by Dev User | Aug 29, 2019 | Uncategorized
Aug 2019 Charity & NFP Law Update
Following up on the federal government’s commitment in the 2018 Fall Economic Statement to establish an advisory committee to provide advice to the Government of Canada with respect to important issues facing the charitable sector, as discussed in Charity & NFP Law Bulletin No. 435, the Honourable Diane Lebouthillier, Minister of National Revenue, announced on August 23, 2019 the full membership of the Advisory Committee on the Charitable Sector (“Committee”). The Committee was formed in response to recommendations made in the May 2017 Report of the Consultation Panel on the Political Activities of Charities, discussed in Charity & NFP Law Bulletin No. 403, and by the Social Innovation and Social Finance Strategy Co-Creation Steering Group, discussed in the September 2018 Charity & NFP Law Update.
The Honourable Diane Lebouthillier stated that “[b]y engaging in an ongoing dialogue with experts from the charitable sector, we can shape the regulatory environment so it supports and helps sustain the important work charities do in the world of today.”
Ms. Hilary Pearson and Mr. Bruce MacDonald from the charitable sector, and Mr. Geoff Trueman from the CRA, will co-chair the Committee, which is comprised of three senior Government officials (two from the CRA and one from Finance Canada), as well as 14 appointed sector members, including Terrance S. Carter of Carters Professional Corporation. The Committee will meet a minimum of twice per year and consult with the government to “engage in meaningful dialogue with the charitable sector, to advance emerging issues relating to charities, and to ensure the regulatory environment supports the important work that charities do.” Working groups will be formed as needed. The Committee will prepare reports for the Minister of National Revenue and the Commissioner of the CRA, summarizing its progress and providing recommendations for the charitable sector.
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by Dev User | Aug 29, 2019 | Uncategorized
Aug 2019 Charity & NFP Law Update
As most recently reported in the June 2019 Charity & NFP Law Update, significant amendments to the Trademarks Act came into force on June 17, 2019. One of the many changes includes the requirement for applicants filing and registering trademarks with the Canadian Intellectual Property Office (“CIPO”) to classify goods and services into one of 45 classes in accordance with the Nice Classification system, which seeks to harmonize the classification of goods and services across member countries and facilitate worldwide trademark searching and filing. Importantly, each class of goods or services included in the application has a separate government filing fee attached to it.
Charities and not-for-profits filing trademark applications with CIPO are cautioned to the position that Canada has taken with regard to the payment of filing fees per class of goods and services. In particular, in various countries around the world, when an applicant files an application with classified goods and services, an examiner may issue an office action indicating that some of the goods or services have been incorrectly classified and that the application needs to be expanded to include more classes of goods or services. In that case, the applicant then has the choice of paying for each additional class identified by the examiner, or it can simply delete the particular goods or services which do not fit into the pre-existing classes, thereby avoiding paying additional class fees.
In stark contrast, the Government of Canada’s Regulatory Impact Analysis Statement states that “[i]f the examiner determines that there are more Nice classes than were identified at the time of filing, the applicant would be required to pay the additional fees.” This means that if an examiner identifies additional classes of goods or services, the applicant will be forced to pay a government fee for each additional class identified by the examiner and will not be afforded the opportunity to delete those goods or services from the application.
Given that there are 45 potential classes of goods and services, this may result in a significant increase in application costs. For instance, if an applicant files an application and includes all goods and services in one class and receives an office action indicating that the goods and services actually fall into 30 additional different classes, the applicant would be forced to pay the government fee for the 30 additional classes, which would amount to $3400. This would, of course, come as a shock to applicants.
As a result, it is very important that charities and not-for-profits work closely with their trademark counsel to carefully consider both the number of goods and services included in a trademark application, and also the classification of the goods and services in order to avoid unexpected and potentially very significant costs during the application process.
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by Dev User | Aug 29, 2019 | Uncategorized
Aug 2019 Charity & NFP Law Update
Federal Government Announces Cybersecurity Voluntary Certification Program
In a news release issued on August 12, 2019, the federal government announced the establishment of CyberSecure Canada, a new voluntary federal certification program that will make cyber security more accessible to small to medium enterprises, including charities and NFPs. To obtain certification, organizations will be required to implement thirteen baseline security controls outlined by the Canadian Centre for Cyber Security, including, among others, developing an incident response plan, using strong user authentication, securing cloud and outsourced IT services, securing portable media and implementing access control and authorization. Organizations will be evaluated on their implementation of the criteria and, if certified, will be given a CyberSecure Canada certification identifier/logo to use on their website to demonstrate compliance. Organizations will have to recertify periodically. CyberSecure Canada is part of a larger National Cyber Security Strategy and supports the “Safety and Security” principle – focused on keeping Canadians safe in the digital world – part of Canada’s Digital Charter that was reported on in Charity & NFP Law Bulletin No. 449.
Certification is no guarantee of protection from cyber threats. However, charities and NFPs that implement the baseline security controls may reduce cyber threats and may be better prepared and equipped to deal with any breaches that may occur. Further, boards of directors of charities and NFPs should be prepared to manage cyber security risk just as they manage other enterprise risks. Ensuring that their organization obtains certification could demonstrate that the board of directors of a charity or NFP is acting with due diligence to oversee and manage organizational cyber risk.
Ontario Privacy Commissioner Releases 2018 Annual Report
On June 27, 2019, the Information and Privacy Commissioner of Ontario (“IPC”) presented the 2018 Annual Report, Privacy and Accountability for a Digital Ontario (“Report”), providing an overview of developments in access to information and privacy matters in Ontario during 2018. In terms of privacy, the Report touches on a broad range of topics. Among others, it cites the increasing number of cyberattacks and reminds organizations of the importance of having appropriate security measures in place as well as a privacy breach protocol. The Report also indicates that the increased use of video surveillance by both government and the private sector has resulted in the collection of more personal information and increased tracking of individuals in their daily lives and has significant privacy implications. In this regard, the IPC recommends balancing privacy and public safety interests by limiting surveillance and the amount of personal information retained. The Report also touches on the European Union’s General Data Protection Regulation (“GDPR”), which was implemented in May 2018 and which, as outlined in Charity & NFP Law Bulletin No. 419, may have implications for Canadian charities and NFPs. While the GDPR is not overseen or enforced by the IPC, it has developed a Privacy Fact Sheet on the GDPR that may be of assistance to charities and NFPs seeking general information about it.
The Report also addresses a broad range of health privacy matters, including new breach reporting requirements and cyberattack concerns, among others. Finally, the Report provides various recommendations going forward, including tests being carried out on the use of artificial intelligence to detect and deter snooping and inappropriate access related to personal health information. The Report also indicates that over 6,000 health-related information privacy breaches came as a result of misdirected faxes, and recommends that Ontario implement a strategy to eliminate dependence on the use of fax machines for the delivery of personal health information.
Canadian Bar Association Submission on Transfers of Information for Processing
As discussed in the June 2019 Charity & NFP Law Update, the Office of the Privacy Commissioner of Canada (“OPC”) initiated a consultation on data transfers for processing (“Consultation”), reversing its own longstanding position by characterizing the cross-border transfer of personal information for processing as a “disclosure” of personal information within the meaning of the Personal Information Protection and Electronic Documents Act (“PIPEDA”), which would require consent, rather than as a “use”, which would not. In response to the Consultation, the Canadian Bar Association’s Privacy and Access Law and Charities and Not-for-Profit Law Sections made a joint submission (“CBA Submission”) addressing the larger issues raised by the Consultation. At a high level, the CBA Submission takes the position that (1) transfers for processing are “uses” rather than “disclosures” under PIPEDA; (2) consent is not required under PIPEDA for such transfers; and (3) most cases do not fit the unique facts of the Equifax Report of Findings discussed in the September 2017 Charity & NFP Law Update, and a reinterpretation of PIPEDA should therefore not be required. The CBA Submission concludes that this significant change in the OPC’s position would eliminate the existing consistency in the legal regime and introduce uncertainty in the law and states that if this change is to be made, it should occur through the federal Parliamentary process.
Of particular note to charities, the CBA Submission specifically addresses the potential impact of this policy change on organizations such as charities and NFPs that are either subject to or that voluntarily follow PIPEDA or the underlying CSA Model Code, as discussed in Charity & NFP Law Bulletin No. 437. The CBA Submission points out that by reversing its well-settled position that a transfer for processing is a “use” of information and not a “disclosure”, and by requiring meaningful consent, and possibly even express consent, to such transfers, the OPC would impose additional costs and onerous requirements on a sector needing “to do more with less” and facing a steady decline in charitable giving. The CBA Submission advises that these requirements would consume resources that could otherwise be deployed for charitable or not-for-profit purposes, cause delays and curtail a charity’s ability to fulfill its mandate, especially in the international context. Rather, the CBA Submission indicates that the resources that would be devoted to compliance could otherwise be better used by charities in achieving their charitable purposes.
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by Dev User | Aug 29, 2019 | Uncategorized
Aug 2019 Charity & NFP Law Update
On June 19, 2019, the Court of Appeal for Ontario (the “Court”) released its decision in Dawe v The Equitable Life Insurance Company of Canada (“Dawe”), partially overturning the lower court’s decision that held that 30 months was an appropriate notice period for termination without cause for an employee with 37 years of service. In this case, the Court reiterated that reasonable common law termination notice periods for long serving employees should not exceed 24 months, in the absence of “exceptional circumstances.” The Court further held that the employer must honour the contracted-for bonus entitlements of the employee during the notice period, unless any subsequent changes in the terms of the employment contract have been brought to the attention of the employee. This Bulletin provides a review of the principles outlined by the Court in Dawe, which are relevant to charities and NFPs.
For the balance of this Bulletin, please see Charity & NFP Law Bulletin No. 454.
Read the August 2019 Charity & NFP Law Update
by Dev User | Aug 29, 2019 | Uncategorized
Aug 2019 Charity & NFP Law Update
In a decision released on August 9, 2019, the Court of Queen’s Bench of Alberta considered whether a separate legal entity could have standing to enforce the bylaws of another Alberta society. In Metis Nation of Alberta Association Local Council #63 v Alberta (Corporate Registry) (“Metis Nation of Alberta”), the court considered whether or not a cross-application filed by the Metis Nation of Alberta Association (“MNAA”) (“Cross-Application”) to dismiss an originating application filed by the Metis Nation of Alberta Association Local Council #63 (“Local 63”) and three individual applicants who were the directors of Local 63 (“Individual Applicants”) (“Originating Application”) would be allowed or dismissed. While the Alberta Registrar of Corporations (“Registrar”) was a named respondent, it took no position.
The Originating Application, which sought declaratory relief regarding dissolution of the Local 63 under the Alberta Societies Act, was adjourned so that the Cross-Application could be heard first. The court in the Metis Nation of Alberta case dismissed the Cross-Application and directed the parties to arrive at a litigation plan to proceed without the Originating Application in order to clarify the issues under dispute. The court’s reasoning, together with a brief summary of some of the key background facts are outlined below.
Local 63 was incorporated on July 5, 2002 under the Alberta Societies Act. The governance structure of Local 63 is set out in the Local 63 by-laws filed on July 5, 2002 (“By-law”). There were a number of references to the MNAA in the Local 63 By-law, as noted below.
In November 2018, Local 63 held a membership meeting to approve a special resolution to dissolve Local 63 (“Special Resolution”). Six of the nine members of Local 63 attended the membership meeting and they voted unanimously to dissolve Local 63. One of the Local 63 directors then wrote to the MNAA advising of Local 63’s Special Resolution to dissolve. Local 63 filed articles of dissolution with the Registrar, but the MNAA later wrote to the Registrar disputing the validity of the Special Resolution on the basis it was contrary to the By-law. The Registrar took the position that due to the conflicting information, Local 63 would be suspended until a court order has clarified who is authorized to file the articles to dissolve Local 63, and also confirmed that Local 63 had met all necessary requirements to dissolve.
In April 2019, the Individual Applicants filed the Original Application seeking a declaration that the Individual Applicants are authorized to file the articles of dissolution with the Registrar and that all requirements to dissolve Local 63 have been met. In response, the MNAA filed the Cross-Application in May 2019 seeking an order striking the Originating Application in its entirety, as well as other relief.
In the Metis Nation of Alberta case, the applicants argued that the MNAA had no standing to bring the Cross-Application on the basis that the MNAA is a third party and a separate legal entity from Local 63, and therefore lacks legal standing to enforce Local 63’s By-law. The applicants relied on Chinese Benevolent Association of Edmonton v China Town Multilevel Care Foundation (“Chinese Benevolent”), reported in the January 2018 Charity & NFP Law Update in which members of the Chinese Benevolent Association of Edmonton were found to have no standing to bring a court application regarding the validity of a foundation’s by-laws, since they were not, and had never been, members of the foundation. However, in finding that the MNAA had standing to bring the Cross-Application, the court distinguished this case from Chinese Benevolent on the basis that Local 63’s By-laws demonstrated “a clear and close relationship between Local 63 and MNAA.” The court cited several articles in the By-law that referenced the MNAA, including a By-law provision which stated one of the objects of Local 63 was to further the objects of the MNAA, a requirement that the By-law was to be consistent with the MNAA by-laws, and that any special resolution approved at a meeting of Local 63 members needed to be ratified by a special resolution of MNAA members.
The court distinguished Chinese Benevolent, as there was no evidence that the Chinese Benevolent Association or its directors had any material interest in the foundation, nor any direct stake in the foundation’s affairs, which was not the case in the Metis Nation of Alberta case. In this regard, the court found the MNAA had standing to bring the Cross-Application since the MNAA does have a material interest in Local 63 and its affairs.
This decision confirms that a separate legal entity can be found to have standing to enforce the by-law of a different corporation in court, where (1) the bylaw of the corporation reflects clear provisions regarding the interests and authority of the entity and (2) where the entity is found to have a material interest and a direct stake in the affairs of the corporation.
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by Dev User | Aug 29, 2019 | Uncategorized
Aug 2019 Charity & NFP Law Update
On June 24, 2019, the Federal Court of Appeal released its decision in Many Mansions Spiritual Center, Inc. v MNR, upholding the Minister of National Revenue’s (the “Minister”) decision to revoke the charitable status of Many Mansions Spiritual Centre, Inc. (“Many Mansions”). The Minister’s decision was based on Many Mansions’ failure to comply with various requirements in the ITA, including failing to maintain adequate books and records; conferring a private benefit to its pastor; and engaging in activities inconsistent with its charitable object of “advanc[ing] and teach[ing] the religious tenets, doctrines, observances and culture associated with the Christian faith.”
Many Mansions relied on the Supreme Court of Canada decision in Highwood Congregation of Jehovah’s Witnesses (Judicial Committee) v Wall (reviewed in Church Law Bulletin No. 54) arguing that matters of religious doctrine had no place in government. However, the court pointed out that this decision stands for the principle that court intervention is warranted “where it is necessary to resolve an underlying legal dispute.” Further, the court held that the question of operating within its registered object is a relevant factor to a charity’s continued enjoyment of its charitable privileges, and found that the Minister neither exhibited bias, nor acted unreasonably by inquiring into this matter.
With regard to inadequate recordkeeping, the court agreed that Many Mansions failed to maintain adequate books and records, which is a “foundational” obligation from which flows significant privileges. As such, the court noted the decision in Humane Society of Canada for the Protection of Animals and the Environment v MNR, which held that the Minister “must be able to monitor the continuing entitlement of the charitable organization to those privileges.” The court held that it was open to the Minister in this case to conclude that Many Mansions’ non-compliance was serious and justified revocation, even in light of Many Mansions’ status as a new charity and its subsequent improvement efforts.
The court also held that it was reasonable for the Minister to revoke Many Mansions’ charitable status because it conferred private benefits to its pastor by providing him with an office and allowing the use of meeting rooms for his private business. The court did not agree with the submission by Many Mansions that the use of the office and meeting rooms was permissible because it was ancillary or incidental to the fulfilment of Many Mansions’ charitable purposes. Instead, the court held that while paragraph 149.1(6)(a) of the ITA permits charitable organizations to “carry on a related business without contravening the requirement to devote all its resources to charitable activities, the pastor’s private business does not come within this exception.” The court also noted that the Canada Revenue Agency (“CRA”) had warned Many Mansions when it applied for registration that using charitable funds for personal benefit was grounds for revocation.
Finally, the court did not find that this sanction of revocation was too severe, and the Minister was well within its authority to revoke. It therefore upheld the Minister’s decision to revoke Many Mansions’ charitable status.
This case serves as a reminder to registered charities of the importance of complying with their obligations imposed on them under the ITA. In particular, charities are reminded to ensure that their resources are devoted to charitable activities, no undue private benefits are conferred, and adequate books and records are maintained. The court specifically noted that newly registered charities are not exempt from compliance, in spite of subsequent improvement efforts upon an audit by the CRA. As well, it is also important for charities to pay special attention to the warning issued by the CRA upon charitable registration and failure to heed the warning could become a negative factor in future court reviews.
Read the August 2019 Charity & NFP Law Update
