by Dev User | Jun 25, 2020 | Uncategorized
June 2020 Charity & NFP Law Update
As a result of the 2019 Federal Budget, amendments were introduced to the ITA to support local Canadian journalism through a new category of qualified donees for registered journalism organizations (“RJOs”) effective as of January 1, 2020. Since then, the CRA has released a guidance to provide further clarity on the ITA provisions supporting Canadian journalism, as discussed in greater detail in Charity & NFP Law Bulletin No. 459. More recently, the Department of Finance released Legislative Proposals Relating to the Income Tax Act (Support for Canadian Journalism) and Explanatory Notes (the “Proposals”) on April 14, 2020, proposing additional amendments to ITA to further clarify the journalism provisions.
The Proposals will amend the definition of a QCJO to require organizations to be “primarily engaged in the production of original news content.” Further, given that a prerequisite of becoming a “qualifying journalism organization” is that the organization must first be a QCJO, the “primarily” requirement will be removed from the requirement that a qualifying journalism organization be “primarily engaged in the production of original written news content,” likely to remove duplication. Similarly, the definition of “digital news subscription”, for which a tax credit is available, will be amended by removing a requirement that a QCJO providing the subscription be primarily engaged in the production of written news content, and instead requiring that content provided under the subscription be primarily original written news. Further, QCJOs will be required to inform subscribers when their digital news subscriptions cease to qualify for the tax credit.
Additionally, the Proposals will also amend definitions under subsection 125.6(1) of the ITA concerning the labour tax credit. Of particular note, these amendments will clarify that qualifying journalism organizations cannot hold a “licence” as defined in subsection 2(1) of the Broadcasting Act. Further, the amount of the labour tax credit available to a qualifying journalism organization will be reduced based on any funding that the organization receives from the Aid to Publishers component of the Canada Periodical Fund. However, the Proposals will also expand eligibility of the tax credit to members of a qualifying journalism organization that is a partnership. Currently, the labour tax credit cannot be allocated to members of a partnership.
A new section 168.1 has also been proposed, and will add rules concerning timing of the designation and revocation of a QCJO’s status. Organizations that apply for designation as a QCJO will generally be deemed to have become designated at the time of application. The section also provides the Minister of National Revenue with the power to revoke a QCJO’s designation.
The Proposals have not been enacted yet, and will first need to be drafted into a bill and passed before they can be brought into force. It remains to be seen if and when this will happen. In the meantime, Canadian journalism organizations remain subject to the ITA provisions as proposed in the 2019 Federal Budget and passed through Bill C-97.
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by Dev User | Jun 25, 2020 | Uncategorized
June 2020 Charity & NFP Law Update
The World Intellectual Property Organization Arbitration and Mediation Centre released a decision under the Uniform Domain-Name Dispute-Resolution Policy (“UDRP”) on April 16, 2020, concerning the transfer of a disputed domain name. The domain name, berrysweet.com, had been previously owned by Berry Fresh LLC (“Berry Fresh”) who, in addition, also owned a trademark registration for BERRY SWEET in Canada and the US. The issue arose when Berry Fresh inadvertently allowed the domain name registration to lapse through a billing miscommunication. Subsequently, a third party purchased the domain name after Berry Fresh’s registration had expired.
In an attempt to recover the domain name, Berry Fresh filed a complaint under the UDRP. In order to prevail in a domain name dispute under the UDRP, the complainant must satisfy the following three requirements:
- the domain name registered is identical or confusingly similar to a trademark or service mark in which the complainant has rights; and
- the domain name owner has no rights or legitimate interests in respect of the domain name; and
- the domain name has been registered and is being used in bad faith.
In its complaint, Berry Fresh argued that it had rights to the mark BERRY SWEET by virtue of its trademark registration and its commercial use of the mark since 2007. It further claimed that the domain name was identical to its BERRY SWEET trademark registration and that the new owner of the domain name had no rights or legitimate interests in the disputed domain name. It also argued that the new owner registered the domain name in bad faith and had not used the domain name for an active website, instead demanding a seven-figure amount for the disputed domain name.
The administrative panel found that Berry Fresh owned a trademark registration for BERRY SWEET and had established use of the mark for the sale of blackberries, pursuant to the UDRP. Further, it established that the disputed domain name was identical to or confusingly similar with its mark. However, in accordance with the UDRP Berry Fresh was also required to establish that the domain name was registered and used in bad faith by the new owner. On this point, the administrative panel found insufficient evidence that the new domain name owner had registered the domain name to take advantage of Berry Fresh or its rights in the BERRY SWEET mark. As such, Berry Fresh’s complaint failed, and it was unable to recover the domain name from the new owner.
This case is an important reminder to charities and NFPs of the importance in actively registering and renewing domain name registrations, and ensuring that renewal deadlines do not inadvertently lapse. Charities and NFPs should register as many relevant domain names as possible in order to prevent them from being registered by third parties. Even where the domain name is identical to an existing registered trademark owned by the charity or NFP, it is difficult to regain possession of the domain name once it has been registered by a third party.
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by Dev User | Jun 25, 2020 | Uncategorized
June 2020 Charity & NFP Law Update
The Ontario Superior Court of Justice released its decision in a well-publicised case, Karahalios v Conservative Party of Canada, on May 20, 2020. While the crux of this case revolves around the disqualification of Mr. Jim Karahalios from the federal Conservative Party’s leadership contest as a result of allegedly making racist comments, in arriving at its decision, the court considered its jurisdiction to intervene in the affairs of unincorporated associations. In doing so, it referenced and upheld the Supreme Court of Canada’s decision in Highwood Congregation of Jehovah’s Witness (Judicial Committee) v Wall (“Wall”), discussed in Church Law Bulletin No. 54.
Mr. Karahalios had been a candidate in the Conservative Party’s upcoming leadership contest. A complaint had been filed against him with the Conservative Party’s Chief Returning Officer (“CRO”) for allegedly making Islamophobic remarks. After an investigation by the CRO, a decision was made to impose a reporting obligation and financial penalty on Mr. Karahalios. He appealed the CRO’s decision to the Dispute Resolution Appeal Committee (“DRAC”), and the DRAC subsequently disqualified him entirely from the leadership contest.
Mr. Karahalios then brought the matter to court, seeking to have his disqualification set aside. As a private unincorporated association, the Conservative Party argued, in part, that the court did not have the jurisdiction to review the decision. In this regard, the court noted that, in order for it to have jurisdiction to intervene in private unincorporated associations’ affairs, a legal right founded in tort, contract, restitution, or statute must be at stake.
The court indicated that it did not have the jurisdiction to review the substantive merits of a private unincorporated association’s decision, and that its role in reviewing the decision was “very much circumscribed.” It stated that written constitutions or by-laws of unincorporated associations constituted a “contractual relationship setting out the rights and obligations of the unincorporated association and its members.” The court therefore had jurisdiction to review decisions and procedures as a matter of contractual interpretation, and to enforce the contractual rights between the association and it members, as well as between the members themselves. However, this jurisdiction is limited to where “a significant private law right or interest is involved,” and is further limited to whether the association’s decision was carried out in accordance with the contractual terms and with the principles of natural justice (i.e. procedural fairness) rather than a review of the merits of the association’s conduct or decision.
Although the Conservative Party argued that its governing documents contained a provision stating that the Conservative Party’s decisions were final and binding without appeal (i.e. a “finality clause”), the court retained a “limited jurisdiction to review the procedural integrity of the association’s action,” and that notwithstanding the finality clause, the court had jurisdiction to determine whether the Conservative Party acted in accordance with its rules, the principles of natural justice, and whether the decision was bona fide. In this regard, the court indicated that the Conservative Party’s argument “would lead to the absurd conclusion that unincorporated associations governed by contract are beyond the rule of law and the court’s normative contract law jurisdiction and access to the courts would be ousted,” and that Wall did not support “that patently unfair and unjust interpretation of a contract or of the law that governs associations operating in the private sector.” The court therefore found the Conservative Party’s decision was subject to private law review.
As a matter of contractual interpretation, the court ultimately found that the DRAC did not have the authority to disqualify Mr. Karahalios, but that the CRO had the authority to make its ruling to impose a reporting obligation and financial penalty on Mr. Karahalios. It therefore set aside the DRAC’s decision, reinstated Mr. Karahalios, and ordered the CRO’s decision to be restored.
This decision upholds the Wall decision, and is a helpful reminder of the limited jurisdiction that courts have to review decisions and actions taken by unincorporated associations. However, despite this limited jurisdiction, it is clear that unincorporated associations must abide by their governing documents and act in a procedurally fair manner, and further that the court may have jurisdiction over matters even where a finality clause exists.
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by Dev User | Jun 25, 2020 | Uncategorized
June 2020 Charity & NFP Law Update
Ontario Releases Proposed Regulations for Corporate Legislation
In another step towards bringing the Ontario Not-For-Profit Corporations Act, 2010 (“ONCA”) into force, Ontario’s Ministry of Government and Consumer Services published Proposed regulations to support proclamation of the Not-for-Profit Corporations Act, 2010 (the “Draft ONCA Regulations”) on June 5, 2020.
Two draft regulations were released – a Draft General Regulation and a Draft Corporations Sole Regulation. The Draft General Regulation contains provisions related to technical matters under the ONCA, including setting out standards and requirements for financial statements, corporate registers, and proxy form; setting out what information that must be in writing (such as directors’ or auditors’ resignations, and members’ consent to the dissolution of a corporation).
The Draft Corporations Sole Regulation lists 55 provisions under the ONCA that apply to corporations sole, with applicable modifications. A corporation sole is a corporation constituted in a single person who, in right of some office or function, has corporate status. It is created by special legislation. Unlike other not-for-profit corporations, corporations sole do not have boards of directors, officers, or members. Examples of ONCA provisions proposed to apply to corporations sole include: section 5 regarding conflict with other law; section 15 regarding the corporation having the capacity, the rights, powers and privileges of a natural person); section 46(1), (6) and (7)(a) regarding indemnification of directors and officers, and ability to purchase and maintain directors’ and officers’ insurance, subject to meeting the requirements of the Ontario Charities Accounting Act by charitable corporations; and section 77 regarding requirements for annual financial reviews. The Draft Corporations Sole Regulation also defines the individual whose office is the corporation sole as being the “office holder”. Where certain sections of the ONCA refer to directors and officers, modifications have been made for those sections to instead apply to office holders in the case of corporations sole. Examples of these modified sections include section 40 liability to employees for wages; subsection 46(1) and (6) indemnification and insurance provisions; sections 70, 72, 75, 78 and 79 audit provisions; and remedy provisions under sections 182 and 191.
In addition to the Draft ONCA Regulations, the Ministry of Government and Consumer Services also released Proposed regulations to support proclamation of schedules, 6, 7 and 8 of the Cutting Unnecessary Red Tape Act, 2017 and the proclamation of the Not-For-Profit Corporations Act, 2010 (the “Draft Red Tape Regulations”) on June 5, 2020. The Draft Red Tape Regulations include 11 separate draft regulations under the ONCA, Business Corporations Act, Business Names Act, Corporations Act, Corporations Information Act, Extra-provincial Corporations Act, and Limited Partnerships Act. These draft regulations contain provisions to accommodate electronic filing; rules governing names and naming conventions; the content, form and filing of articles, applications, and other documents, both in paper format and electronically; required supporting documents for articles and applications filed under the respective legislation; and removing requirements for manual signatures.
British Columbia Introduces Benefit Companies as of June 30, 2020
As reported in the May 2019 Charity & NFP Law Update, British Columbia’s Bill M 209, Business Corporations Amendments Act (No. 2), 2019 (“Bill M 209”) received Royal Assent on May 16, 2019, which would include a new Part 2.3 in the BC Business Corporations Act introducing “benefit companies” as a new category of corporation. One year after its Assent, Bill M 209 was proclaimed to come into force on June 30, 2020.
As previously reviewed, benefit companies pursue social and environmental goals, rather than just profit, and must include a “benefit statement” in their articles identifying the company as a benefit company that is “committed to conducting its business in a responsible and sustainable manner and promoting one or more public benefits.”
While BC and Nova Scotia have permitted other forms of social enterprises, i.e. community contribution companies and community interest companies respectively, once Part 2.3 of the BC Business Corporations Act is brought into force on June 30, 2020, BC will be the first jurisdiction in Canada to provide a legal framework for benefit companies to pursue social and environmental goals, rather than just profit.
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by Dev User | Jun 25, 2020 | Uncategorized
Charity & NFP Law Bulletin No. 476
The COVID-19 pandemic has had a yet undetermined, but significant, impact on charities and NFPs. As the provinces, and Ontario in particular, move to new stages of the reaction to COVID-19, much of the initial emergency financial assistance and relief will likely soon come to an end. It is yet unknown what provincial and federal governments will do during these next stages, but it is almost certain that there will be ‘growing pains’ as both society and the economy start to slowly gear back up. Charities and NFPs, as well as businesses, will all need to carefully review how to mitigate the impact of COVID-19 on their organizations during this period. However, with proactive strategy and legal assistance, it is possible to minimize the risks and potential losses. This Bulletin reviews some of the strategies in this regard that charities and NFPs may want to consider in conjunction with their legal counsel, and provides an update on what is happening in the courts in Ontario during COVID-19.
For the balance of this Bulletin, please see Charity & NFP Law Bulletin No. 476.
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by Dev User | Jun 25, 2020 | Uncategorized
June 2020 Charity & NFP Law Update
The House of Commons Standing Committee on Finance (the “Committee”) published a News Release on June 12, 2020, launching its annual pre-budget consultation process in preparation of the 2021 Federal Budget. As usual, Canadians are invited to share their priorities for the next budget. Given the widespread effects that the COVID-19 pandemic has had on the Canadian economy, the Committee has indicated that it is particularly interested in receiving submissions on “measures the federal government could take to restart the Canadian economy, as it recovers from the COVID-19 pandemic.” Written submissions and recommendations can be made online to the Committee until Friday, August 7, 2020. After considering the submissions, a report will be tabled in the House of Commons in December 2020.
Read the June 2020 Charity & NFP Law Update
