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Not-For-Profit and Charity Corporations

Incorporation in Ontario

Business Development Centre has been registering Not-for-profit and Charitable corporations for over 15 years. We provide a one-stop solution to get your organization up and running.

Our website contains significant amount of information related to Not-for-profit and Charitable corporations. Feel free to browse the topics.

Once you are ready to register your organization, we would be happy to assist you with the entire process.

What is a Not-For-Profit Company?
Nature of a Corporation

Corporation is a legal entity that has an independent existence, separate and distinct from its members. The corporation owns property in its own name, acquires rights, obligations and liabilities, enters into contracts and agreements and has the capacity to sue and be sued as would a natural person.

For example, a corporation may be insolvent while its individual members may be wealthy. As a separate legal entity a corporation is not affected by changes in its membership and its existence continues in perpetuity unless its members or the Government take steps to dissolve it.

A corporation is managed or governed by a board of directors which is elected by the members. Usually the board of directors, in turn, either elects or appoints officers such as secretary, treasurer, president. These officers are responsible for the actual operation of the corporation.

Neither the directors, officers nor members “own” the corporation nor do they have any right of ownership to any particular asset of the corporation and the corporation may not be operated for the financial gain of its members, directors or officers.

In certain circumstance, a not-for-profit corporation may engage in activities that are revenue producing and that produce a “profit”. Such activities must be incidental to the principal objects of the corporation and in furtherance of the principal objects. For example, a boys’ hockey club may hold a dance to raise funds for new uniforms for the team. If, after paying the expenses, the dance produces a “profit”, the monies belong to the club and are to be used for the benefit of the club i.e. to purchase new uniforms for its team.

Should you Incorporate?

The act of incorporation offers certain advantages to the incorporators and their successors but at the same time it also places certain responsibilities upon them. Accordingly, before proceeding with incorporation, the members of an unincorporated organization should give the matter serious consideration. In this regard you may wish to consult a lawyer who has experience in corporate matters and who, given all the facts, can advise you whether it would be to your advantage to incorporate.
It is not mandatory for a not-for-profit organization to incorporate. There are in existence hundreds, possibly even thousands, of unincorporated organizations in Ontario that are carrying on their activities without any hindrance. Unincorporated organizations do not have a legal separate existence apart from their members.

Advantages of Incorporation

As the corporation is a separate legal entity distinct from its members and has the capacity to own property, to sue and be sued, it affords limited liability protection to its members.

• Individual members are not personally liable in certain instances, for the corporation’s debts and obligations.
• Continuity of the organization is assured while the membership changes.
• A corporation can own property in its name regardless of membership change
• The ability to bring a legal action in its own name (an unincorporated body cannot)
• Better chance of receiving government grants, because of the stability the organization appears to have.

The corporation is not affected by changes in its members, be it due to death or any other reason. Therefore, it is easier to enter into a number of transactions in the name of the corporation such as, banking, owning real estate or signing a lease or contract. A majority of the members of the corporation have the power to bind the others by their acts.

Disadvantages of Incorporation

As the corporation is a creature of statute, it is subject to some supervision by the Government of Ontario and it must conduct its affairs in accordance with the applicable statutes. For example, the constitution or by-laws of the corporation, the election of directors and the calling of meetings of members are all governed by the Corporations Act. In addition, a corporation is required to report certain information on a regular basis to certain departments of the Government. Failure to comply with reporting or disclosure requirements could render the corporation and its directors and officers liable to certain penalties, the ultimate penalty being the cancellation of the charter and dissolution of the corporation.

Types of Corporations

Not-for-profit corporations are incorporated for the purpose of carrying on, without financial gain, objects of a patriotic, charitable, philanthropic religious, professional, sporting or athletic character. In other words, not-for-profit corporations are engaged in activities that are of benefit to the community. They are incorporated under Part III of the Corporations Act as corporations without share capital.

Basically, there are five types of not-for-profit corporations:

A. General type – this would include such corporations as ratepayers’ associations, business or trade associations, community organizations, etc.;
B. Sporting and athletic organizations;
C. Social clubs – these are corporations with objects in whole or in part of a social nature;
D. Service clubs such as Rotary, Lions, Kiwanis and Optimist;
E. Charities – these would include religious organizations and organizations that are engaged in carrying out certain good works that are of benefit to society.

One of the main differences between a charity and another type of not-for-profit corporation is that upon dissolution a charity is required to distribute its remaining assets to other charities, not to its members, whereas another type of not-for-profit corporation may (unless prohibited from so doing in its charter of by-laws) on dissolution distribute its remaining assets among its members. Also, a charitable corporation, because it usually solicits funds from the public and enjoys certain legal and tax advantages (e.g. under the Federal Income Tax Act) is subject to more stringent reporting requirements than a not-for-profit corporation of another type.

Selecting your Corporate Name
Name cannot be Deceptively Similar

The Act provides that a corporation shall not be given a name that is the same as or similar to the name of a known corporation, association, partnership, individual or business if the use of the proposed name would be likely to deceive, except where the existing corporation, association, etc. gives a consent in writing. In other words, the Act permits the granting of a similar corporate name so long as the proposed name is not CONFUSINGLY or DECEPTIVELY SIMILAR to an existing name.

Name must be Distinctive

Corporate name must be such that it will not be confused with EXISTING names of corporations, trademarks or unincorporated organizations and will not MISLEAD or CONFUSE the public as to the undertaking or nature of the corporation or its relationship to other corporations.

Types of Distinctiveness

The name itself may be distinctive or may acquire its distinctiveness through long use. Usually the most distinctive or unique names have a coined word as the distinctive element, for example:

– Avinta Social Club
– Zaltak Hockey Association
– 5-P Bowling Club

Unusual use or combination of generic words may produce a distinctive name, for example:

– All-That-Jazz Club
– Sorcerers Hockey Club
– Magic Eleven Soccer Club

Words that are coined using parts of other words, geographical location, numbers, initials and dictionary words make a less distinctive name.

– Sundance Social Club
– Kenora Hockey Association
– Loyal Order of Moose Lodge 35
– Guelph Dance Club
– Northern Lights Skating Club

Elements of A Corporate Name
Most corporate names consist of three elements:

1. The DISTINCTIVE element is the main identifier of the corporate name. It may be a coined word of a dictionary word used in a fanciful sense quite different from its ordinary meaning or a geographic term. Every corporate name must have a distinctive element.
2. The DESCRIPTIVE element describes the nature of the main corporate undertaking. Care should be taken not to use terms that may be misdescriptive or misleading.
3. The LEGAL element indicates the status of the organization as an incorporated body. Either “Corporation” or “Incorporated” or “Incorporée” or their abbreviations may be used. The use of this element is optional.

DISTINCTIVE ELEMENT	DESCRIPTIVE ELEMENT	LEGAL ELEMENT
Canvelo	Cycling Club	Inc.
Village Green	Square Dancers
Don Mills	Student Exchange	Corp.

Name not to be too General

Corporate name cannot be too general. The reason for this prohibition is that corporate names that are too general tend to infringe on a number of existing names, are likely to contribute to confusion and unduly restrict or limit the possibility of using names in the future that otherwise would be available to the public except for the existence of the name that is too general.
A corporate name that is too general may be defined as a name that usually lacks the distinctive element.

Example A: names that are too general consist of words of general meaning that have no distinctive element to them and for the purposes of a corporate name consist of only the descriptive and the legal element:

– Student Exchange Corporation
– Cycling Club Inc.
– Jazz Singers Friendship Society

Example B: a general name can be rectified by adding the distinctive element:

– Don Mills Student Exchange Corporation
– Canvelo Cycling Club Inc.
– Soundville Jazz Singers Friendship Society

Name cannot Suggest Connection with the Crown
The Act provides that a corporation shall not be given a name that suggests or implies connection with the Crown or the Royal Family.

The consent of the Secretary of State, Canada, has to be obtained by the applicant where the word “Royal” is used as a prefix in a corporate name and where is suggests Royal Patronage. The onus is on the applicant to obtain such consent.

Example A: Corporation names that suggest Royal Patronage and need the consent of the Secretary of State, Canada:

– The Royal Agricultural Winter Fair
– The Royal Canadian Yacht Club
– The Prince Charles Youth Foundation

Example B: corporation names where “Royal” is used as a descriptive adjective in the use of “majestic” or “grand” and Royal Patronage is not suggested and therefore the consent of the Secretary of State, Canada, is not required:

– Royal Wave Surfing Association
– Royal Mountain Ski Club

Name cannot Suggest Connection with Government
The Act provides that a corporation shall not be given a name that suggests or implies connection with any government or a government department or agency without the written consent of the appropriate authority. In this connection particular attention should be given to the use of the words “Canada” and “Ontario”.

Example A: names that suggest or imply government connection:

– Heritage Ontario
– Multi-Culture Canada
– Metro Toronto Sports and Recreation Authority

Example B: Names implying government connection may be modified by rearranging and adding words thus eliminating the suggested government connection:

– Heritage Association of Kingston, Ontario
– Canadian Multi-Cultural Society of Timmins
– Sports and Recreation Association of Metro Toronto

Prohibited Words / Expressions
The Regulation prohibits the use of some words and expressions and restricts the use of others.

Here is a summary of such prohibitions and restrictions:

The following words and expressions shall not be used in a corporate name:

1. “Amalgamated”, unless the corporation is an amalgamated corporation resulting from the amalgamation of two or more corporations.
2. “College”’ “institute” or “university” except with consent in writing on behalf of the Ministry of Education and Training.
3. “Engineer” or “engineering” or any variation thereof, except with the consent in writing of the Association of Professional Engineers of the Province of Ontario.
4. “Housing”, unless the corporation is owned by, sponsored by, or connected with the Government of Canada, the Government of Ontario, or a municipal government in Ontario.
5. “Royal”’ where used a prefix, unless the consent of the Crown has been obtained through the Secretary of State, Canada.
6. Numerals indicating the year of incorporation, unless the proposed corporation is the successor to a corporation the name of which is the same as or similar to the proposed corporation, or, the year is the year of amalgamation of the corporation.
7. Any word or expression that would lead to an inference that the corporation is a business corporation.

A corporate name shall not contain a word or expression, an element of which is the family name of a particular individual, who is living or who has died within the previous thirty years whether of not preceded by a given name or initials, unless the individual, his heir, executor, administrator, assigns or guardian consents in writing to the use of his name.

A corporate name shall not contain any word or expression in any language that describes in a misleading manner the activities or services in association with which the corporate name is proposed to be used.

Choosing the Corporate Name

When choosing the corporate name, it is important to remember the many situations when and how the corporate name will be used. For example, the name may be used visually (stationery, signs, uniforms, cheques, correspondence, newsprint, advertising, etc.) and auditorially (telephone, radio, television). In each of these uses it would be to the advantage of the corporation to have a name that is memorable. To this end, the name should be distinctive and short.

The Corporate Name Search Report

If the proposed name does not appear to be deceptively/confusingly similar to the name of an existing organization or corporation, and does not appear otherwise to contravene the Act or the Regulations then you should contact a Search House in order to obtain an Ontario biased name search report for the proposed name of the corporation. You can order your NUANS name report online.

Incorporation Process

If a decision is made to incorporate you should take the following steps:

FIRST STEP:	Select the proposed corporate name
SECOND STEP:	Prepare and file the application for incorporation
THIRD STEP:	Following the receipt of the Letters Patent of incorporation, organize the corporation
FOURTH STEP:	The organization of a corporation is followed by an ongoing activity of “corporate maintenance”, that is, ensuring that the corporation complies with the reporting requirements and conducts its affairs in accordance with the applicable Acts and Regulations

Head Office

Every corporation is required to have a head office in Ontario. This does not necessarily mean that a corporation must own or lease a special building or a suite of offices. Some incorporators use their home address for this purpose. However using a registered corporate address provides significant flexibility and increased privacy.

Directors

Each corporation must have not less than three directors. The first directors of the corporation have all the powers, duties and liabilities of directors that are elected to the board.

The office of director is not only an office that accords prestige to the person who holds it, it also places on that person responsibilities and even liabilities. Accordingly, any person accepting a directorship should be prepared to assume the responsibilities that go with the director’s office.

Objects of the Corporation

Objects are a concise statement of the ultimate purpose of the corporation.

The principal objects are objects that describe the primary undertaking of the corporation

Objects statement should be short but broad in nature. On the other hand, the objects should be sufficiently specific so as to avoid ambiguity.

Examples: the objects for a community youth organization might be drafted as follows:

The establishment and operation of a youth organization for the purpose of:

a) promoting the best interests of teenagers in the Town of Kenora;
b) promoting interest in athletics, sports and recreation and establishing and maintaining facilities and equipment for same.

and other complementary purposes not inconsistent with these objectives.

Timing

An application for incorporation is usually processed within approximately 8 weeks of filing. The Letters Patent will bear the effective date as of the date of delivery unless the application is returned for revision, in which case Letters Patent will bear an effective date as of the date of redelivery to the Companies Branch, provided the application is correct.

Organization And Start Up

Once the corporation has received its Letters Patent, a number of essential steps are required to be initiated so that the directors may properly administer the affairs of the corporation.

Among these steps are:

• Establishing directors’ quorum
• Adoption of by-laws
• Banking and financial arrangements
• Adoption of corporate seal
• Appointment of auditors
• Appointment of officers

It may be advisable to retain the services of a lawyer who specializes in corporation law to ensure the corporation is properly organized and the directors understand their responsibilities. By having the corporation properly organized, you should eliminate a number of potentially serious problems in the future.

Initial Reporting Requirements

Within 60 days of incorporation you are required to file an Initial Return.

Subsequently, within 15 days after any change that takes place in the information set out in the Initial Return, you must file a Notice of Change.

Note: Failure to file the Initial Return within the prescribed period of time may attract penalties for the corporation as well as for the directors and officers. Under the Corporations Information Act, upon conviction, each director and officer is liable to fines of up to $2,000 and the corporation may be fined up to $25,000. In addition, the charter (Letters Patent) of the corporation may be cancelled and the corporation dissolved

Business Development Centre is always available to provide assistance with filing Initial Notice or Notice of Change.

Maintaning Corporate Records

Annual Meeting

An annual meeting must be held not later than eighteen months after incorporation and subsequently not more than fifteen months after the holding of the last annual meeting.

Election of Directors and Officers

Usually the directors are elected annually at the general meeting, by the members of the corporation. Directors in office at the time are retired and, if eligible, may seek re-election to resume office for another year. Generally directors are elected by members. Officers are appointed by the board of directors.

Quorum for Meetings

The quorum for meetings of directors is a majority, unless otherwise provided for in the Letters Patent, Supplementary Letters Patent or in a special resolution of the corporation, and in any event shall not be less than two-fifths of the board of directors.

Reporting Requirements

Within 60 days of incorporation you are required to file an Initial Return.
Subsequently, within 15 days after any change that takes place in the information set out in the Initial Return, you must file a Notice of Change.

Business Development Centre is always available to provide assistance with filing Initial Notice or Notice of Change.

Special Information Notice

Periodically special information notices under section 6 of the Corporations Information Act are mailed out to all Ontario non-profit corporations on record with the Companies Branch. When your corporation receives this document, it is essential that it be completed and returned to the Branch within thirty days. The special information notice must be filed whether or not the corporation has recently filed an Initial Return or Notice of Change. Failure to file the special information notice may result in cancellation of the charter and the dissolution of the corporation.

Penalties for Failure to Comply with Filing Requirements

The importance of submitting these filings cannot be over-emphasized. Failure to comply may lead to cancellation of the Letters Patent and dissolution of the corporation. Penalties are provided in the Corporations Information Act for individuals (up to $2,000) and for corporations (up to $25,000) where reporting requirements are not complied with. Also, a corporation that is in default of the reporting requirements is not capable of maintaining any action in any court in Ontario in respect of any contracts made by the corporation.

Audit Provisions

Members of the corporation must appoint an auditor to hold office until the first annual meeting and at each annual meeting must appoint one or more auditors to hold office until the next annual meeting. There is no waiving of this statutory requirement.

Record Keeping Requirements

A not-for-profit corporation is required, among other things, to meet certain record keeping obligations such as:

• Proper books of account and accounting records
• Minutes of meetings of members and directors
• Maintain copies of Letters Patent, Supplementary Letters Patent, By-Laws and Special Resolutions
• Register of its members and directors

Use of Corporate Name

The name of a corporation is set out in the instrument of incorporation (Letters Patent) or if subsequently changed; in the instrument of amendment (Supplementary Letters Patent) and that is the name that the corporation must use in all transactions.

For example, if the name of the corporation is The Muskoka and Haliburton Naturalists Inc., it may not identify itself as Muskoka and Haliburton Naturalists.

Changing Corporate Name

A corporation may apply for Supplementary Letters Patent to change its corporate name.

Use of a Name Other than Corporate Name
A corporation may use a name other than its corporate name. For example, a corporation called Federation of Ontario Moose Callers may carry on its undertaking under the assumed name “Ontario Moose Callers”.

However, NO corporation shall carry on business in Ontario or identify itself to the Ontario public by a name other than its corporate name unless the assumed name is first registered with the Companies Branch.

A corporation which has registered and uses a name other than its corporate name is required to set out its corporate name on all contracts, invoices, negotiable instruments and orders for goods and services.

Changing the Authorized Number of Directors

The number of directors of a corporation is established at the time of incorporation, being the number of first directors named in the Letters Patent.
The board of directors of a corporation shall consist of a fixed number of directors not fewer than three.

A corporation may by special resolution increase or decrease the number of its directors.

“Special Resolution” means a resolution passed by the directors and confirmed with or without variation by at least two-thirds of the votes cast at a general meeting of the members of the corporation duly called for that purpose or in lieu of such confirmation by the consent in writing of all the members entitled to vote at such a meeting.

A notice of such special resolution must be filed with the Companies Branch and published by the corporation in the Ontario Gazette within 14 days after the resolution has been passed.

Changing the Location of the Head Office

The location of the head office is established in the Letters Patent. However, a corporation may by special resolution change the location of its head office to another place in Ontario.

“Special Resolution” means a resolution passed by the directors and confirmed with or without variation by at least two-thirds of the votes cast at a general meeting of the members of the corporation duly called for that purpose or in lieu of such confirmation by the consent in writing of all the members entitled to vote at such a meeting.

A notice of such special resolution must be filed with the Companies Branch and published by the corporation in the Ontario Gazette within 14 days after the resolution has been passed.

Changing the Objects and Special Provisions

A corporation may apply for Supplementary Letters Patent to change all or any of its objects and/or special provisions set out in the Letters Patent.

If the corporation is, or after issuance of Supplementary Letters Patent, would be funded, supervised, etc. by a Government Agency or Ministry, it may be wise to consult with the funding or supervising Agency or Ministry prior to completing the application for Supplementary Letters Patent.

Applicants for Supplementary Letters Patent should also bear in mind that, in addition to the Corporations Act, there may be other legislation to which the corporation may be subject.

Income Tax Act Considerations

A not-for-profit corporation is generally exempt from federal income tax.
Although an organization may not qualify for charitable status, the non-profit-non-charitable designation may still be advantageous from a federal income tax point of view.

Ontario Corporations Tax Branch Requirements

Corporations, whether share or non-share, which are exempt from both income tax and capital tax, are not required to file annual Ontario Corporations Tax Returns (CT-23) with the Corporations Tax Branch.

Where a corporation loses its exempt status for a particular taxation year it would be required to file a return and pay the taxes for that year. It would also be required to file for each subsequent year if:

a) it had a taxable income for the year;
b) its total assets and/or gross revenue exceed $1 million.

For corporations which have not lost their exempt status, the Branch may require that these corporations complete questionnaires from time to time to see if their tax status has changed.

Dissolution – Surrender of the Charter

Where a corporation no longer serves the purpose for which it was incorporated or where the members have lost the interest in the corporation, it may be desirable for the members to terminate the existence of the corporation. The most straight forward method of dissolution is the surrender of the charter

Incorporating a charity

The majority of Ontario charitable corporations are incorporated by Letters Patent issued under the provincial Corporations Act.

What is a charitable corporation?

Charities are a special kind of not-for-profit corporation. In order to be a charity, a corporation must meet the general requirements for not-for-profit corporations and some additional requirements. A summary of these additional requirements is set out below.

1. The name of the corporation

The name of a charitable corporation must satisfy all of the requirements set out in the Act. The name should also describe the purpose of the charity. The name of a foundation can include the name of a person or family, for example, the “Smith Foundation”.

2. The objects or purposes of the corporation:

The objects, or purposes, of a corporation are set out in one or more paragraphs, in the Letters Patent, called the object clauses. The object clauses describe the nature of the work the charitable corporation will undertake.

A corporation can carry out activities described in the object clauses. It can also carry out other activities provided they further the objects or are minor in relation to the activities described in the object clauses. It is not permissible to use the property of the corporation for purposes, charitable or not, which are outside the scope of the objects set out in the Letters Patent. Examples of object clauses are found in Appendix G.

For a corporation to be a charity, the objects must satisfy the following requirements:

a. The objects of the corporation must be legally charitable:

If a corporation is to be a charity its objects must be charitable. The legal meaning of charity is not the same as the popular meaning of the word. Charity, in the legal sense, describes four areas.
A charitable corporation must be set up to carry out activities in one or all of these areas. They are:

• Relief of poverty;
• Advancement of education;
• Advancement of religion; and
• Other purposes beneficial to the community, as determined by the courts,
but not falling under any of the above.

It is important that the object clauses clearly describe the activities the corporation will carry out. It is not acceptable simply to reproduce the four principal areas of charity.

All of the objects of a charitable corporation must be charitable. A corporation which has some charitable objects and some non-charitable objects is not a charity.
Objects must be stated precisely so that it is clear how the property of the charity is supposed to be used. If it is not clear whether an object is charitable, the courts have decided that it will not be considered charitable.

b. The objects must promote a public benefit:

A charity must benefit the community or a large part of the community – not only a few people. For example, raising funds for one person who suffers from a disease is not considered charitable because it provides a benefit only to that person. Raising funds for disease research is considered charitable because, while only the people who suffer from the disease benefit directly from research, the community as a whole benefits from decreased health care costs and decreased risk of contracting the disease.

3. Special Provisions

The special provisions set out some of the duties and obligations of the charity and its directors. The Public Guardian and Trustee requires the special provisions found in Appendix H to be set out in the Letters Patent.

4. Incidental and ancillary Powers

The incidental and ancillary powers are the means by which the charity will fulfil its objects. If the applicant is not using the pre-approved object clauses, the applicant may decide to use power clauses. If no power clauses are stated in the Letters Patent, the corporation will have the powers set out in the Corporations Act, subject to any restrictions found in charities law.

Deciding Whether to Use the Pre-approved Objects

The pre-approved object clauses cannot be used by all charities. A charity should only use the pre-approved object clauses if one or more of the clauses describes the intended purposes of that organization. It is important that the object clauses accurately describe the charitable purposes the corporation will carry out.

Before deciding to use the pre-approved object clauses you should think about the activities your charity will carry out both on start-up and in the foreseeable future. Engaging in activities beyond the scope of the objects set out in the Letters Patent is not permissible. Directors of a corporation which uses property for purposes not in the object clauses may be required by a court to repay the money used for other purposes.

If the pre-approved object clauses do not accurately describe the purposes you intend the corporation to carry out, or if you wish to add additional object clauses, the pre-approved object clauses should not be used. Other object clauses will have to be drafted and the application for incorporation must be reviewed and approved by the Public Guardian and Trustee.

How to Use the Pre-approved Objects

If you use the pre-approved object clauses to apply directly to Companies Branch you must also use the pre-approved special provisions.

To use the pre-approved object clauses you must use the pre-approved object and special provision clauses word-for-word.

From time to time, the Public Guardian and Trustee will approve additional pre-approved object clauses. The most recent list of pre-approved object clauses is available from the Public Guardian and Trustee and from Companies Branch.

Revenue Canada

Revenue Canada has pre-approved the pre-approved clauses to simplify applying for a charitable registration number (now known as a business number). If you intend to apply to Revenue Canada for charitable registration and you wish to use any of the pre-approved clauses, it is your responsibility to make sure that you have used the pre-approved clauses word-for-word. Even if Companies Branch issues the Letters Patent, Revenue Canada may not approve the clauses if there is a variation in wording.

Your organization’s use of proper objects is only part of Revenue Canada’s requirements for charitable registration. Revenue Canada must take other factors into consideration, including the activities and programs your organization undertakes to achieve its objects. For information on how to apply to Revenue Canada for charitable registration you may wish to contact your local Revenue Canada office which can be found in the blue pages of your telephone book.

Applications for incorporation through the Public Guardian and Trustee
All applicants who do not use the pre-approved object and special provision clauses must submit their applications for incorporation to the Public Guardian and Trustee for approval. Applicants should submit their applications to the Public Guardian and Trustee as if they were applying to the Companies Branch of the Ministry of Consumer and Commercial Relations.

Objects

If you submit your application to the Public Guardian and Trustee for approval, you may draft object clauses tailored to fit the unique nature of the work your corporation will undertake. The Public Guardian and Trustee will review your objects to determine whether they are charitable.

Powers

If no powers are stated, the corporation will have the powers provided in the Corporations Act, subject to any restrictions found in charities law.

Grounds for refusing applications for charitable organizations
The following are some of the reasons for which the Public Guardian and Trustee may refuse to approve an application to incorporate a charitable organization:

• Objects are not wholly and exclusively charitable
• Objects are too broad or are vague
• The power clauses include a purpose which is not legally charitable
• There are concerns that the proposed charity will not be properly administered, considering a previous failure of the incorporators to comply with the law relating to charities
• The organization has been operating as an unincorporated association and its financial documents show that a disproportionate amount of charitable funds are being used for non-charitable purposes or administrative expenses
• The name of the organization does not reflect the purposes set out in the application
• The organization is primarily promoting private members’ interests or benefits
• The organization is pursuing political purposes
• The organization’s liabilities exceed its assets

If your application does not meet the Public Guardian and Trustee’s requirements you will be notified of the deficiencies and, in most cases, given an opportunity to amend your application.

Benefits of being a charity

Charities enjoy certain tax privileges. Charities have exemption from, and reduced liability for, some municipal, provincial and federal taxes. Registered charities under the federal Income Tax Act can issue income tax donation receipts so that donors can obtain tax credits.

Charities enjoy legal protections intended to protect charitable property. When a charitable purpose or object becomes impossible or impracticable to carry out, the courts apply charitable property to new purposes which are as similar as possible to the original purposes. The courts can also use this power when charitable organizations dissolve without a clause in their Letters Patent providing for the distribution of its remaining property.

A charity reporting to the Public Guardian and Trustee derives the following benefits:

• Members of the public, charitable foundations and government agencies that provide funding and donations often seek confirmation from the Public Guardian and Trustee that the charity is complying with the Public Guardian and Trustee’s reporting requirements.
• The Public Guardian and Trustee maintains a database of Ontario charities that is regularly used to find charities entitled to receive gifts under Ontario estates.
• The Public Guardian and Trustee’s database may also be used to identify charities which may be suitable to receive the property of dissolved charities or gifts from estates to non-existent, defunct or unidentifiable charities.

Special situations of religious organizations
Religious organizations should consider certain issues carefully before incorporating.

Governing Law

If a religious organization becomes incorporated, its ecclesiastical, canon or church laws, rules or regulations may be subject to the Corporations Act. This means that if any ecclesiastical, canon or church law, rule or regulations conflicts with the Corporations Act, the organization, once incorporated, must comply with the Corporations Act and will no longer be able to use that law, rule or regulation in administering its affairs.

Real Estate

In addition, a religious organization’s power to lease real estate or buildings to others may be substantially restricted by the Charities Accounting Act. The Religious Organizations’ Lands Act applies to unincorporated religious organizations.

That Act allows the trustees of a religious organization to lease land held by them on behalf of the organization for a maximum period of 40 years, provided the land is no longer required for any of the organization’s religious purposes. When a religious organization incorporates, the Charities Accounting Act applies. That Act generally allows charities to hold land only for their own use. If the organization is currently leasing property, it may wish to consult a lawyer before incorporating.

Initial Reporting Requirements

When you incorporate a charity, you must provide to the Public Guardian and Trustee the following documents and information:

• A copy of the Letters Patent governing the charity
• The street and mailing addresses of the charity, and the names and the street and mailing addresses of its directors and officers
• All legal and popular or common names or acronyms by which the charity is known or identified
• The registration and business identification numbers assigned by Revenue Canada for charitable donation tax-credit purposes. Please advise if a registration number has not been assigned, or subsequently is revoked, and provide an explanation.

These reporting requirement also apply to charitable trusts and incorporated charitable organizations.

Registration with Revenue Canada
Any charitable corporation wishing to apply for registration with Revenue Canada as a registered charity must file with Revenue Canada.

The application forms and an explanatory brochure are available from any Revenue Canada Office. See the blue pages of your telephone book for the office nearest you.

Most Used Purposes for
A Not-For-Profit and Charity

Athletics and Sports
Arts
Business / Professional Groups
Community
Religious Organizations
Religious Schools
Foundations
Services for Senior Citizens
International Development
Assistance for the Sexually/Physically Abused
Relief of Poverty
Programs for Physically or Mentally Disabled
Promotion of Health
Substance Abuse
Preservation of the Environment
The Arts
Community Centres, Immigrant Services, Literacy and Employment Training