Definition of NGOs

There is no legal definition of an NGO in Canada. The currently passing “Canada Not-for-profit Corporations Act” (Act respecting not-for-profit corporations and other corporations without share capital) considers the “not-for-profit corporations” or “corporations without share capital”. For tax purposes, organization may register as a charitable or non-profit organization. (According to Canada Revenue Agency)

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Definition of NGOs

There is no legal definition of an NGO in Canada. The currently passing “Canada Not-for-profit Corporations Act” (Act respecting not-for-profit corporations and other corporations without share capital) considers the “not-for-profit corporations” or “corporations without share capital”. For tax purposes, organization may register as a charitable or non-profit organization. (According to Canada Revenue Agency)

Founding of NGOs 

Founding of a not-for-profit incorporation requires minimum of tree individuals aged eighteen years and having power under law to contract. Founders should propose a name of the corporation and define the purposes for which its incorporation is sought, identify the within Canada where the head office of the corporation is to be situated, provide the names in full and the address and calling of each of the applicants and the names of the applicants, not less than three, who are to be the first directors of the corporation.

The name of a not-for-profit incorporation should be compatible with its purposes. It is required to define the following matters as conditions of membership, mode of holding directors', members' and executive committee meetings; appointment or election, term of office, powers, remuneration and removal of directors, officers, and committee members. The auditor is to be appointed by the members at each annual meeting to audit the books for report to members at the annual meeting. The documents are subject for approval of the Minister of Industry. (Corporations Canada)

Aims that may be pursued by NGOs, and rules applicable to members

In a not-for-profit corporation, the persons acting together for a common purpose are members who are prohibited by the statute from receiving any pecuniary gain. Their common purpose is not to make money for themselves but rather to carry on some activity of a national, patriotic, religious, philanthropic, charitable, scientific, artistic, social, professional or sporting character, or the like. (Section 154 (1) of the Canada Corporations Act, Part II)

A not-for-profit corporation has two basic components there are the Membership and the Board of Directors. The Board of Directors is responsible to manage the affairs of the corporation. They meet together as often as necessary and may delegate certain responsibilities to specified officers so that routine matters can be taken care of in the interval between their meetings. The Membership must meet at least once a year to receive the Board's report on how the corporation has been managed over the last year and how it will be managed over the next year, to review the audited financial statements and to appoint an auditor for the coming year.

Certain actions of the board must be confirmed by the membership, e.g. amendment of the Letters Patent. In many corporations, the Membership will have the power to re-elect directors on a regular basis and to remove existing directors, if necessary, in order that the management of the corporation reflects the wishes of the Membership. (Corporations Canada) Most general by-laws and their amendments require approval by the membership. In order to change the place (municipality) where the head office of the corporation is situated the corporation must file a by-law, sanctioned by a 2/3 vote of members. (Section 24 of the Act)

Membership in the corporation shall be limited to persons interested in furthering the objects of the corporation and shall consist of anyone whose application for admission as a member has received the approval of the board of directors of the corporation. Normally, there shall be no membership fees or dues unless otherwise directed by the board of directors. Any member may withdraw from the corporation by delivering to the corporation a written resignation. Any member may be required to resign by a vote of three-quarters (3/4) of the members at an annual meeting. (Corporations Canada Model By-Law: Not-for-profit)

Functioning of NGOs without state registration

It is allowed for an NGO to function without obtaining status of a legal entity and without registration.

Registration requirements for NGOs

The applicants for letters patent shall file in the Department an application signed by each of the applicants and setting forth the following particulars: the proposed name, the purposes, the place of the head office, the full names and addresses of the applicants, not less than three names of the applicants who are to be the first directors of the corporation. (Section 155 (1) of the Canada Corporations Act, Part II)

The founders (applicants) must file the following documents: 1) an application for Letters Patent (two originals); 2) an affidavit or statutory declaration of one of the applicants, sworn before a commissioner for taking oaths, stating that the contents of the application are true; 3) a $200 filing fee (cheque payable to the Receiver General for Canada) (See the fees schedule pursuant to Schedule 2 of the Canada Corporations Act, Part II); 4) a Canada-biased name search report not more than 90 days old, of the proposed name, or one $15.00 filing fee per search to be made in the Corporations Canada. A bilingual name normally requires 2 searches; 5) one copy only (unsigned) of the proposed By-laws of the Corporation with identifier, if applicable; 6) a covering letter, specifying the street address of the Head Office of the corporation.

The founders should define the following matters in the by-laws: 1) conditions of membership; 2) whether and how membership may withdraw; 3) mode of holding directors' meetings (including provision for notice, quorum and voting rights); 4) mode of holding members' meetings (including provision for notice, quorum and voting rights); 5) mode of holding executive committee meetings (including provision for notice, quorum and voting rights); 6) directors (their appointment or election; term of office; powers; remuneration; removal); 7) officers (their appointment or election; term of office; powers; remuneration; removal); 8) committee members (their appointment or election; term of office; powers; remuneration; removal); 9) auditor to be appointed by the members at each annual meeting to audit the books for report to members at the annual meeting; 10) mode of repealing or amending by-laws including a clause to say that no repeal or amendment shall be enforced or acted upon until it has received the approval of the Minister of Industry; 11) custody of the corporate seal (authorized officer); 12) mode of certifying that a particular document is a document of the corporation (a person authorized to sign on behalf of the corporation).

If accepted, the applicant gets back the Letters Patent, with one of the original applications attached, dated as of the date of receipt of the application in the Department. If not accepted, the applicants gets back: a form letter explaining that the date of receipt of the application will continue to be the effective date providing that the date of the returning application remains the same; a checklist identifying the unacceptable provisions; the original pages to be corrected. (Corporations Canada)

Authorized state bodies and NGO registry

Registration of not-for-profit corporations is under responsibility of the Ministry of Industry but the direct executor is the Corporations Canada, Industry Canada. Information on the registered not-for-profit corporations is kept in a database administered by the Ministry. A search of information with the NUANS automated search system as well as other services are subject for paying fees in accordance with the approved fees schedule pursuant to Schedule 2 of the Canada Corporations Act, Part II. (Corporations Canada) In addition to the Corporations Canada, certain private firms, called Search Houses may access this database of the NUANS system.

Registration as a charitable corporation is under authority of the Charities Division, Revenue Canada. After its registration as a not-for-profit corporation any organization may file an application for Supplementary Letters Patent. At the same time it is recommended to make application for registration prior to or at the same time when an applicant files an application for incorporation.

Denial of registration to NGOs

The Criminal Code prohibits participation in activity of terrorist group (Section 83.18 of the Criminal Code, Revised Statutes Canada 1985 c. C-46) and participation in activities of criminal organization (Section 467.11of the Criminal Code, Revised Statutes Canada 1985 c. C-46). It foresees liability only for individuals who involved to these activities.

In accordance with the Canada Not-for-profit Corporations Act any corporation will be required to make the transition to the new Act within three years of the new Act coming into force. Failure to do so will result in the Director taking action to dissolve the corporation. Any corporation must file an Annual Summary with the Corporations Canada. Failure to file for two consecutive years can result in the dissolution of the corporation. (Section 133 of the Act)

Branch offices of NGOs

There are no specials provisions adopted regarding the branch offices of not-for-profit corporations. According to Canada Corporations Act any company have Incidental and ancillary powers stipulated in section 16. Legislation allows activity of a not-for-profit corporation throughout Canada and abroad. Following the general principles, by-laws respecting branch offices require approval by the membership.

Operational requirements for international NGOs

International and foreign organizations may operate in Canada as long as that group is not engaged in terrorist or criminal activity. Umbrella organizations outside of Canada may register for charitable status for tax purposes within Canada.

Re-registration requirements for NGOs

There is no obligatory re-registrations requirement. The currently passed Canada Not-for-profit Corporations Act requires making the transition to the new Act within three years of the new Act coming into force. Normally, a not-for-profit corporation shall submit an application to the Ministry of Industry for approval of by-law amendments (no fee).

Right of appeal of NGOs

Any decision of the authorities may be appealed at the court.

Authorized state bodies granting financial and other benefits to NGOs

Various government bodies grant financial benefits to various non-profit organizations (e.g., a club, society, or association etc).

Foreign funding of NGOs

Any organization is free to receive foreign funding as long as that group is not engaged in terrorist or criminal activity.

Tax exemptions for NGOs

There are no specific tax exemptions for NGOs.  However, an NGO may apply for tax exemption as a non-profit organization or a charity. Under the Income Tax Act, a non-profit organization will generally be exempt from tax if no part of its income is payable to, or available for, the personal benefit of a proprietor, member, or shareholder.

For an organization to be registered as a charity, its purposes have to fall within one or more of the following categories: the relief of poverty; the advancement of education; the advancement of religion; or other purposes beneficial to the community in a way the law regards as charitable. Once the organization is registered as a charity, it is exempt from paying income tax.

Reporting requirements for NGOs

NGOs, per se, are not required to submit reports to a government authority. However, registered charities are required to file an annual return with the Canada Revenue Agency, a portion of which is available to the public, and must meet certain requirements of the Income Tax Act concerning their expenditures and activities.

Not-for-profit corporations must file an Annual Summary with the Corporations Canada by June 1st of each year, containing information relating to the year ending March 31st. A blank Annual Summary form is sent out to the corporation at its postal address on record in the Corporations Canada, about March 31st of each year. Failure to file the Annual Summary in any given year is an offence which is subject to a fine. Failure to file for two consecutive years can result in the dissolution of the corporation (Section 133 of the Act).

It is required to provide the Corporations Canada with information on a change of the head office location which is subject to sanction of a 2/3 vote of members. (Section 24 of the Act) Any amendments of not-for-profit corporation’s general by-laws are required to be submitted to the Corporations Canada for the approval of the Minister. Most general by-laws require that such amendments be approved by the membership before the application is made to the Minister for his approval.

Termination, dissolution, and liquidation procedure for NGOs

There is no procedure to dissolve an NGO in Canada.  However, there is legislation which prohibits participation in the activity of a criminal organization or terrorist group.  As well, terrorist groups can also have their assets frozen in Canada and proceeds of crime may be seized.

In order to surrender the charter and dissolve a not-for-profit corporation it is required to submit an application. The application must include the following documents: 1) a copy of the by-law or resolution authorizing the surrender including the date it was passed by the members; 2) a certificate or statement of an officer of the corporation attesting to the due passage of the by-law or resolution by the members of the corporation; 3) an affidavit or statutory declaration of an officer certifying that the facts mentioned in the application are true; 4) an officer's statement certifying that: a) the corporation has no assets; b) if the corporation had assets they have been: i) rateably divided amongst the members or ii) distributed among other corporations in Canada having the same or similar objects or among other recognized charitable corporations in Canada; c) the corporation has no debts, liabilities or other obligations; 5) the original Letters Patent (and Supplementary Letters Patent if any).

If accepted, the applicant gets back a directive of dissolution and surrender of Charter bearing an effective date one year after the date of publication in the Canada Gazette. No other certificate is issued and the dissolution takes effect unless a reasonable objection is received. If not accepted, the applicant gets back a checklist identifying the unacceptable provisions and the original pages to be corrected.

Participation in law-drafting that affects the status of NGOs

There are no specific provisions that define a status of NGOs in law-drafting in Canada.

Analysis provided by Dmitry Kabak, OSCE/ODIHR consultant.

Posted: April 2007

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