Protect Yourself: Incorporate
Presentation to Multiple Births Canada
Volunteer Development Retreat
Cathy Barr
September 2012
What Are Your Risks?
1. What are some risks faced by your
organization?
2. Have you ever thought about the risks
you face, personally, due to your
involvement in your organization?
Risks of Unincorporated Associations
• An unincorporated association has no legal status.
• Legally, it is a just a collection of individuals.
• This means that:
– the association cannot legally carry out any
action in its own name (e.g., enter into a
contract, incur debt, sue or be sued)
– all members of the association are liable for
actions of the association
How Can Incorporation Protect the
Members of an Association?
• A corporation is a legal entity separate from its
shareholders (in the case of for-profit corporation) or its
members (in the case of a non-profit corporation).
• A corporation can do things in its own name (e.g., enter
into contracts, buy and sell property, take legal action).
• The directors of a corporation are responsible for its
actions. However, they can be indemnified by the
corporation’s by-laws.
Indemnification & Insurance
• Indemnification: The organization agrees to protect
its directors in the event they are sued or occasion
losses in the course of fulfilling their duties as
directors.
• Insurance: An indemnity is only useful if the
organization has the resources to back it up. An
indemnity from an organization with few or no
assets provides little protection for directors.
Therefore, most organizations will purchase
Directors & Officers’ Liability Insurance.
Not-for-profit vs. For-profit Corporations
• Not-for-profit corporations differ from for-profit
corporations in 3 major ways:
– Nonprofit corporations have members rather than
shareholders.
– The members of a nonprofit corporation cannot
receive any financial gain during the life of the
corporation.
– In most jurisdictions, the powers of a nonprofit
corporation are limited to what is specified in its
objects.
Can a Not-for-profit Corp. Have a Profit?
• Yes.
• A not-for-profit corporation can operate with a
surplus (i.e., with revenues exceeding expenses
in a given year).
• However, the surplus must be reinvested in the
organization.
• It cannot be distributed to members.
Not-for-Profit, Nonprofit or Charity?
Not-for-profit = Nonprofit
Not-for-profit/Nonprofit ≠ Charity
Charity ≠ Registered Charity
What is a Charity?
An organization is considered a charity if its objects
(purposes) fall under one of the following “heads”:
1. Relief of poverty
2. Advancement of religion
3. Advancement of education
4. Other purpose beneficial to the community (in ways the
courts have defined as charitable)
To be considered a charity, an organization must also
benefit the public or a significant segment of the
public.
What is a Registered Charity?
• Organizations that meet the criteria of a charity
can apply to the Canada Revenue Agency (CRA)
to become a registered charities.
• Registered charities are able to issue tax receipts
for donations and receive funding from public
and private foundations.
• They also have to follow a variety of rules and
regulations, file annually with CRA etc.
Other Advantages of Incorporation
Aside from limiting the personal liability of members,
incorporation also:
1. Provides a framework for making decisions, solving
problems etc.
2. Increases opportunities for funding
3. Insures the continuity of the organization over time,
despite changes in membership
4. Protects the organization’s name from use by others
5. Reduces the risk of fraud
Incorporation Process
• You can incorporate federally or provincially.
• Each jurisdiction has its own act and its own
procedures.
• There are, however, several common
requirements.
Steps to Incorporate
Each jurisdiction has its own process but in most
cases you must:
1. Complete an application form
2. Submit a NUANS name search report
3. Pay the required fee, which ranges from $40 to $200
(fee in Ontario is $155).
The process takes 6-8 weeks in most jurisdictions.
Key Application Requirements
1. Office – You must provide an address where
official correspondence can be sent.
2. Directors – Names and addresses of the
individuals who will be the first directors of the
corporation (usually need at least 3).
3. Objects of the Corporation – e.g., “The
establishment and operation of an association
for the purpose of offering support and
encouragement to families in our area that are
raising multiple-birth children.”
New Canada Not-for-Profit Corporations Act
• Received Royal Assent on June 23, 2009.
• Came into force on October 17, 2011.
• Organizations currently incorporated federally
must apply for a Certificate of Continuance within
3 years of the Act coming into force (i.e., by
October 16, 2014).
• Failure to apply to continue will result in the
dissolution of the corporation.
New Canada Not-for-Profit Corporations Act
1. Review your letters patent and by-laws.
2. Prepare Articles of Continuance (2 page form).
3. Create by-laws. Corporations Canada has an
online “By-law Builder”:
http://www.ic.gc.ca/eic/site/cd-dgc.nsf/frmeng/NGRR-8AFNVX
4. Get members’ approval (2/3 required).
5. Submit your documents.
New Ontario Not-for-Profit Corporations Act
• Received Royal Assent on October 24, 2010.
• Was expected to go into effect on January 1,
2013.
• On September 27th, the government announced
that the date of implementation has been moved
to July 1, 2013.
• Organizations currently incorporated in Ontario
will have 3 years from the date of proclamation to
come into compliance with the new Act.
Questions
Discussion