federal Not-For-Profit Corporations Act (NFP Act) received Royal Assent. We wrote about the NFP Actin a previous newsletter and there is now more information about the nature of the Act and the timing of its implementation.

With perhaps one or two exceptions, national sport organizations in Canada are incorporated under Part II of the Canada Corporations Act (CCA). The NFP Act replaces Part II of the CCA and all previously created corporations will continue under the NFP Act.

This means national sport organizations, incorporated under Part II of the CCA, will simply transition to operate under the NFP Act, but there will be a few important things these organizations will be required to do. The NFP Act is expected to come into force in 2011 or 2012 - so there is no rush to do anything immediately. After the Act is implemented, all corporations will be required to obtain a certificate of compliance with the NFP Act, and this will entail careful review and revisions of bylaws. Failure to obtain the certificate may result in the dissolution of the corporation. These certificates and more information will be forthcoming from Industry Canada.

Here are a few highlights of what we can expect with the NFP Act:

• Overall the legislation is less complicated and cumbersome. It also emphasizes the rights of members, rather than the rights of government, to oversee bylaw matters.
• The NFP Actcontains numerous provisions regulating directors; such as the number of directors and the powers of members to remove directors. Directors may also receive reasonable remuneration for their services.
• Members are vested with powers that they did not previously have under the CCA. For example, non-voting members are granted voting rights on any issues that would have a substantial effect on their class of membership. They may also vote on matters relating to the disposition of a corporation’s assets or its dissolution.
• Although bylaws must be submitted to Industry Canada to be kept on file, they will no longer be reviewed for compliance.
• A significant departure from the CCA is that with some exceptions, directors may unilaterally make changes to bylaws without seeking membership approval. The exceptions are ‘fundamental changes’, which are defined as changes to articles, changes to the rights of any class or group of members, changes to the method of giving notice to members, and changes to how absentee members can vote.
• Lastly, the NFP Act provides some specifics about the conduct of directors meetings, and allows a number of voting conveniences that are currently prohibited by Industry Canada

Interestingly, the government of Ontario has also introduced new legislation to govern non-profit societies. Although not yet passed into law, Bill 65 (Ontario Not-For-Profit Corporations Act) will create a regime in Ontario not unlike that which exists in British Columbia, Alberta and Saskatchewan, whereby societies are created and regulated by a special statute, separate from business corporations. Both the NFP Act and Bill 65 are indicative of government recognizing the unique needs and significant economic contributions of the not-for-profit sector in Canada.

Originally published: Centre for Sport and Law Newsletter (2010) Vol. 6(3)