Ontario’s Not-for-Profit Legislation is Finally Coming into Force

Published on: October 2021 | What's Trending

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Over a decade has passed since Ontario’s Not-for-Profit Corporations Act, 2010 (“ONCA”) received Royal Assent and now it is finally coming into force effective October 19, 2021. The legislation will simplify the process of incorporation for Ontario not-for-profit corporations (“NFPs”), increase accountability, allow some NFPs to use “review engagement” financial statements in place of audited financial statements and enhance member rights. The legislation is coming into force on the same day as Ontario launches its new online business portal, the Ontario Business Registry, which will be used for both NFPs and business corporations to submit incorporation applications, corporate updates, and annual (or other) information filings.

Effective on October 19th, ONCA will apply to all NFPs incorporated under Ontario’s Corporation Act and some NFPs incorporated under other provincial legislation. This includes all NFPs that are registered charities. Charity registration is a designation conferred by the Canada Revenue Agency. It does not relieve a charity of its obligations under provincial incorporation legislation like ONCA.

ONCA will not apply to federally-incorporated NFPs: they continued to be governed by the Canada Not-for-Profit Corporations Act (“CNCA”).

Affected NFPs will have 3 years from the date ONCA is proclaimed to review, update, and file their governing documents with the Ontario government. Updated documents must be submitted by October 18, 2024. The Ontario government has not indicated that they will notify individual NFPs of the need to update their documents. It is therefore incumbent on each NFP to determine whether ONCA applies and ensure it has submitted properly updated documents by the deadline. We suggest that all Ontario NFPs review whether ONCA applies to them and if it does, review their governing documents, even if they recently conducted an update or were recently incorporated. Along with proclaiming ONCA into force, the Ontario government has issued several regulations to the Act which could affect governance documents even if they were recently prepared.

ONCA is largely structured as a default governance regime: many of its provisions apply automatically unless an organization’s governing documents dictate otherwise. However, some requirements are mandatory. For example, all affected NFPs must have at least 3 directors by the end of the review period. This could represent a significant shift for NFPs that have been operating with a sole director.

Registered charities may find that they are already in compliance with some of the mandatory provisions like the required number of directors. However, they should still review their governance documents, particularly since ONCA may be more restrictive in some cases than the Canada Revenue Agency. Also, ONCA and the CNCA are not identical, and Ontario NFPs should not assume they are in compliance if they used the federal by-law builder or other federal resources to structure their governance documents, or if they based their documents from similar federal NFPs.

All affected NFPs should therefore review all their governance documents to ensure compliance. This includes letters patent, any supplementary letters patent, by-laws (including the borrowing by-law if passed separately), and other documents such as committee descriptions, director or member position requirements, and so on as applicable.

Once documents are reviewed, an NFP will be in a better position to determine where changes need to be made. Reviewing the new legislation and current documentation is a necessary first step to moving into compliance with ONCA. Stay informed as more information on the transition becomes available. Pallett Valo LLP is happy to help any NFP in their transition to comply with the new legislation.

The author would like to thank Cassie Wasserman, Student-at-Law, for her assistance with this article.