Terrance S. Carter, B.A., LL.B. - Editor
WARDLAW, MULLIN, CARTER, THWAITES & WARD©

Barristers, Solicitors & Trade-Mark Agents February 1997

1. ORGANIZE YOUR THOUGHTS - REVIEW AND UPGRADE THE CHURCH CONSTITUTION
 

A. Essential For A Church To Have A Written Constitution
 

avoids infighting, misunderstandings and lawsuits

required by Revenue Canada for charitable status
 

B. Develop A Written Procedure For Biblical Discipline And Include It As Part Of The Church Constitution
 

(See CCCC Bulletin on Discipline No. 2 - 1992 and No. 2 - 1993)
 

C. Include An Indemnification Provision For Church Leaders As Part Of The Church Constitution
 

(See CCCC Book on Incorporation of Churches)
 

D. Set Out An Explanation Of Qualification For Membership And The Expectations Placed Upon Church Members
 

E. Have The Church Constitution Authorize The Implementation Of Policy Statements On Practical Applications Of Biblical Principals And Christian Conduct
 

(See CCCC Bulletin on Discipline No. 2 - 1992 and No. 2 - 1993)
 

F. Provide A Definition Section To Simplify Terminology In The Church Constitution To Avoid Confusion And Misunderstanding
 

G. Identify And Avoid Conflicts Of Interest Involving Remuneration Of Directors
 

(See CCCC Bulletin on Remuneration No. 3 - 1991 and No. 4 - 1993)
 

H. Precedents Are Useful But Need To Be Carefully Reviewed And Customized
 

I. Need To Educate The Church Board On Its Constitution And Related Matters By Developing A Board Binder Including All Constitutional Documents
 

2. RAISE THE SHIELD - CONSIDER CHURCH INCORPORATION
 

(See CCCC Book on Incorporation of Churches)
 

A. The Advantages Of Church Incorporation
 

limited liability protection for members of the church

perpetual existence

stability in ongoing corporate structure

indemnification of church leaders

maintain and defend legal actions in the name of the corporation

purchase, sell, mortgage and lease land and buildings in the name of the church corporation

avoidance of anachronisms of the Religious Organization Lands Act for unincorporated churches

insurance is in the name of the church corporation as opposed to trustees who would otherwise not be recovered

federal incorporation will permit the church to obtain an Internet Domain Name using the designation of ".ca"
 

B. Disadvantages Of Church Incorporation
 

incorporation is more costly than organizing as an unincorporated church

corporate filings must be maintained for change of directors, officers and head office

proper corporate minutes of meetings of members and directors must be kept

drafting an effective general operating by-law for a church corporation is often challenging

the ability to lease surplus land for 40 years pursuant to the Religious Organization Lands Act is not available for an incorporated church
 

C. Do It Right Or Don't Do It At All
 

a deficient general operating by-law and letters patent for church corporation can be more problematic than not incorporating at all

the membership, assets and liability of the unincorporated church must be transferred to the incorporated church

charitable registration number must be transferred

remaining unincorporated church association must be formally dissolved
 
 
 

3. KEEP YOUR HOME IN ORDER - MAINTAINING THE CORPORATE STRUCTURE
 

(See "Legal Risk Management Checklist" in Church and the Law Update No. 7)
 

A. Avoid Failure To File Government Forms And Notices
 
 
 

forms required under the Ontario Corporation Information Act for change of directors, officers and head office

forms required under the Canada Corporations Act on an annual basis

corporate changes required for change of head office (both Federal and Provincial corporations)

corporate changes required for variation in number of directors (for Ontario corporations)
 

B. Avoid Having To Reconstruct Corporate Records By Maintaining Up To Date Corporate Minutes And Filings
 

C. Avoid Unauthorized "Ultra Vires" Activity By Ensuring That Corporate Activities Fall Within The Objects In The Letters Patent
 

D. Draft A General Operating By-law That Reflects The Personality Of The Church Instead Of Utilizing A "Boiler Plate" By-Law
 

E. Need To Educate Church Staff And Key Members On How To Operate The Church As A Corporation
 

F. Need To Develop A Board Binder To Consist Of
 

letters patent

general operating by-law

policy statements

a legal explanation of the duties and responsibilities of directors of a charitable corporation
 

G. Avoid Improper Use Of Corporate Name
 

ensure that the full corporate name is used on all documents

ensure that ministry names are registered under the Business Name Act of Ontario
 
 
 

4. TRANSFER HIGH RISK MINISTRIES TO SEPARATE CORPORATIONS
 

(See 1995 and 1996 Church and The Law Conference Tapes on Multiple Corporations)
 

A. Identify High Risk Ministries
 

education - i.e., daycare centres, elementary schools, high schools

youth ministries - i.e., camps and outdoor ministry programs

counselling - i.e., crisis pregnancies, spiritual/emotional counselling, recovery from sexual abuse
 

B. Advantages Of Utilizing Associated Corporations
 

diverts liability of high risk ministries away from assets of the church

additional corporate structure allows more people to be involved in associated ministries
 

the requirement for a separate board of directors can reduce the amount of work of the church board
 

C. Essential To Indirectly Control Associated Church Corporations
 

include statement of faith of Church in the letters patent of associated corporation

ensure that upon dissolution any remaining assets revert to the church

require church approval and membership as a qualification to become either a director or member of the associated corporation

require unanimous approval by board members of associated corporations before an amendment can be made to the letters patent

maintain "closed membership" of associated corporation to avoid takeover by special interest group
 
 
 

5. KNOW WHAT YOU STAND FOR - DEVELOP AND IMPLEMENT CHURCH POLICY STATEMENTS
 

A. Purpose Of Church Policy Statements
 

to articulate expectations of the church

to avoid claims of discrimination

to avoid complaints to the Ontario Human Rights Commission
 

B. Cross Reference Policy Statements To Authority In The Church Constitution
 

C. Develop A Policy Statement To Avoid Physical And Sexual Abuse Of Children
 

(See Church and the Law Update No. 2, No. 5, No. 8 and No. 9)
 

implementing comprehensive screening process with application form and references

require mandatory criminal record checks

develop procedures to minimize risks to children

establish reporting requirements reflecting provincial child welfare legislation
 

D. Policy Statements And Lifestyle Expectations
 

(See Church and the Law Update No. 6)
 

lifestyle expectation policy statement should only be implemented if the church is prepared to follow through with discipline

need to carefully define what lifestyle expectations are
 

E. Examples Of Other Important Areas Of Policy Statements
 

counseling

sexual harassment

divorce and remarriage
 
 
 
 
 
 
 
 
 

6. WHAT'S IN A NAME - PROTECTING MINISTRY GOODWILL AND TRADE-MARK RIGHTS
 

A. The Name Of A Church Or Christian Ministry Is One Of Its Most Important Assets
 

B. Church Or Christian Ministry Names Are Often A Wasting Asset If They Are Not Properly Protected
 

C. Need To Be Pro-Active In Protecting Church Or Christian Ministry Names And Trade-Marks
 

D. Registration Of A Corporate Name Or A Business Name Does Not By Itself Provide Adequate Trade-Mark Protection
 

E. The Advantages Of Trade-Mark Registration
 

it establishes presumption of ownership of the trade-mark

trade-mark registration is effective throughout Canada instead of only in the local geographic area

trade-mark registration provides a monopoly to use the trade-mark in relation to its stated goods or services

trade-mark registration can be enforced across Canada
 

F. Enhanced Protection Available For Section 9 Official Marks For Charities
 

section 9 Official Marks apply to all wares and services

example of the Canadian Olympic symbols and Anne of Green Gables names (i.e., Official Mark for "Gilbert Blythe")

must establish that the charity is a public authority by showing

* the charity is involved in pursuing a public benefit instead of a private interest

* there is a sufficient degree of government control, i.e., ongoing control by Revenue Canada and the Public Guardian and Trustees Office
 

G. Acquisition And Protection Of Internet Domain Names
 

there are a limited number of Internet Domain Names available

a church or christian ministry interested in obtaining an Internet Domain Name should do so sooner as oppose to later

before obtaining an Internet Domain Name it is advisable to obtain a trade-mark search to avoid trade-mark infringement

an Internet Domain Name is regulated by The Internic Domain Name Dispute Policy effective as of September of 1996 as well as trade-mark infringement rules

if Internet Domain Name is not available in one form, i.e., "newlife.org", then there may be other alternatives available, i.e., "newlife.com" or "newlife.ca"

need to protect and insulate Internet Domain Name by obtaining a trade-mark registration either in Canada or in some other jurisdiction before a challenge is made to the Domain Name

a challenge can be made to an existing Domain Name by obtaining a Trade-Mark Registered with a date of first usage prior to the activation date of the existing Domain Name
 
 
 

7. AVOIDING LIABILITY FROM THIRD PARTY USAGE OF FACULTIES
 

A. Church Insurance Will Not Normally Cover Third Party Usage Of Church Facilities Unless There Is Written Disclosure And Endorsement By Insurance Company
 

B. Third Parties Using Church Facilities Need To Provide Evidence Of Insurance With Church Shown As Named Insurer
 

C. Third Parties Need To Sign Licence Agreement
 

to set out rules for use of church facilities

to require fair market value compensation for use by non-charity

to require indemnification of the church by third party
 
 
 

8. AVOIDING IMPROPER USE OF CHURCH FUNDS
 

A. Improper Transfer To Foreign Charities
 

church can only transfer funds to a "qualified donee"

"qualified donee" includes registered charities, prescribed universities, municipalities, etc.

a foreign charity is not a "qualified donee"

church can only transfer monies to a foreign charity if

* an agency is signed to transfer monies to complete a specific project

* a joint ministry agreement is signed for an ongoing joint ministry
 

B. Excessive Payments To Non-Charities
 

payments to non-charities must reflect fair market value consideration

payments in excess of fair market value based upon a "love gift" to a non-charity would be an unauthorized application of church monies
 

C. Violation Of Revenue Canada Requirements For Acceptable Political Activity
 

D. Using Church Funds To Support Unrelated Business Activities
 
 
 

9. SOWING THE SEED - PLANNED STEWARDSHIP FOR LOCAL CHURCHES
 

A. Need To Develop A Stewardship Policy At The Local Church Level
 

to encourage estate gifts from members

to identify how unrestricted church gifts will be used, i.e., a percentage towards current operations and a percentage on long term endowments

ensure that the correct name of the church is used in wills
 

B. Consider Establishing A Parallel Foundation
 

(See 1996 Church and the Law Seminar)
 

to protect long term estate gifts

to receive existing church assets
 

C. Avoid Breach Of Trust Involving Donor Restricted Trust Funds
 

(See 1995 Church and the Law Seminar)
 

need to distinguish between donor restricted trust funds and board designated funds

donor designated trust funds must be held as segregated trust monies to avoid breach of trust
 
 
 

10. DOWNLOADING RISKS - REVIEW AND UPGRADE INSURANCE POLICIES
 

(See "Legal Risk Management Checklist" in Church and the Law Update No. 7)
 

A. Insurance Is The First Line Of Defense For A Church
 

B. Churches Do Not Understand That Liability Insurance Provides "Occurrence Basis" Not "Claims Made" Coverage
 

C. As A Result Quantum Of Insurance Is Often Inadequate
 

D. Failure To Maintain Historical Records Of Insurance Policies And Insurance Brokers
 

E. Potential Deficiencies In Insurance Coverage
 

i.e., sexual abuse and harassment exclusion

i.e., mental anguish exclusion

i.e., counselling limited to professionals

i.e., limited definition of who are insureds

i.e., limitation on geographic area covered
 

F. Separate Policy Needed For Directors And Officers Coverage
 

DISCLAIMER: This summary of Ten Essential Steps to Protect Churches and Christian Ministries is distributed with the understanding that it does not constitute legal advice or establishing the solicitor/client relationship by way of any information contained herein. The contents are intended for general information purposes only and under no circumstances can be relied upon for legal decision making without first consulting with a lawyer and obtaining a written opinion concerning the specifics of your particular situation.
 
 

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