A. INTRODUCTION
All corporations under Part II of the Canada
Corporations Act (CCA) have until October 17, 2014, to continue under the
new Canada Not-for-profit Corporations Act (CNCA). As of the end of
February 2014, 2900 of approximately 17,000 Part II CCA corporations had filed
for continuance. According to Corporations Canada, the exact number of existing
Part II CCA corporations is not available because many of them do not regularly
file their annual corporate returns. This leaves approximately 14,100
corporations that still need to apply for continuance by the deadline.
B. DISSOLUTION OF NON-CONTINUED CORPORATIONS
Failure to continue under the CNCA by the October 17,
2014, deadline may result in those corporations being dissolved. Since the
October 17, 2014, deadline is mandated by the CNCA, this date cannot be changed
without an amendment to the CNCA. However, dissolution of corporations that
fail to continue by the deadline is not automatic. Section 297(5) of the CNCA
provides that Corporations Canada may dissolve corporations that fail to
continue by the deadline. The dissolution process will be in accordance with
the process outlined in section 222 of the CNCA. Under section 222, before
dissolving a corporation, Corporations Canada will give notice to the
corporation and to each director and publish the notice in a publication generally
available to the public. Unless cause for the contrary has been shown, a
certificate of dissolution may be issued after 120 days of giving notice.
According to Corporations Canada, after the October 17,
2014, deadline, they will start sending out dissolution notices to
corporations. However, corporations may still file for continuance after having
received the notice. At Corporations Canada’s Client Outreach Sessions in
Ottawa on February 3, 2014, and in Toronto on February 19, 2014, they indicated
that Corporations Canada is planning to start dissolving corporations that have
not filed anything (such as by-laws, supplementary letters patent, annual
summary) for the last 5 years, and many of those corporations may not have
filed anything for 10 years. Corporations should therefore ensure that
Corporations Canada has their correct address so that notice of dissolution is
sent to the right place. Corporations Canada indicated at the Outreach Sessions
that, where possible, they do not want to dissolve corporations that are making
an effort to continue.
However, once a corporation is dissolved because it has
not continued by the October 17, 2014, deadline, they will need to be revived
and continued in one step. Section 219 of the CNCA provides that if a
corporation is dissolved under Part II of the CCA, Part 14 of the CNCA or a
special Act corporation, any interested person may apply to the Director to
have the dissolved corporation revived as a corporation under the CNCA. As
such, this section essentially provides a two-in-one step process. Corporations
Canada is in the process of working on other information to explain this
process and it will soon be releasing a communications in this regard.
Although a process is available to revive the corporation, it would be prudent
to file for continuance before the deadline to avoid the time, costs and hassle
(let alone embarrassment to stakeholders, donors and the public) to reviving a
dissolved corporation.
C. THE CONTINUANCE PROCESS
The continuance process involves applying for a
certificate of continuance by filing articles of continuance and an initial
notice of registered officers and directors. Corporations should also prepare
and adopt new by-laws that comply with the CNCA. Because the rules under the CNCA
are very different from the rules under the CCA, what needs to be set out in
the articles and by-laws will also be different from what is set out in the corporations’
current documents. This is not simply transposing the provisions from its
current letters patent into the articles and using the same by-laws.
The articles need approval from at least a two-thirds
resolution of the members and must be filed with Industry Canada. Upon issuance
of the certificate of continuance, the articles and the certificate replace the
letters patent and any supplementary letters patent. Industry Canada’s approval
is no longer necessary for by-laws to take effect; however, a corporation must
still file its by-laws with Industry Canada within twelve months of adoption by
its members.
Registered charities must also file their articles of
continuance, certificate of continuance and new by-laws with Canada Revenue
Agency. Additionally, charities in Ontario need to file their articles of
continuance and certificate of continuance with the Ontario Public Guardian and
Trustee, which oversees charities in Ontario.
D. TOOLS FOR THE CONTINUANCE PROCESS
To assist Part II CCA corporations to move forward with
the continuance process, Corporations Canada has made a number of useful tools
available on its website. As well, Corporations Canada recently posted on its website two informational
videos to help not-for-profit corporations complete the transition process. The first video highlights the key elements of this transition process, while
the second video takes the viewer step-by-step through Form 4031-Articles of
Continuance. An information sheet was also released by Corporations Canada.
During Corporations Canada’s Client Outreach Sessions,
they advised that common transition deficiencies include:
• leaving box 8 blank in relation to the number of classes of membership;
• not setting out the voting rights of membership if there are more than
one class of members;
• including conditions of membership in box 8 rather than in box 10 as additional
provisions;
• not setting out the full legal names of directors;
• not reconciling the list of directors in Form 4002 with the number of
directors set out in box 5 of the articles;
• filing inadequate NUANS name search reports; and
• not setting out the same corporate name as set out in their letters
patent or supplementary letters patent where a name change is not intended.
E. CONCLUSION
Given the serious consequences associated with failing to
continue by the deadline, it is essential that the remaining Part II CCA
corporations take appropriate steps to continue under the CNCA as soon as
possible. As explained above, the continuance process will require the
preparation of articles of continuance and a new by-law which complies with the
CNCA. Drafting these documents and having them approved by the board and the
members at meetings called for that purpose before filing with Industry Canada
can take a number of months, subject to the governance process and policy of
the organization.
