Business Law, Taxation law

Tick Tock: Deadline to Continue Federal Non-Profits Is Fast-Approaching

Jun 23rd, 2014

By Daniel Frajman

As we have mentioned before, non-profit organizations and registered charities incorporated under Part II of the old Canada Corporations Act have until October 17, 2014 to continue under the new Canada Not-for-profit Corporations Act (the “CNCA”).  Those that have not yet continued should do so as soon as possible, for the following reasons:

-        Industry Canada has stated an intention to begin to issue Notices of Dissolution shortly after October 17, 2014, probably on a rolling basis, to organizations that have not continued by then.  The Notices will likely provide 120 days to respond before the corporate dissolution takes effect;

-        Charities that are subject to corporate dissolution stand to have their charitable status revoked by the Canada Revenue Agency (CRA), and if applicable, by Revenu Québec.  This is because a charity must have a certain legal form (a charity must be a corporation or a trust, or sometimes an unincorporated association or similar form for public charities that are charitable organizations), and a dissolved corporation does not meet this standard.  Charities whose charitable status is revoked owe a “revocation tax” equal to 100% of their assets, which would obviously be a dire consequence of not continuing under the CNCA;

-        Although organizations that are dissolved for not continuing can apply for a certificate of revival, revival could take some time, and for organizations with revoked charitable status there is no guarantee that charitable status will be provided again by the CRA.

Unless a federal non-profit is both dormant and wishes to give up its corporate existence, we suggest, if it has not already done so, that it immediately take the steps to continue (preparation of articles of continuance and new by-laws, approval of those documents by the members and directors, and filing of approved documents with the government).  We have a lot of experience in helping organizations complete this efficiently, and you should not hesitate to contact me.

Daniel Frajman, a shareholder of Spiegel Sohmer, a Montreal law firm, negotiates and drafts contracts for non-taxable non-profit and charitable businesses, and for business and real estate sales and purchases, leases, debt and equity financings, shareholders’ agreements, trusts, and wills.