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SUCCESSion: Tax & Estate Matters

Nov 25, 2014

Soliciting or Non-Soliciting: That is the Question.

The October 17, 2014 deadline for not-for-profit corporations to apply for a Certificate of Continuance under the Canada Not-for-profit Corporations Act (the CNCA) has come and gone. Corporations incorporated under the Canada Corporations Act that have not yet completed the continuance process face the possibility of dissolution. Those that have obtained a Certificate of Continuance are now governed by the CNCA, and the focus shifts from continuance to compliance.

The CNCA distinguishes between two categories of not-for-profit corporations – "soliciting corporations" and "non-soliciting corporations". Understanding this distinction is important, as soliciting corporations are subject to more onerous audit requirements, reporting requirements and governance requirements than their non-soliciting counterparts.

CNCA corporations that receive donations, gifts, or financial assistance from "public" sources in excess of a prescribed threshold are classified as soliciting corporations, and those that do not are considered non-soliciting corporations under the CNCA. Therefore, a corporation could potentially go back-and-forth between being a soliciting corporation and a non-soliciting corporation as its quantum and sources of revenue change.

The CNCA and its regulations currently provide that a corporation becomes a soliciting corporation at its annual members' meeting if, in the previous financial year, the corporation received in excess of $10,000 from any combination of the following "public" sources:

 

  • donations and gifts requested from persons who are not members, directors, officers, or employees of the corporation (or family members of such individuals);
  • financial assistance (e.g. grants) from a government or government agency; or
  • donations and gifts from soliciting corporations.

Once a CNCA corporation becomes a soliciting corporation, it maintains that status for three years (i.e. until the third annual members' meeting following the meeting at which it became a soliciting corporation). Therefore, an assessment of a corporation's revenue for each of the last three years should be made at each members' meeting in order to determine its soliciting/non-soliciting status.

In an upcoming blog post, we will discuss the implications of being a soliciting corporation versus a non-soliciting corporation under the CNCA.

Click here to read the second part of this blog series.

 

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