The document summarizes key aspects of transitioning an association incorporated under the former Canada Corporations Act to the new Canada Not-for-Profit Corporations Act (CNCA). It outlines enhanced members' rights, financial reporting requirements, and directors' duties under the CNCA. It recommends associations establish a transition committee to review documents, choose an approach to revising bylaws to comply with the CNCA, and complete the transition process by the October 2014 deadline to avoid dissolution.

1. Canada Not‐for‐Profit Corporations Act
Canadian Chamber of Commerce
Industry Association Business Roundtable
November 21, 2012
Presented by: Thomas A. Houston and Margot Patterson, Fraser Milner Casgrain LLP
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2. Overview
The Canada Not-for-Profit Corporations Act
and what it means for Associations
Process: a suggested transition guide
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3. 1. The CNCA – what it is, what it does
• A new framework for the incorporation and governance of Associations and
other federal not-for-profits
• A comprehensive rule book, modeled on the Canada Business Corporations
Act, which includes much of the detail previously required in the by-laws
• Replaces Part II of the Canada Corporations Act (1917)
• Entered into force October 17, 2011
• Gives Associations incorporated under Part II of the CCA until October 17,
2014 to transition to the CNCA to avoid dissolution
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4. The CNCA – what it means for Associations
1. Enhanced Members’ Rights
2. Fundamental Changes
3. Financial Accounting and Disclosure:
Soliciting and Non-Soliciting Corporations
4. Directors’ Duties
5. Elimination of Ex Officio Directors
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5. Enhanced Members’ Rights
• Right of members with 5% of votes to requisition a meeting
• Right of voting members to submit notice of a proposal of a
matter to be raised at a members’ meeting
• Class voting, including:
– right of members of a class to special resolution vote
– right of non‐voting members to vote separately from voting members
on matters that impact their rights
• Consider “eliminating” non-voting members
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6. Enhanced Members’ Rights
• Unanimous member agreement (UMA):
– Non-soliciting corporations only
– UMA restricts, in whole or in part, the powers of the directors to
manage, or supervise the activities and affairs of the corporation
– Those given powers under UMA have all the rights, powers,
duties and liabilities of a director of the corporation
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7. Enhanced Members’ Rights
• Remedies to enforce members’ rights:
– court‐ordered investigations (to review alleged
wrongdoing)
– compliance orders (e.g. to share information with
members)
– “business‐style” derivative action and oppression remedies
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8. Fundamental Changes
• Fundamental changes require approval by special resolution (2/3rd
member vote)
• Fundamental changes to Articles or by-laws include:
– name of the corporation
– corporation’s activities
– Corporation’s statement of purpose
– conditions of membership or rights of any class/group of members
– means of giving notice of a members’ meeting to voting members
• Certain fundamental changes affecting a class of members also require a
special resolution of that class
– e.g. reclassifying or canceling class, changing membership conditions
• A director or voting member may propose a fundamental change
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9. Financial Accounting & Disclosure
Soliciting or Non‐Soliciting Corporation?
• “Soliciting corporation”
– receives more than $10,000 in a financial year, in the form of:
– third party donations, government grants, financial assistance, or
donations from another soliciting corporation
• “Soliciting corporation” status lasts for three years
• “Non‐soliciting corporation” ≠ soliciting corporation
• Level of corporate gross revenues relevant to review and
reporting
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10. Financial Accounting & Disclosure
Corporation Type / Revenues Defaults, Options for Financial Review
Soliciting corporation < $50,000 Members may unanimously vote not
Non‐soliciting corporation < $1M to appoint a public accountant; can have
its financial statements reviewed or
audited.
Must have a financial review by a
Soliciting corporation between $50,000 public accountant; can have its financial
and $250,000 statements reviewed or audited.
Must have a financial review by a
Soliciting corporation > $250,000 public accountant; must have its
Non‐soliciting corporation > $1M financial statements audited.
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11. Directors’ Duties
• Directors are subject to the same duty and standard of care as
directors of business corporations:
an explicit duty to act honestly and in good faith,
in the best interests of the corporation,
and to exercise the care, diligence and skill of
a reasonably prudent person in similar circumstances
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12. Elimination of Ex Officio Directors
• CNCA does not permit ex officio directors
• Does your Association Board include ex officio directors
representing: regions? industry sectors? other?
• Work-around:
– create a class of member with the right to appoint a single
director for that constituency (e.g. “Ontario” or
“manufacturing”)
– however - consider class rights
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13. 2. Process: A suggested transition guide
1. Designate a Committee to work with Management and Legal
Counsel
• Governance, Executive, Ad Hoc
2. Review current Letters Patent and By-laws
• Review objects in Letters Patent to determine if they remain
current
• Identify by-law provisions which may have been problematic in the
past
• Consider adding a provision to require nominations for directors
to be submitted prior to AGM
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14. Process: A suggested transition guide
3. In determining the best approach to revising your by-laws, consider the
following questions:
• Has the Association recently undergone a governance review? If not, good
opportunity to do so
• Does the Association refer to its by-laws as a “rule book”?
• How complex are the Association’s corporate governance structure and
processes?
4. Choose your option:
• Make only the minimum necessary changes to adapt existing by-law to
CNCA
• Adopt a short by-law, addressing only the few provisions that must be
included
• Adopt a comprehensive by-law, modeled on CNCA, to act as “rule book”
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15. Process: A brief transition guide
1. Prepare Articles of Continuance (transition)
2. Prepare revised by‐laws
3. Obtain Board and Member approval
4. File with Industry Canada
• the Articles of Continuance (transition)
• Registered Office Address
• “First” Board of Directors
• amended by‐laws (approval of Industry Canada not required)
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16. Ongoing Corporate Obligations
1. Elections
• Minimum of 1 Director (non-soliciting corporation)
• Minimum of 3 Directors (soliciting corporation), 2 of whom must
not be officers or employees of the corporation
• Directors can elect up to 1/3 of Board after AGM (if articles
provide)
2. Meetings
• Meetings of Directors or Members can now be conducted by
unanimous written resolution
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17. Ongoing Corporate Obligations
3. Reporting to Industry Canada
• New, simpler reporting: simply file copies of by‐laws, no
review/approval process
• Key ongoing filing requirements:
– annual return
– changes in directors and registered office (15 days)
– articles (and amendments)
– by‐laws (and amendments)
– financial statements and accountant’s report (soliciting
corporations)
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18. Thank You. Questions?
Fraser Milner Casgrain LLP
Thomas A. Houston (613) 783-9611 tom.houston@fmc-law.com
Margot Patterson (613) 783-9693 margot.patterson@fmc-law.com