As of the end of April, only 3,795—or 22 per cent of approximately 17,000 organizations—have filed for continuance under the new Canada Not-for-profit Corporations Act (CNCA).
That leaves approximately 13,200 organizations that have yet to apply for continuance by the October 17 deadline. All corporations incorporated under Part II of the Canada Corporations Act (CCA) must apply.
Dissolution and revival of non-continued organizations
Failure to continue under the CNCA by the deadline does not lead to automatic dissolution for an organization. Under section 222 of the CNCA, before dissolving an organization, Corporations Canada must first give notice. The notice is generally distributed through a publication available to the public. Unless cause for the contrary has been shown, a certificate of dissolution may be issued after 120 days of giving notice.
Corporations Canada indicated that after the deadline they will begin sending dissolution notices. However, organizations may still file for continuance after having received notice. Corporations Canada is planning to start dissolving organizations that have not filed anything (such as by-laws, supplementary letters patent and/or annual summaries) for the last five years, and many of those organizations may not have filed anything for 10 years. Where possible, organizations that are making an effort to continue will likely not face dissolution.
However, if an organization is dissolved because it does not file for continuance by the deadline, it can be revived and continued in one step. According to section 219 of the CNCA, if an organization is dissolved any interested person may apply to have it revived under the CNCA. This is essentially a two-in-one step process, of which Corporations Canada will be releasing more information soon.
Although a process is available to revive the organization, it would be prudent to file for continuance before the deadline to avoid the time, costs and hassle (let alone embarrassment to stakeholders, donors and the public) that would come with reviving a dissolved organization.
The continuance process
The continuance process involves applying for a certificate by filing articles and an initial notice of registered officers and directors. Organizations should also prepare and adopt new by-laws that comply with the CNCA. Because the rules under the CNCA are very different from the rules under the CCA, what needs to be set out in the articles and by-laws will also be different from what is set out in the organization’s current documents. This process is not as simple as transposing the provisions from current letters patent into the articles and using the same by-laws—the articles need approval from at least a two-thirds resolution of the members and must be filed with Industry Canada. Upon issuance of the certificate of continuance, the articles and the certificate replace the letters patent and any supplementary letters patent. Industry Canada’s approval is no longer necessary for by-laws to take effect; however, an organization must still file its by-laws with Industry Canada within twelve months of adoption by its members.
Registered charities must also file their articles of continuance, certificate of continuance and new by-laws with the Canada Revenue Agency. Charities located in Ontario also need to file their articles and certificate of continuance with the Ontario Public Guardian and Trustee.
Organizations that want to collapse membership classes as part of the continuance process may require approval by class. Sometimes, class approval may be avoided by collapsing membership classes under the CCA at a separate members meeting prior to continuance. With only a few months left before the deadline, time required to hold two separate meetings is running out. As well, registered charities that want to revise their corporate objects should be aware that there is likely no longer sufficient time to obtain pre-approval from the Canada Revenue Agency for the revised objects. They may want to consider the option of first continuing to use the same objects, and then revising the objects afterwards.
Continuing under the CNCA requires preparing articles of continuance and the development of a new CNCA compliant by-law, which may take time to draft and approve. Given the serious consequences associated with failing to continue by the deadline, it is essential that organizations take appropriate steps to continue under the CNCA as soon as possible.
