October 17, 2014 was a critical date for federally incorporated not-for-profit corporations and charities. That was the date by which corporations were required to adopt and file articles of continuance under the new Canada Not-for-profit Corporations Act.
Failure to have filed for continuance now places those corporations that have not filed and received certificates at risk of being dissolved. For charities, they face the possibility of having their charitable status revoked by the Charities Division if they cease to exist as a corporation.
The government is issuing notices to corporations that did not comply with the new law, giving those corporations an additional 120 days to file articles of continuance. After this deadline, those corporations that have not complied will be automatically dissolved. Therefore, corporations should move quickly to approve and file articles of continuance.
A corporation is a separate legal entity and once dissolved, it ceases to exist. The consequences are enormous.
Once dissolved, a corporation’s directors and officers no longer hold office and cannot oversee the operations of the corporation. This obviously includes dealing the corporation’s assets. The normal winding up procedures of a corporation do not apply to this situation and the assets and property, rather than being transferred to another organization or corporation, become the property of the government. The government takes over the assets and decides what to do with them. The Public Guardian and Trustee in Ontario steps in and takes control of the assets of a charity that operates in Ontario, regardless of where it was incorporated. This means a federally incorporated charity will have its assets taken by the PGT. The same occurs in other provinces.
A registered charity that is incorporated will lose its charitable status and cease to be able to receive donations and issue charitable tax receipts and loses its exemption to pay income tax. Its property will need to be transferred to an qualified donee. The Canada Revenue Agency has indicated clearly that it will take steps to revoke charitable registration issued pursuant to the Income Tax Act. It will give time to prove continued legal existence but failing to do so will result in revocation of charitable status.
While the above summary is serious and leads to a corporation ceasing to exist, it can be revived. A person (member, director or officer) can take the required steps by applying for and receiving Articles of Revival. A certificate of revival will be issued if a valid reason does not exist for not issuing the certificate. Once revived, the corporation continues as it did before dissolution.
The costs incurred and the administrative challenges associated with dissolution can be avoided by complying with the new law and obtaining Articles of Continuance.
Our lawyers can help in preparing and filing for Articles of Continuance or other actions that may be required.