Corporate Legal Changes in Ontario, Canada
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1 Changes to Not-for-Profit Incorporation Charitable Gaming Conference Canadian Gaming Summit June 24, 2014
2 Presented by Robert B. Hayhoe / Danielle Bush
3 NEW FEDERAL LEGISLATION Canada Not-for-Profit Corporations Act in force October 17, 2011 Replaces Canada Corporations Act Industry Canada
4 FEDERAL CONTINUANCE Must apply for a Certificate of Continuance within 3 years October 17, 2014 Failure to apply to continue may result in the dissolution of the corporation Industry Canada no gov t fee Resources: MT, Industry Canada, CRA website
5 ONTARIO Not-for-Profit Corporations Act, 2010 Royal Assent received October 25, 2010 in force day to be named (2015 or 2016) guides Replaces Corporations Act (Ontario)
6 NON-SHARE CORPORATIONS (ON) No action is required to continue under the ONCA applies to non-share capital corporations in Ontario as of the day the statute is named into force Exceptions: Co-operative Corporations Act; Insurance Corporations - Part V of OCA Specific Exclusions (Professional Association) repeals application of Part III of OCA
7 KEY CONCEPTS 1. Ultra vires discarded 2. New categories of Soliciting Corporation (Fed) and Public Benefit Corporation (ON) 3. Member rights strengthened 4. Class veto right to non-voting members in certain circumstances
8 KEY CONCEPTS 5. Directors standard of care 6. New audit requirements 7. No Ex officio directors (Fed) 8. Special Act Corporations 9. Transition
9 ULTRA VIRES / BEYOND POWER Formerly limited to objects Powers of a natural person Are purposes necessary? registered charity status
10 WHAT IS A SOLICITING CORPORATION (FED)? Federal corporation that receives more than $10,000 during a 3 year period from a government, another soliciting corporation or requested from a person other than member, director, officer or employee or related persons Calculate last day of financial period; effective at AGM
11 WHAT IS A PUBLIC BENEFIT CORPORATION? (ON) A charitable corporation; or A non-charitable corporation that receives more than $10,000 in one financial year from any level of government; or gifts from persons other than members, directors, officers or employees of the corporation Effective at AGM
12 CONSEQUENCES OF PUBLIC BENEFIT CORPORATION OR A SOLICITING CORPORATION Must have at least 3 directors (Fed) Stricter audit requirements On wind-up must distribute assets to a qualified donee (Fed) or to a similar Ontario corporation (ON) Not more than 1/3 of directors can be employees (Fed/ON) or officers (Fed) Federal must file financial statements, prepared by the public accountant, with the Director
13 MEMBER RIGHTS All members are entitled to at least one vote on certain fundamental changes (i.e. amalgamation, continuance to other jurisdiction, extraordinary sale, leases or exchange of property) Separate class votes on issues
14 CHANGES TO MEMBERSHIP CLASSES Consider adding some limits to the articles on class votes/vetos Consider amalgamation of classes Consider limiting who can become a member Use categories of supporters where need nonvoting category
15 DIRECTORS AND OFFICERS STANDARD OF CARE Current Subjective Standard: Person with Same Experience New Acts Objective Standard: Reasonably Prudent Person in Similar Circumstances Due diligence defense available Directors of charities still considered trustees at common law
16 AUDIT REQUIREMENTS Federal thresholds (Soliciting): Audit required unless members pass an unanimous special resolution No audit if gross annual revenues $50,000 or less; or Review engagement where gross annual revenues are between $50,000 and $250,000 Audit is mandatory where gross annual revenues are above $250,000
17 AUDIT REQUIREMENTS Ontario Thresholds (Public Benefit): Audit required unless members pass an extraordinary resolution No audit required where gross annual revenues are less than $100,000 Engagement where gross annual revenues are between $100,000 and $500,000 Audit is mandatory where gross annual revenues are above $500,000
18 CONSIDERATIONS FOR DIRECTORS Federal legislation does not contemplate ex officio directors all must be elected by members, up to 1/3 appointed by other directors Ontario directors no longer required to be members
19 CNCA (FED) Need to apply before October 17, 2014 ONCA (ON) Applies automatically on day to be named 2015?
20 ONTARIO TRANSITION ONCA deems documents into compliance after 3 years
21 CONTINUANCE STEPS 1. Review existing letters patent and by-laws 2. Draft articles of continuance (Fed) or restated articles (ON) 3. Draft new by-laws 4. Obtain the approval of directors and members 5. Submit documents to: Corporations Canada (Federal) Ministry of Governance Services (ON) Canada Revenue Agency Public Guardian and Trustee
22 1. REVIEW EXISTING LETTERS PATENT AND BY-LAWS Changes desired by corporation Changes dictated by CNCA/ONCA Consider objects/purposes and tax status
23 1. MEMBERSHIP ISSUES Consider changes before continuance (Fed) Add limits to the articles on class votes/vetos Dilution of membership voting rights Use categories of supporters where need nonvoting category
24 2. DRAFT ARTICLES OF CONTINUANCE (FED) Form 4031 Articles of Continuance Available on Corporations Canada s website EN.pdf/$FILE/4031-Form-EN.pdf
25 2. DRAFT ARTICLES OF CONTINUANCE (FED) Corporate name, change Current corporate number Province or territory of registered office Number of directors Statement of purpose
26 2. DRAFT ARTICLES OF CONTINUANCE (FED) Restrictions on the activities of the corporation CRA suggestions Classes of members Distribution of property remaining on dissolution Additional provisions
27 2. DRAFT RESTATED ARTICLES (ON) Restated Articles must conform with ONCA if previously deemed into compliance must amend to conform with ONCA
28 3. DRAFT NEW BY-LAWS No ex officio directors (Fed) No delegate voting (ON) Limits on directors terms Many other changes
29 3. DRAFT NEW BY-LAWS (Cont d) Options 1. Default by-law (ON) 2. Federal Model by-law The by-law builder 3. Miller Thomson LLP precedent customized
30 4. OBTAIN THE APPROVAL OF DIRECTORS AND MEMBERS Call meetings under existing by-laws Pass by-law under rules in existing by-law Articles of Continuance (Fed) Special resolution of members & class votes if membership rights impacted Articles of Amendment (ON) Special resolution if fundamental change & class votes if membership rights impacted
31 5. SUBMIT DOCUMENTS (Fed) Corporations Canada: Form 4031 Articles of Continuance NUANS (if name change) Form 4002 Initial Registered Office Address and First Board of Directors By-law (12 months) Fax, or mail
32 5. INFORM PGT/CRA Send a copy of the by-law and certificate to CRA Ontario charities send a copy of the certificate to PGT Send by-law to Industry Canada
33 Added experience. Added clarity. Added value. Follow us... Miller Thomson LLP, All Rights Reserved. All Intellectual Property Rights including copyright in this presentation are owned by Miller Thomson LLP. This presentation may be reproduced and distributed in its entirety provided no alterations are made to the form or content. Any other form of reproduction or distribution requires the prior written consent of Miller Thomson LLP which may be requested from the presenter(s). This presentation is provided as an information service and is a summary of current legal issues. This information is not meant as legal opinion and viewers are cautioned not to act on information provided in this publication without seeking specific legal advice with respect to their unique circumstances.
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