Updated November 2016
This How-To Brief outlines the steps to take to set up a not-for-profit corporation under both federal and Ontario legislation.
1Discuss the general incorporation issues with the client
- Canvass options with the client as to the most appropriate vehicle in which to carry on the not-for-profit organization, e.g., unincorporated association, trust, provincial incorporation or federal incorporation.
- Note that they cannot be partnerships since their objective is not to make a profit. Note also that they cannot be unincorporated associations if they want to become registered as foundations under the Income Tax Act (Canada).
- Issues to be covered would normally include concepts such as limited liability, perpetual existence, taxation, costs of incorporation and maintenance, and prestige.
- Review the benefits
of incorporation. Although there are benefits of incorporation, there may
be situations where the client may not wish to incorporate. For example,
an organization may wish to initially operate as an unincorporated
association for a few years and then incorporate later when their
membership and programs grow.
- Consideration should also be given as to whether the entity should be a registered charity.
- Discuss whether the entity should be registered as a federal or a provincial corporation.
- Consider whether there are any other third party requirements that may affect the jurisdiction of incorporation or form of vehicle, such as requirements of funders, government regulations.
On June 23, 2009, the Canada Not-for-Profit Corporations Act (the "CNCA") received Royal Assent, and on October 17, 2011, the majority of the provisions of the CNCA and its regulations came into force. The CNCA replaced Part II of the Canada Corporations Act (the "CCA")
The CNCA applies to federal non-share capital not-for-profit corporations. In addition to new corporations incorporated under the CNCA, Part
19 of the CNCA applies to federal special act corporations.
The CNCA replaced Part II of the CCA and introduced the following changes in relation to the incorporation process:
- Incorporation is now "as of right" (there is no longer a need for Ministerial approval of letters patent); corporations will be incorporated by filing articles of incorporation.
- It is no longer necessary to submit a draft form of the by-laws with the articles of incorporation; rather, at the first organizational meeting, the directors may make by-laws, which must then be filed within 12 months after the members have confirmed them (see the Corporations Canada's Not-for-Profit Corporations ActModel By-Laws link in the Resources section of this How-To Brief, which was designed to apply to a typical not-for-profit corporation).
- The articles must set out the classes of membership that the corporation is authorized to establish. If there is more than one class of members, the articles must give the right to vote to at least one class.
- The articles must set out the minimum and maximum number of directors that the corporation may have on its board. If the corporation wants to have a fixed number of directors, then the same number would be indicated in both the minimum and maximum boxes on the form.
- It is no longer necessary to list the powers of the corporation.
- It is possible to include restrictions on the activities that the corporation may carry on.
- It is possible to be incorporated as a numbered company.
- Documents may now be filed electronically.
See the Resources section of this How-To Brief for the Corporations Canada's Not-for-Profit Corporations link, which describes how to create and maintain a federal not-for-profit corporation
Non-share capital non-for-profit corporations may be incorporated under Part III of the Corporations Act (the “OCA”). A new
Not-for-Profit Corporations Act, 2010 (the “ONCA”) to replace Part III of the OCA received Royal Assent on October 25, 2010. At the time of writing, the ONCA has not been proclaimed.
ONCA is very similar to the CNCA in many respects, including
incorporation as of right by filing articles of incorporation, and fast and
efficient incorporation process. In the meantime, Ontario non-for-profit
corporations will continue to have to incorporate under the OCA.
proclaimed into force, it will automatically apply to all corporations
incorporated under Part III of the OCA.
The ONCA was originally anticipated
to be proclaimed on July 1, 2013. Key amendments to the ONCA embodied in Bill 85 were introduced in June 2013, and the
government indicated that the ONCA would
not be proclaimed until at least 6 months after the enactment of Bill 85 in
order to allow not-for-profit corporations to prepare for transition. Bill 85 died
on the Order Paper when Parliament was dissolved on May 2, 2014. The Ontario government
announced on September 17, 2015, that the ONCA
will not come into force for at least another 2 years. A new bill will need to
be introduced to amend the ONCA and
the government will give 24 months’ notice to the sector before implementing
the ONCA. The government also
indicated that they need to update their system to accommodate electronic
filings under the ONCA. It is not
clear whether the 24 months will start to run after the amendments or before. At
the time of writing, no amendments have been tabled. Those interested in the
progress of the ONCA are encouraged
to monitor the website of the Ontario Ministry of Government and Consumer
Services for updates.
2 General Drafting Considerations of Articles of Incorporation or Letters Patent
discussion and consideration should be given to the provisions to be included
in the articles/letters patent and by-laws, such as corporate purposes,
dissolution clauses, non-profit clauses, director remuneration clauses, and
other additional or special provisions. Having the appropriate provisions
included upon incorporation will avoid the corporation having to amend these
provisions at a later time, such as when the corporation applies for charitable
status after incorporation.
corporate purposes must accurately reflect the nature of the organization, and be
consistent with the intended tax status of the corporation. For example, if the
corporation intends to be registered as a charity, then the corporate purposes
must be drafted with the requirements of the Income Tax Act (Canada) and Canada Revenue Agency in mind to ensure
that the purposes would be acceptable to the Canada Revenue Agency when the
corporation applies for charitable status; if the corporation is intended to
operate as a non-profit organization under the Income Tax Act (Canada), then the corporate purposes must be for
social welfare, civic improvement, pleasure or recreation, or for any other
purpose, except profit. See the Resources section of this How-To Brief for
sample charitable and non-charitable purposes in Appendices C and A
respectively in the Government of Ontario, Ministry of the Attorney General, Not-For-Profit Incorporator's Handbook.
Also see the Charities Directorate’s Guidance
on How to Draft Purposes for Charitable Registration and model charitable
purposes on their website in the Resources section of this How-To Brief.
an Ontario corporation intends to become a registered charity, there are a
number of provisions that must be included in the letters patent. See the
Resources section of this How-To Brief for these clauses in Appendix D in the Government
of Ontario, Ministry of the Attorney General, Not-For-Profit Incorporator's Handbook.
discuss with the client whether other provisions should be included. For
example, some faith-based organizations may want to include their statement of
faith as part of the incorporation papers.
3Establish that the desired name is permitted
In choosing a suitable corporate name, consideration must be given to the requirements under the CNCA and OCA, which are explained below. In addition, other considerations to discuss with the client include whether the name reflects the nature of the organization, is easily recognizable and whether to seek trademark protection.
- Obtain a federal-biased NUANS name search report; ensure that the proposed name otherwise complies with the ss. 11–13 of the CNCA, as well as ss. 42-59 (Part 4) of the Canada Not-for-Profit Corporations Regulations, made under the CNCA. As well, the name must also comply with requirements in Corporations Canada's Name Granting Compendium. The proposed name must be distinctive, must not cause confusion with any existing name or trade-mark and must not include unacceptable terms. See the Corporations Canada's "Canada's Name Granting Compendium" link in the Resources section of this How-To-Brief.
- Other searches that can be conducted to ensure the proposed corporate name is not deceptively similar to the name of a known organization, corporation, association, partnership, individual or business include lOCAl telephone directories, Canada Revenue Agency's online database for registered charities, internet searches, and internet domain name searches. Where applicable, trademark searches may also be conducted. See the Corporations Canada's "Choosing a Name" link in the Resources section of this How-To Brief.
- The CNCA also allows the use of a number name as the corporation's legal name. Using a bilingual name is also permitted.
- It is possible to apply for a name pre-approval decision from Corporations Canada in advance of incorporation to ensure that a desired name will be approved.
- Obtain an Ontario-biased NUANS name search result; ensure that the name otherwise complies with s. 13 of the OCA, as well as ss. 1-9 of the General regulation, made under the Corporations Act.
- Name search considerations and the types of name searches are similar to those under federal incorporation.
- However, application for a name pre-approval decision is not available. The use of a numbered name is not permitted.
4Prepare and file the application for incorporation
In order to apply for a certificate of incorporation, the following items must be filed with Corporations Canada using one of the following methods: Corporations Canada's Online Filing Centre, email, fax, or mail. (see the Industry Canada's "Instructions to File Articles of Incorporation" link in the Resources section of this How-To Brief for another useful checklist):
In order to incorporate a not-for-profit corporation in Ontario, the following items must be submitted to the Ontario
Ministry of Government and Consumer Services:
- Form 2, Application for Incorporation of a Corporation without Share Capital, completed in duplicate and bearing original signatures on both copies
- Ontario-biased NUANS name search report
- Fee of $155 (standard-service processing time is six to eight weeks) or a fee of $255 (expedited-service processing time is seven business days)
- Covering letter giving a contact name, return address and telephone number
If the corporation intends to become registered as a charity under the Income Tax Act, the above documents must first be submitted to the Ontario Public Guardian and Trustee's office for pre-approval. However, if an application was to use their pre-approved charitable objects contained in Appendix C of the Not-For-Profit Incorporator's Handbook (see the Resources section of this How-To Brief) referred to above, the incorporators may apply directly to the Ministry of Government Services for incorporation, and no pre-approval from the Ontario Public Guardian and Trustee is required.
(See the link to the above form in the Resources section of this How-To Brief.)
For additional information, see the following links in the Resources section of this How-To Brief:
of Government and Consumer Services, Start, dissolve and change a corporation
- Ministry of The Attorney General, Not For Profit Incorporator's Handbook, for comprehensive information and guidelines on incorporation in Ontario
- The Ontario NUANS Search Houses listed by Industry Canada
5Post Incorporation Considerations
For federal corporations, see Corporations Canada's "Reporting Obligations after Incorporation" link in the Resources section of this How-To Brief, for a list of maintenance requirements once your client's federal not-for-profit corporation has been incorporated. For Ontario corporations, see Ministry of The Attorney General, Not For Profit Incorporator's Handbook in the Resources section of this How-To Brief for a summary.
One of the key steps after incorporation is to organize the corporation in order to operate. This step would include the incorporators (or the first directors) calling the first board meeting and members' meeting to adopt initial organizational resolutions, such as adopting by-laws, admitting members, electing directors, appointing officers, etc. Under both the CNCA and the OCA, written resolutions may be adopted in lieu of holding meetings.
See the Industry Canada Next Step Following Incorporation link in the Resources section of this How-To Brief. See also Section 4.1 in the Ministry of The Attorney General, Not For Profit Incorporator's Handbook link in the Resources section of this How-To Brief.
The lack of any by-laws after incorporation can often create problems for the governance of the corporation should disputes arise in later years. This can often lead to unsatisfactory and surprising results, including the court ruling that the incorporators continued to be the only directors and members of the corporation years after the corporation having operated for many years, or the court ordering the winding up of the corporation all together. (See Rexdale Singh Sabha Religious Centre v. Chattha, 2006 CarswellOnt 7413,  O.J. No. 4698 (Ont. C.A.), reversing 2006 CarswellOnt 497,  O.J. No. 328 (Ont. S.C.J.); Warriors of the Cross Asian Church v. Masih (2007), 87 O.R. (3d) 169, 2007 CarswellOnt 6345, 41 B.L.R. (4th) 153 (Ont. S.C.J.))
This underscores why it is very important for the lawyer who assists with the incorporation process to also stress to the client the importance of having a by-law prepared at the same time as part of the incorporation process, and completing the organization of the corporation after incorporation.
If the corporation had been operating as an unincorporated association or trust for some time before deciding to be incorporated, then the assets, liabilities and membership of the unincorporated association/trust would need to be transferred into the new corporation, followed by dissolution or winding up of the unincorporated association/trust.
As well, if the organization is a registered charity, then part of the transfer will also include requesting Canada Revenue Agency to assign the charitable registration from the unincorporated association/trust charity to the new corporation. It will be necessary to make such a request because the new corporation will have been issued a new nine-digit business number ("BN") by Canada Revenue Agency at the time of incorporation. Once the charitable registration has been assigned to the corporation, it will be given a new charitable registration number, bearing the nine digits of the new business number that was assigned upon incorporation with a "RR" suffix. The organization will then cease using its former charitable registration number.
Canada, Choosing a Name
Canada's Name Granting Compendium
- Industry Canada, Articles of Incorporation Form 4001
Canada, Instructions to File Articles of Incorporation
Canada, Form 4002, Initial Registered Office Address and First Board of
Canada, Instructions for Form 4002 — Initial Registered Office Address and
First Board of Directors
Canada, How do I file my application under the Canada Not-for-profit
Corporations Act (NFP Act)?
Canada, Model By-Laws
Canada, Transition guide for federal not-for-profit corporations
Canada, Federal Not-for-Profit Corporations
Canada, Schedule of Fees
Canada, Next Step Following Incorporation
Canada, Reporting Obligations after Incorporation
of Ontario Ministry of Government and Consumer Services, Form 2, Application
for Incorporation of a Corporation without Share Capital, Corporations
of Ontario, Ministry of Government and Consumer Services, Start, dissolve
and change a corporation
of Ontario, Ministry of the Attorney General, Not-For-Profit
NUANS Search Houses listed by Industry Canada
Revenue Agency, Charities Directorate, Guidance on
How to Draft Purposes for Charitable Registration
6Statutes and Rules
- Canada Not-for-profit Corporations Act, S.C. 2009, c. 23
- Canada Not-for-profit Corporations Regulations, SOR/2011-223, made under the Canada Not-for-profit Corporations Act
- Canada Corporations Act, R.S.C. 1970, c. C-32
- Corporations Act, R.S.O. 1990, c. C.38
- General, R.R.O. 1990, Reg. 181, made under the Corporations Act
- Not-for-Profit Corporations Act, 2010, S.O. 2010, c. 15