What is the Not-for-Profit Corporations Act, 2010?

What is the Not-for-Profit Corporations Act, 2010?

The Not-for-Profit Corporations Act, 2010 (ONCA) functions to outline how non-for-profit organizations can be built, managed, and ceased. It was an act created October 2021 to provide guidance and regulate those who have created and are part of an incorporated not-for-profit organization in Ontario.

Before ONCA was created, incorporating not-for-profits was regulated by the Corporations Act, a statute that administers how a corporation should be established and overseen. Because there is a new act governing the incorporation of not-for-profit organizations, there will be new rules that directors and administrators will need to integrate into their contracts and policies, so they align accurately.

It is important to note that not every not-for-profit is required to follow these guidelines. It is strictly dependant on whether the not-for-profit is choosing to incorporate their company. If administrators or directors choose to keep their not-for-profit unincorporated, they will not be overseen by ONCA.

What are some of the elements that the ONCA introduces?

There are newly improved elements to ONCA that the Corporations Act did not sufficiently provide for not-for-profit corporations. This new act:

  • Provides a specified and easier method for incorporating a not-for-profit organization.
  • Outlines the differences between public corporations and not-for-profit corporations.
  • Allows for voting to be accomplished through other modes other than by proxy.
  • Outlines that the not-for-profit organization can be involved in profit-generating projects, however they must align with the company’s purpose, and remain within the rules outlined in the Income Tax Act.
  • The method to review the company’s financial records has been adjusted to a “review engagement” framework that is more suited to not-for-profit organizations. This framework asks for minimal revision, for example, sometimes they will require an audit, however other times it may not be necessary.
  • Advances a straightforward method for how not-for-profits should be managed by directors and administrators, encouraging these roles to always act in good faith and to hold them accountable for their actions. In addition, this act outlines a due diligence and good faith defence for directors, where if the director is reasonably acting in good faith, it may diminish or eliminate their liability.
  • Provides a method for filing conflict reports by directors.
  • Provides a method for members of the not-for-profit to file claims acknowledging the directors are not acting in good faith.
  • Articulates that when not-for-profit corporations are incorporated, they are considered a charitable corporation which entitles them to no longer require approval from the Office of the Public Guardian and Trustee (OPGT).

If you have decided to incorporate your not-for-profit and need help implementing the rules outlined in ONCA, please contact KCY at LAW by filling in an online consultation request or contact us by phone at 905-639-0999 to book your consultation today.