New Canada Not-for-profit Corporations Act

The new Canada Not-for-Profit Corporations Act came into force October 17, 2011. All federally incorporated not-for-profit corporations must continue into this new Act by October 17, 2014. Failure to continue the not-for-profit corporation will result in dissolution.

The new Canada Not-for-Profit Corporations Act makes positive improvements to the not-for-profit sector particularly in the areas of powers, corporate governance and accountability. Under the old regime, a not-for-profit corporation only had the powers expressly granted to it under its Letters Patent. Under the new Canada Not-for-Profit Corporations Act, a not-for-profit corporation has the powers of a natural person subject only to restrictions in the articles, thus opening opportunities for non-for-profit to engage in activities that might previously have been unable to pursue. Corporate governance has been brought more into line with those applicable to the for-profit sector. Accountability has been made more rational, with greater accountability to members including the right of members to access oppression remedies, and with the mandated requirement for audited financial statements being eliminated for some lower revenue corporations.

The transition by a not-for-profit corporation from the old act to the new Canada Not-for-Profit Corporations Act is made by a continuance. A continuance is filing of Articles of Continuance, along with the new by-laws with the Director for the Canada Not-for-Profit Corporations Act. The Articles of Continuance and new by-laws must be approved by the members by special resolution prior to submission. While there is no fee for the continuance, the process is not trivial and requires significant changes to the by-laws. The good news is that in many cases the by-laws may be significantly reduced because the default provisions of the new Act may be relied upon. A clear understanding of the new Canada Not-for-Profit Corporations Act is required in order to appropriately formulate the new by-laws to preserve the intentions of the members.

We represent the interests of a number of not-for-profit corporations located in Ottawa and elsewhere in the Province of Ontario.

Frequently Asked Questions

Should I incorporate my medical practice as a professional corporation?

I am a practicing family physician with two young children. My accountant mentioned the idea of incorporating my practice into a professional corporation. How does this work?

As a physician, you are generally permitted to create a physician corporation. The Ontario Business Corporations Act (OBCA) and the Regulated Health Professions Act govern physician corporations. Once incorporated, a Certificate of Authorization from the College of Physicians and Surgeons of Ontario (CPSO) is required for your professional corporation to practice medicine in Ontario.

There may be significant benefits to incorporation arising from income splitting through the payment of dividends to adult shareholders and the deferral of tax through retention of excess cash and investing in the corporation.

A professional corporation carries on the practice of medicine with you as both a shareholder and employee of your corporation. It is important to note that under the provisions of the OBCA, a professional corporation does not shield the shareholders from professional liability as acts of a professional corporation are deemed to be acts of the shareholders. Non-voting shareholders who are not members of the CPSO are exempted from any professional liability.

All voting shares of the corporation must be held by a member of the CPSO. Non-voting shares can be held by a parent, spouse or child (and minor children must have their shares held in trust). Professional corporations are only permitted to carry on the practice of the profession or activities that are related to or ancillary to the profession. Furthermore, a professional corporation is permitted to invest its surplus funds in passive investments.

A Lawyer with experience in incorporating professionals can help you set up your professional corporation such that your objectives may be realized.

Should a lawyer review your small business contracts?

I run a small business and I have several small contracts that I am currently in the process of negotiating. Are these worth bringing to a Lawyer for review?

‍Depending on the type of contract, there are a number of areas a Lawyer’s expertise can provide guidance, including contracts relating to employment or contractor relationships, borrowing and secured transactions, equipment leases, and other commercial agreements. Simply because a document is short, this does not mean there aren’t important clauses or terms that require careful consideration.

Contracts often contain important clauses relating to the limitation of liability, indemnification, and the waiver of important legal rights. Such clauses can have legal and financial implications for you or your business down the road. Understanding these implications is crucial and one of the services a Lawyer can provide.

A Lawyer can meet with you for a short consultation in order to review your contractual document and answer any questions you might have. By communicating to the Lawyer your expectations of the proposed contract, a Lawyer can work with you to achieve your goals as well as highlight and help you understand risks and liabilities that you or your business may be taking on as part of the contract.

If you have some questions about a contract and feel you may benefit from meeting with a Lawyer call and ask to set up a meeting.

How do partnerships work and how are they setup?

My friend and I have an idea for a business and we are considering forming a partnership. How does a partnership work and how should one be setup?

Whether or not a partnership exists is a fundamentally a legal question. Ontario’s Partnerships Act says that a relationship between “persons carrying on a business in common with a view to profit” is a partnership within the meaning of the Act. This is important because it means that whether or not you declare yourself to be a partnership, legally speaking, you might be a partnership anyways, whether you intended to or not.

A partnership can exist between you and your friend personally, or even as between two corporations controlled by each of you. Unlike a corporation, however, a partnership has no separate legal existence from the partners themselves and each partner has the power to bind the partnership and each partner is jointly liable for any obligations incurred on behalf of the firm. This is why, when deciding to form a partnership, a partnership agreement can be very practical.

A partnership agreement sets out the rights and obligations for partners in the partnership and provides for what should happen in circumstances of partnership incapacity, retirement or death. Without one, the Partnerships Act will provide for what happens to the partnership in these circumstances, often with unintended results. A partnership agreement can also provide mechanisms for the distribution of partnership income and a process for bringing additional persons into the partnership. Creating a partnership agreement that meets your goals with the help of a commercial Lawyer ensures that your partnership will continue in a manner of your design.