NFP Act transition… down to the wire… only two months left!

Published August 26, 2014

Four months ago in a blogpost we counted the remaining National Sport Organizations (NSOs) that had not yet transitioned to compliance with the new federal NFP Act. At the time, of the 59 organizations that are recognized as NSOs there were only 24 that had completed the continuance process. So how are we doing now – with only two months to go?

Well, currently 40 of the 59 NSOs have finished the process and that leaves a further 19 NSOs that have some real work to do over the next eight weeks. We’re aware of some organizations that are just finishing their bylaws and articles revisions and have a meeting of the Members upcoming. But we are also aware of some organizations that still have not scheduled that meeting of the Members and are still in the consultation stage. In addition to the 19 remaining NSOs, there are still nearly 40 sport-related active organizations (such as clubs and multi-sport organizations that are federally incorporated) that have not received their certificate of continuance.

Next Steps

If your organization has completed transition then you are likely dealing with various NFP Act-related after-care tasks. We wrote about these tasks in a separate blogpost back in April. It is imperative not to let the governance momentum slow because these after-care tasks are very important. Among other things, policies must be updated, the CRA must be informed of your transition (if your organization is an RCAAA), and committees and Directors should be have a process in place for nominations and elections (especially if your organization formerly had a representative or ex-officio Board).

If your organization has not completed transition then you need to work quickly! After our blogpost in April we were contacted by one large national organization that had not yet started transition. In a short period of time we were able to revise their bylaws, update their articles, consult with Members, restructure governance, and plan a Special Meeting of the Members to pass the new bylaws and articles. The meeting is scheduled for early September and everything seems to be going smoothly. It’s a small window – but we can help you fit through it!

Out of time?

We are not hearing that an extension will be issued after the October 17^th deadline. Organizations that have not received their Certificate of Continuance by this date will receive, at the address listed on their corporate profile, a Notice of Intent to Dissolve from the government. This is a legal notice that the government is required to send non-compliant organizations before dissolution. The good news? Organizations have another 120 days to respond to the notice. Responding to the Notice can take the form of attempting to continue to compliance with the new Act. That four month grace period effectively acts as an extension to the deadline. Still, catching the attention of the government because your organization has failed to transition on time to a required new law (after a three-year transition period) would not be advisable – especially for an NSO that relies on government funding.

We are however hearing that organizations that attempt to submit non-compliant documents are receiving a flag from the government and being given the opportunity to revise their submission. The flag is accompanied by a notice saying that an additional six months are permitted to fix compliance errors. This process is notable on one hand because it demonstrates that the government is checking the forms for errors, and on the other hand that submitting anything permits additional time to complete the process and get it right.

Dissolution

As we mentioned back in April, the consequences of dissolution are dire. Here are a few:

• The assets of the corporation are lost
• The corporation’s loans are breached because the corporation is no longer a legal entity
• The corporation’s monies and bank accounts are lost

Essentially, the corporation no longer exists and it legally cannot hold title or funds. Yes the corporation can be revived (for a fee) and although the organization would likely get to reclaim its name, the organization would be unlikely to recover its assets or re-enter loan agreements without restarting them anew. It would be an inexcusable and unfathomable embarrassment and challenge if an NSO had to dissolve.

We can help

We have had to move fast to help some federally-incorporated organizations transition and it is still possible to start and complete the process over the next two months. Also if your organization has received a message back from the government identifying an area of non-compliance with the submitted forms we can help you untangle that as well. The window for a successful and pain-free transition is still open - but it is closing fast! KRL@sportlaw.ca