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Government Announces the Introduction of
Governing Federal Not-for-Profit
Not-for-profit corporations are essential to the
Canadian life and economy. Canada's social and economic life is
significantly influenced by the thousands of diverse non-profit
and volunteer organizations that contribute to the vitality of
communities across Canada. Indeed, many of these organizations
are important governmental partners in the delivery of services
The Government of Canada has long
acknowledged the importance of the "Third Pillar" of the
economy — the not-for-profit and voluntary sectors. In light
of this, the Voluntary Sector Initiative (VSI) was initiated
in 1999 to build a stronger partnership with volunteer and
not-for-profit organizations. One of the government's
commitments to the VSI was to modernize the federal
not-for-profit corporation legislation in order to improve
governance and accountability, eliminate unnecessary
regulation and offer flexibility to meet the sector's needs.
The 2004 Speech from the Throne and the
recent budget also emphasized the importance of
strengthening Canada's social foundations and reaffirmed the
government's commitment to a strong partnership with
community-based organizations to find solutions for problems
such as poverty and social exclusion.
The importance of modernizing the governance
of not-for-profit corporations is widely recognized. The
current legislation, the Canada Corporations Act (CCA),
under which more than 18,000 not-for-profit corporations and
corporations without share capital are incorporated, has
remained largely unchanged since 1917 and lacks modern
governance rules. The new legislation, the Canada
Not-for-Profit Corporations Act, will strengthen and
clarify corporate governance rules for federally
incorporated not-for-profit organizations. It will provide
these organizations with the necessary governance tools to
help ensure their strength and vitality.
Many of the provisions in the proposed
legislation are modelled on corporate law statutes, but are
modified to meet the needs of not-for-profit corporations.
The legislation does not by itself play a determining role
on whether a corporation qualifies as a charity or as a
not-for-profit corporation under the Income Tax Act.
The new Act also follows on the government's
commitment to a smart regulation agenda, which will simplify
and streamline the regulatory burden on enterprises.
The proposed legislation would make it
easier for Canadians to take advantage of the protections
offered by incorporation and the predictability and
accountability offered by a modern corporate governance
framework. In doing so, the law will make the sector more
viable and increase its potential as a governmental partner.
The key elements of the proposed legislation are outlined
Streamlined Incorporation Process:
The "letters patent" system of incorporation is replaced by
an incorporation "as of right" system. This new streamlined
incorporation process is a more efficient and less
burdensome process. It eliminates the current requirement
for Ministerial review of applications for incorporation. It
no longer requires the filing of by-laws and by-law
amendments by the corporation for Ministerial approval.
Instead, incorporation would be granted upon the filing of
specified forms and the payment of a fee. Incorporation
would be faster, especially since the new act allows