Monday, March 09, 2009

Bill C-4: Proposed Non-Profit Reform

Bill C-4 is coming! In January, the government proposed a bill aimed at reforming the way non-profits and associations incorporate. There are significant changes to how organizations incorporate initially and operate daily. Are you aware of Bill C-4’s impact on your organization?

Non-profit organizations (NPOs) in Canada are created and sustained by an organizational motivation of a common goal. As a result, NPOs intend to devote less time on organizational structure than reaching their goal. The truth is an organization cannot be successful without a solid organizational framework. The government of Canada has proposed a bill that will amend the structures of all NPOs big and small.

The reintroduction of the Canada Not for Profit Corporations Act risks affecting everyone of Canada's NPOs day-to-day operations. Bill C-4, reintroduced by Secretary of State (Small Business and Tourism) the Honourable Diane Ablonczy, aims to change the way in which NPOs are governed. For NPOs that require funding and donations to alleviate operations costs, they will be subject to similar standards as for-profit corporations. The act aims to increase fiscal accountability, clarify directors’ liabilities and responsibilities, and clearly define members’ rights. For NPOs, this means increased accounting, record-keeping procedures, and general prudence. The changes in Bill C-4 run deep, but can be tactfully navigated with the consul of an informed not for profit professional.

Bill C-4 Resilience

Barring any disruption of parliament, this bill is sure to pass with few amendments. Once passed, existing non-profits will be forced to comply within three (3) years or face dissolution!

The most recent bill is the reincarnation of two previous attempts to pass virtually identical bills. Both Bill C-21 introduced by Liberal Industry Minister, David Emerson in 2004 and Bill C-62 introduced by Secretary of State (Small Business and Tourism), Diane Ablonczy in 2008 died shortly after first reading, due to the dissolution of parliament.

Notable Changes

New organizations, as well as existing organizations, will be affected by these changes. It is imperative that directors and officers familiarize themselves with the proposed changes in order to prepare preemptive modifications to their organizations.

Essentially, the bill attempts to modernize the corporate framework under which Canadian not for profit organizations are governed. It is clear that the current process of incorporation is tediously long and time consuming. This method of federal incorporation regulates NPOs by reviewing, accepting and approving organizational by-laws. Industry Canada will no longer be involved in this process, transferring the majority of responsibility onto the board of directors and officers of the organization.

Why the Change?

It’s about time. Currently, Canadian NPOs are regulated by sections II and III of the Canada Corporate Act, with the exception of few special circumstances governed under section IV. These sections concerning NPOs have had no significant changes since 1917. The proposed changes will revolutionize the way most NPOs do business.

Bill C-4 at a glance

  • Incorporation as of right, contrary to current “letters patent” method.

  • Definition of soliciting and non-soliciting corporations relative to annual revenues.

  • Appointment of a federal Director to act as public registrar.

  • All corporations will be required to disclose a statement of purpose or mission statement.

  • Increased organizational accountability and transparency, similar to publicly-traded corporations.

  • Clarification of directors’ responsibilities/liabilities.

  • Definition of members’ rights.

  • _________________________________
    Mark Buzan is Principal of Action Strategies, a GR Consultancy for non-profits. If you have questions on how Bill C-4 impacts on your organization, please contact him. Subscribe now to his Lobbying tips newsletter at www.actionstrategies.ca/Action_Strategies/Newsletter.html


    Anonymous said...

    On page 2 of the Legislative Summary of bill c-4, it refers to the canada coproations act "which currently regulates federally incorporated NPCs..."

    are ALL NPs federally incorporated?

    助けて~! said...
    This comment has been removed by a blog administrator.
    精神年齢 said...
    This comment has been removed by a blog administrator.
    Mark Buzan said...

    The truth is, no, not all NPOs are federally incorporated. That being said, quite a number are and those who operate on a national basis or with a national mandate will need to pay attention to this important piece of legislation.

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