Special Act Corporations Under the Canada Not-for-Profit Corporations Act

Federal corporations established by their own legislation (“Special Act Corporations”) need to be aware that parts of the new Canada Not-For-Profit Corporations Act (the “CNPCA”) will apply to them.   This article will provide an overview of these provisions and the option for Special Act Corporations to continue under the CNPCA.

The Canada Not-For-Profit Corporations Act (the “CNPCA”) received Royal Assent on June 23, 2009 and is expected to come into force in the late spring of 2011.  As soon as it comes into force the CNPCA will automatically apply to Special Act Corporations, as discussed below.

Provisions Applicable to Special Act Corporations

Annual Requirements

• Special Act Corporations will be required to file an annual return.
• Directors will be required to call the first annual meeting of the Special Act Corporation no later than 18 months after the creation of the corporation. Subsequently, directors must call annual meetings at least every 15 months, and no later than 6 months after the corporation’s fiscal year end.  If it is not practical to hold the meeting within these timeframes, on application to the court it can order that a meeting be called and conducted in a manner directed by the court.

Powers

• Special Act Corporations will have the capacity and powers of a natural person.  They will be able to carry out activities throughout Canada, and outside Canada if permitted by the laws of the foreign jurisdiction.

Third Parties

• CNPCA sets out provisions for the protection of third persons dealing with Special Act Corporations.  Specifically, third persons, without special knowledge, will not be expected to know of the governance structure of the corporation simply because the articles of the corporation are available to the public for viewing.

Dissolving the Corporation

• A Special Act Corporation may be dissolved under the CNPCA in one of the following three ways:
  • A director or any member of the Special Act Corporation who is entitled to vote at an annual meeting may make a proposal for the voluntary dissolution or liquidation of the corporation.
  • The Director appointed to administer CNPCA (the « Director ») may dissolve a Special Act Corporation if the Special Act Corporation:
    • has not started its activities 3 years after its formation;
    • has not carried on activities for 3 consecutive years;
    • is in default for not having submitted required documents, notices or fees to the Director; or
    • does not have any directors.
  • The court may order the dissolution of a Special Act Corporation upon the application of the Director or an interested person if that corporation has:
    • failed to call an annual meeting of members in 2 consecutive years;
    • acted contrary to its articles;
    • denied access to the corporate records to its members;
    • failed to keep a registry of members;
    • failed to keep up-to-date financial statements; or
    • obtained a certificate under the CNPCA by misrepresentation.

Continuance Under the CNPCA

Special Act Corporations have the option of having the entire the CNPCA apply to them by applying to continue under the CNPCA. Once a Special Act Corporation continues under the CNPCA, its own special legislation ceases to apply to it.

Since there is no requirement for a Special Act Corporation to continue under the CNPCA, corporations will have to evaluate the pros and cons of continuing.  An overview of some of the key provisions of the CNPCA are reviewed in Kate Lazier’s article in the January 2011 issue of this newsletter.

The lawyers in Miller Thomson LLP’s Charities and Not-for-Profit Group can assist Special Act Corporations to evaluate these options and, if desired,  to continue under the CNPCA.