Revising the Corporations Act A Brief to the Sector

A Dedicated Public Benefit Corporations Act. (non-profit) Organizations serving the public good need their own act. Trade Associations and true membership corporations (clubs) have different interests and needs and confuse the public about the true nature of public benefit organizations. Organizations that can distribute assets to members should be in other legislation. Public Benefit Corporations cannot distribute assets to members except in very limited situations.

A Dedicated Public Benefit Corporations Act Should be so called because while they are not- for-profit (meaning all revenues are dedicated to the mission, and, retained for the public good on dissolution) the public gets confused and thinks they must never make a profit - e.g. breakeven or operate at a loss. A Public Benefit Corporations clarifies the nature of the corporate identify and avoids confusing the public.

Understanding the difference between charitable and non-profit corporations A charitable organization is almost always non- profit and a charity. Charities have additional privileges and obligations. Donations to a charity are eligible for tax relief under the CRA. Moreover Charitable Foundations are restricted to making grants to charities. Charities are subject to more regulation but that regulation is located elsewhere - not in the Corporations Act

Charitable regulation requires improvement Ontario Public Guardian and Trustee of the Attorney General’s Office and Canada Revenue Agency (CRA) Charities Directorate both regulate charities. This causes difficulties and confusion for charities. Who does what? when? Other provinces have delegated to CRA responsibility for charitable regulation and enforcement.

Public Benefit Incorporation should be “As of Right” Meaning - that after meeting minimal criteria public benefit organizations may incorporate. The alternative is government deciding what is or is not a public benefit which may be cumbersome and slow to respond to emerging issues. All public benefit corporations will be subject to stringent non-distribution constraints.

Why “As of Right?” We do not believe that others, not genuinely interested in the public good, will find the non-distribution restraints appealing. CRA is already responsible for approving tax relief to public benefit organizations so they will act as a control if there are dubious public benefit organizations.

Unrestricted right to earn revenues Public Benefit Corporations must not be limited in their ability to earn revenues. The current act does not limit revenue generation by non-profit corporations. The PBC Act will limit the corporation’s ability to confer private benefit. (e.g. pay exorbitant salaries.) The Corporation must spend to further the mission. And on dissolution their assets must remain in the public domain.

The Powers of a Natural Person Business Corporations have the powers of a natural person and we think non-profit public benefit corporations should have the same rights. Charities, by virtue of their special status have controls and regulations that limit their activity.

Flexible Approach to Directors Three director minimum – at a minimum stand for election every three years, modern approach to calling meetings, Liability – same duty of care as for-profit. Directors not personally liable (acting in good faith) statutory liability remains

Membership, rights and remedies Role of members to elect directors to make decisions Right to financial disclosure, to by-law approval and to require compliance with Act, articles, and by-laws Right of interested “other parties” to seek court permission for corporation’s “best interest.”

An exciting opportunity to work with Government Clarifying and modernizing corporate legislation for Public Benefit Organizations. Ensuring clarity for the public as to the true nature of public benefit corporations. Robust non-distribution constraints to ensure public benefit. Streamline and improve charitable regulation Work with Government to keep regulations updated.

ONN Expert Working Group preparing briefing notes to the sector on the modernization of the Corporations Act. Contact Chair: Janice Wiggins April 28 launch: