Amendment to Canada Not-for-profit Corporations Regulations
On May 13, 2016, Regulation SOR/2016-98 was registered to amend certain Department of Industry Regulations. Among the changes, section 73 and 83 of the Canada Not-for-profit Corporations Regulations SOR/2011-223 were amended by replacing the Canadian Institute of Chartered Accountants (CICA) Handbook references with the Chartered Professional Accountants Canada (CPA) Handbook. In this regard, the CPA is the new association of professional accountants in Canada that replaces the Canadian Institute of Chartered Accountants. As a result, the names of the handbooks have changed, but the accounting rules remain the same.
Nova Scotia now permits Community Interest Companies
On June 15, 2016, the Nova Scotia legislature passed the Community Interest Company Regulations, which bring into effect the Community Interest Companies Act (the “Act”). At the same time, an order was made by Governor in Council on June 14, 2016, declaring the proclamation of the Act as of June 15, 2016. In a Service Nova Scotia news release on June 15, 2016, it indicated that Department of Business is working with stakeholders to develop a social enterprise strategy.
The Act received Royal Assent on December 6, 2012. The Act permits companies incorporated under the Companies Act to be designated as Community Interest Companies (“CICs”) if they pursue profits while advancing social causes that are traditionally associated with not-for-profit organizations, such as promotion of health or social and environmental concerns. CICs are required to declare their “community purpose,” provide a community interest plan and report on their plan annually. A “community purpose” means “a purpose beneficial to (i) society at large, or (ii) a segment of society that is broader than the group of persons who are related to the community interest company. The Act also clarified that the following are examples of a community purpose: “providing health, social, environmental, cultural, educational or other services, but does not include a political purpose” or a purpose prescribed under the Act. CICs are restricted in the amount of dividends they may declare, how assets are distributed on dissolution and are required to make financial statements public.
However, the Income Tax Act was not amended to provide special tax relief or tax status for CICs. As such, CICs must comply with the rules for non-for-profits or pay tax as a for-profit entity under the Income Tax Act.