Did you know that as of September 1, 2023, there were 47,243 Canada Not-for-profit Corporations Act (“CNCA”) corporations. There were 43,449 as of a year earlier. That was an increase in just one year of 3794 CNCA corporations.
Clearly, many new CNCA corporations are being incorporated, and for most groups, the CNCA makes a lot of sense as the incorporating legislation.
According to Corporations Canada, “Federal not-for-profit incorporations are mainly concentrated in Ontario and Quebec (close to 80%)”. Obviously, Ontario and Quebec are a big part of Canada, but from a population point of view, only about 61% of the total Canadian population. Therefore, it appears that the use of CNCA corporations is seemingly higher in Ontario and Quebec than one may expect. Why is this?
In part, this could be because Ontario has had corporate changes with ONCA, and for many years before ONCA came into force, groups were more likely to establish a CNCA corporation rather than an Ontario non-profit under the old OCA that would need to make governance changes later.
In Quebec, there is uncertainty and additional complexities around language and human rights, and many groups would prefer to have a Canadian entity over a Quebec non-profit, not being completely certain about the future of Quebec.
In many cases, it is advantageous for a group that is being established to be established under the CNCA. This is not always the case. However, in 90% of cases, it is probably the best route. So it is unfortunate that the CNCA is widely used in Ontario and Quebec, but seemingly less widely used outside of Ontario and Quebec.
Unfortunately, many provincial governments are not as upfront as they should be about the limitations of their own provincial acts. Some of these acts are very old. Some don’t allow a non-profit corporation to ever leave the province, which can result in lots of additional expenses in maintaining an office for decades after no activities take place in that province.
Many incorporators are average, well-intentioned people who don’t necessarily understand governance, may not have ever run a non-profit, and don’t understand some of the many advantages of a Federal corporation. Some of the service providers are just more comfortable doing provincial corporations and will continue to do them for decades to come.
People sometimes get confused between non-profits and registered charities. In the Income Tax Act, you can be a non-profit under Section 149(1)(l) of the Income Tax Act (Canada) or a registered charity – only one or the other. In corporate law, you can be under a non-profit act, but in tax law, you can be a 1) non-profit under the ITA, 2) a registered charity or 3) you could even be considered a for-profit if you are undertaking profit business activities. Being a corporate non-profit does not make you a non-profit or a registered charity under the ITA. Registered charities generally start off by being a non-profit corporation and then applying for registered charity status.
Apparently, according to Corporations Canada, 23% of federal not-for-profit corporations are registered charities.