Protect Yourself: Incorporate
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Protect Yourself: IncorporatePresentation to Multiple Births Canada Volunteer Development RetreatCathy BarrSeptember 2012
1What Are Your Risks?What are some risks faced by your organization?Have you ever thought about the risks you face, personally, due to your involvement in your organization?2Risks of Unincorporated AssociationsAn 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
3How 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 corporations by-laws.
4Indemnification & InsuranceIndemnification: 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.5Not-for-profit vs. For-profit CorporationsNot-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. 6Can 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.7Not-for-Profit, Nonprofit or Charity?Not-for-profit = Nonprofit
Charity Registered Charity
8What is a Charity?An organization is considered a charity if its objects (purposes) fall under one of the following heads:Relief of povertyAdvancement of religionAdvancement of educationOther 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.9What 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.10Other Advantages of IncorporationAside from limiting the personal liability of members, incorporation also:Provides a framework for making decisions, solving problems etc.Increases opportunities for fundingInsures the continuity of the organization over time, despite changes in membershipProtects the organizations name from use by othersReduces the risk of fraud
11Incorporation ProcessYou can incorporate federally or provincially.Each jurisdiction has its own act and its own procedures.There are, however, several common requirements.
12Steps to Incorporate Each jurisdiction has its own process but in most cases you must:Complete an application formSubmit a NUANS name search reportPay the required fee, which ranges from $40 to $200 (fee in Ontario is $155).The process takes 6-8 weeks in most jurisdictions.13Key Application RequirementsOffice You must provide an address where official correspondence can be sent.Directors Names and addresses of the individuals who will be the first directors of the corporation (usually need at least 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.14New Canada Not-for-Profit Corporations ActReceived 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.
15New Canada Not-for-Profit Corporations ActReview your letters patent and by-laws. Prepare Articles of Continuance (2 page form).Create by-laws. Corporations Canada has an online By-law Builder: http://www.ic.gc.ca/eic/site/cd-dgc.nsf/frm-eng/NGRR-8AFNVXGet members approval (2/3 required).Submit your documents.
16New Ontario Not-for-Profit Corporations ActReceived 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.17QuestionsDiscussion18