June 4th, 1998
EIGHT ESSENTIAL FACTORS TO CONSIDER IN STARTING AND OPERATING A CHARITY
1. What Are The Different Legal Forms For A Charity?
• unincorporated association
• charitable trust
• charitable not-for-profit corporations
• Federal vs. Ontario incorporation
2. What Are The Key Incorporating Documents Required To Incorporate And Operate A Charitable Corporation?
• application for letters patent including charitable objects, investment powers and dissolution clause
• general operating by-law
• initial corporate organization
• initial government filings
• maintaining corporate records
• proper use of corporate name
• proper use of business name other than corporate name
• protecting charitable name and associated goodwill
3. What Are The Different Types Of Charitable Designations Under the Income Tax Act?
• charitable organization
• public charitable foundation
• private charitable foundation
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4. What Are The Key Documents Required To Obtain Charitable Status?
• completed application form for charitable status
• certified copies of organizational documents
• statement of activities
• initial budget
• list of officers and directors
5. What Steps Can Be Taken To Reduce Board Liability?
• understand that board members have responsibilities akin to a trustee
• avoid remuneration of directors
• adopt indemnification by-law for directors and officers
• establishing due diligent procedures
• protecting personal assets of directors
6. What Are The Key Factors In Insurance Coverage?
• maintain a historical record of insurance coverage
• obtain an annual report from the insurance broker on recommended coverage and what is not covered
• review and upgrade property insurance
• review and enhance general liability coverage, particularly for sexual abuse
• secure directors and officers liability coverage
7. How Can Problems Be Avoided With Donor Restricted Charitable Gifts?
• identify when donor restricted charitable gifts constitute special purpose trust funds
• use donor restricted funds only in accordance with applicable restrictions
• failure to comply with restrictions or misuse of funds will result in breach of trust for board members
• possible exposure to investigation under the Charities Accounting Act
• public fundraising campaigns for a specific project should state that surplus funds can be used for general charitable purposes of the charity
• be aware of legal pitfalls in fundraising
8. How To Avoid Pitfalls In Investing Charitable Funds
• review investment powers in the letters patent for the charity
• become familiar with provisions of the Trustee Act as amended
• pending passage of amendments to the Trustee Act, do not invest in mutual funds
• retain an investment advisor for advice on investments
• do not delegate investment decisions to investment advisors
• be present at all board meetings, as much as possible, where investment decisions are being made
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