July 17th 2023
The Not-for-Profit Corporations Act, 2010 (ONCA) in Ontario, Canada, has recently undergone updates to streamline processes, increase accountability, and strengthen governance within not-for-profit corporations. The amendments bring significant changes, such as simplifying the incorporation process, allowing for profit from commercial activities, providing options for financial reviews, and enhancing members' rights. This article aims to summarize these key changes and their implications for not-for-profit organizations.
One notable amendment clarifies that not-for-profit corporations can earn a profit through commercial activities, such as selling merchandise, as long as those profits are reinvested to support the organization's not-for-profit purposes. This provision enables organizations to engage in revenue-generating activities while ensuring that the funds are utilized to advance their mission rather than distributed as dividends.
The ONCA introduces a new process called the "review engagement," which provides a less extensive and typically more affordable alternative to a full audit for certain corporations. This review engagement process allows for a review of financial records, ensuring transparency and accountability. The type of financial review required depends on the corporation's revenue and its classification as a public benefit or non-public benefit corporation.
ONCA came into force on October 19, 2021. Not-for-profit corporations have been granted a three-year transition period from this date to make any necessary changes to their governing documents. During this period, organizations previously governed under the Corporations Act are advised to review and update their documents accordingly. The standard organizational by-law applies automatically to corporations that do not establish their own within 60 days of incorporation.
In summary, the updated Not-for-Profit Corporations Act, 2010 (ONCA) in Ontario introduces important changes to the regulations governing not-for-profit corporations. These updates simplify the incorporation process, clarify rules for governance and accountability, permit profit from commercial activities for reinvestment, offer financial review options, and enhance members' rights. It is crucial for not-for-profit organizations to understand and comply with these amendments to ensure adherence to the updated legal framework. The team at Liddiard Law can support organizations in navigating these changes effectively and maximizing their positive impact on the communities they serve. So, if you are part of a non-profit organization, or are looking to start one, do not hesitate to reach out to us.
Brock A. Buckley, LLB
Articling Candidate, Corporate, Real Estate
Commissioner of Oaths
Office: (905) 374-1617 ext 304