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Canada Not-For-Profit Corporations Act
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Canada Not-For-Profit
Corporations Act

Alberta Government

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Backgrounder

Government Announces the Introduction of New Legislation
Governing Federal Not-for-Profit Corporations

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 and programs.

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 below.

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 electronic filing.

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