As you may know, non-profit organizations put an emphasis on carrying out activities and roles that serve the community rather than its members and board of directors. Organizations like your local United Way or Salvation Army are prime examples of non-profits at work.
With the positive impact and causes non-profits strive to create and support within the immediate community, it is no wonder that people are looking to start charitable organizations.
If you already started up a new non-profit in Canada, you may be ready to start carrying out charitable activities and putting your fundraising events into action. However, before you start, you need to ensure that your non-profit is ready and set up to run smoothly.
All you might need is some direction on how to structure the organization. In this article, we cover questions you may have on how to choose the business structure for your non-profit, how to organize members and directors, and how to establish by-laws.
Incorporate Your Non-Profit Organization
When you have your organization set up, it is generally ideal to form a non-profit corporation. Incorporating your non-profit organization means that you have limited liability and gain status as a separate legal entity.
You can incorporate federally or provincially. Note that each jurisdiction has its own incorporation requirements, so you will need to check in with your province’s regulations. This requires that you have articles of incorporation that are specific for a not-for-profit (NFP) corporation under the Canada Not-for-profit Corporations Act (CNCA).
In Ontario, not-for-profit organizations are incorporated under the Ontario Corporations Act. Federally, they are incorporated under the Canada Not-for-profit Corporations Act.
Post-Incorporation: Organize Your Non-Profit
Initial Meeting of the Board of Directors: Board Resolutions
The next steps to take after incorporation will be to organize your non-profit corporation. This involves arranging resolutions of the first board of directors.
After you receive your certificate of incorporation, you need to send out 5 days’ notice to all the directors to meet. This first meeting is where you will decide upon the duties, responsibilities, and operational items to give structure to your non-profit organization.
This is where directors create and decide upon resolutions that will build up and move your organization forward. This includes:
- Creating by-laws for the organization
- Maintaining corporate records
- Issuing debt obligation certificates
- Authorizing the issuance of debt obligations
- Appointing officers
- Appointing an accountant
- Issuing memberships
- Obtaining charitable status
- Approving a corporate seal
- Making banking arrangements
- Creating a minutebook
- Carrying on any other business required or authorized by the CNCA
Some of the above items can be complex or require detailed planning. It is, thus, recommended to seek the assistance of a corporate lawyer. He or she can ensure your non-profit corporation is established properly and that the directors are aware of their responsibilities.
The First Meeting of Members: Members’ Resolutions
After the meeting of the first directors, an organizational meeting of the members is then required. You must hold this meeting within 18 months from the date of incorporation.
While the main organizing resolutions are decided by the board, certain items of business may need to be confirmed by the members. This requires members adopting and implementing resolutions. Members of the organization must decide upon important items, such as: the election of directors, confirmation, modification or rejection of by-laws, appointment of an accountant, adoption of special by-laws, etc.
Members make decisions by voting on such resolutions, which can either be passed at a members’ meetings or adopted by signing written resolutions (instead of holding meetings). Decisions can be made by ordinary, special or unanimous resolutions or by consensus decision-making.
Create A Members’, Directors’ and Officers’ Register
When you have a good idea of the structural control and organization of your non-profit corporation, you should create a register of individuals. This includes a members’ register, a directors’ register, and an officers’ register. Registers are essentially documents that record information about the individuals.
You should create a register for each group. Within each register, list the name of the member, director or officer (depending on the register), the individual’s residential address, and the date they became a member, director or officer. On the directors’ register you should also include whether or not the individual is a Canadian citizen or resident. Consult a corporate lawyer if you need guidance on what details you need to include.
Set Up Protection Of Directors and Officers
Running a non-profit organization requires that directors and officers also understand their rights and duties as stipulated in Canada Not-for-profit Corporations Act. Despite the directors’ and officers’ best efforts to act accordingly, there is always the risk of liability.
While incorporation offers the board of directors some protection (the organization can be held responsible as a legal entity), it is only extended to individuals acting on behalf of the organization. Directors and officers themselves can be personally liable for their decisions or actions if they did not ensure the safety of others. This can be due to not having the appropriate policies in place or due to not enforcing the existing policies already set up.
Depending on the situation, it may be worth it to consider extra methods to indemnify directors and officers from certain liabilities. Purchasing insurance, agreeing upon a compensation amount for directors or officers, and advancing funds to help with legal costs could be a few options to consider.
Other measures, in the form of disclosures, are a necessity to protect against any conflicting interests or duties, financial or otherwise, whether they be direct or indirect. If an officer or director is in a financially-related conflict of interest with the non-profit, for instance, the organization or members can request any profits to be repaid.
Create A Unanimous Member Agreement (Non-Soliciting Corporations Only)
A Unanimous Member Agreement (UMA) is a written agreement that restricts some powers of the directors. It restricts the ability and scope of the directors to manage or supervise the activities of a non-soliciting corporation (one that does not rely on public funds for support).
As the name suggests, all members must be part of or involved with the agreement. It makes it possible to transfer some powers of the board to the members themselves. This can be helpful when your non-profit has only a few members. It can also be helpful when you want to keep a director from exercising certain powers. A UMA can help simplify the decision-making process by giving the membership the responsibility of doing so.
Are you hoping to start a non-profit organization? Not sure where to start? Our OMQ lawyers can help you through the process and formalities of organizing one. Contact one of our lawyers for a free consultation and advice on a non-profit document package.