What follows is Part I of a two-part discussion on the content of articles of incorporation (Form 4001) under the Canada Not-for-profit Corporations Act ("CNCA"). Part I addresses the mandatory elements of the articles. Part II address various optional provisions.
Most of the following comments apply equally to articles of continuance (import) in Form 4011 and articles of continuance (transitional) in Form 4031.
The box numbers below correspond to the numbered boxes in Form 4001.
Box 1 (Corporate Name): In most cases, the applicants will have obtained a corporate name search report (NUANS report) for the proposed name, which reserves the corporate name for 90 days. That name must be inserted in Box 1.
If the corporation will have both an English form of corporate name and an interchangeable French form of name, a NUANS report must be obtained for both names. The French and English names should be set out in the articles, one above the other (without a "/" or another character to separate the two alternative corporate names) as follows:
Box 2 (Province or Territory Where Registered Office is Situated): Only the province (or territory) in which the registered office will be located must be stated. For example, state: Ontario.
The address within the province will be set out in Form 4002 (Initial Registered Office Address and First Board of Directors), which is filed with the articles.
Box 3 (Minimum and Maximum Number of Directors): The corporation has a choice between a fixed number of directors or a minimum and maximum range in the number of directors. A soliciting corporation must have a minimum of three directors. A non-soliciting corporation may have one director. There is no maximum number of directors under the CNCA.
If the corporation wishes to have a fixed number, then Box 3 must be completed so that the minimum number and maximum number is the same number.
Box 4 (Statement of Corporation's Purpose): The statement of purpose is relevant in determining whether the corporation can qualify as a registered charity or a registered Canadian amateur athletic association ("RCAAA").
Alternatively, it is a critical element in ensuring that the corporation qualifies as a tax-exempt non-profit organization for purposes of the Income Tax Act.
In every case, the statement of purpose should commence with the expression:
"The exclusive purpose of the corporation is to:
[(a), (b), etc. [state purpose.]"
If Box 4 does not provide enough space for a complete statement of purpose, the following sentence can be inserted into Box 4 and a schedule added accordingly:
"The annexed Schedule "A" is incorporated into this form."
Box 5 (Restrictions on the Activities that the Corporation May Carry On): Most corporations will chose not to adopt express restrictions. In that case, Box 5 should read:
"There are no restrictions."
If the corporation wishes to consider imposing restrictions on its activities, see the further discussion in Part II (Articles of Incorporation - Optional Elements). Box 5 must never be left blank.
Box 6 (Classes, or Regional or Other Groups, of Members that the Corporation is Authorized to Establish): See discussion in Part II (Articles of Incorporation - Optional Elements).
Box 7 (Statement Regarding the Distribution of Property on Liquidation): Upon dissolution of a soliciting corporation, the net assets of the corporation must be distributed to one or more qualified donees as defined in the Income Tax Act. A typical statement for a registered charity or other soliciting corporation is:
"In the event of liquidation, dissolution or winding-up of the corporation, all its remaining assets after payment of its liabilities shall be distributed to one or more organizations that are "qualified donees" as defined in the Income Tax Act (Canada) and that carry on similar activities to those of the corporation, as determined by the directors."
Upon dissolution of a non-soliciting corporation, the default rule is that, except to the extent otherwise provided in the articles, the net assets of the corporation are to be distributed to the members (with each member entitled to an equal share). To qualify as a tax-exempt non-profit organization under the Income Tax Act, however, no part of the assets of the corporation can be distributed to members before or on liquidation or dissolution. A typical statement for a non-profit organization is:
In the event of liquidation, dissolution or winding-up of the corporation, all its remaining property after payment of its liabilities shall be distributed to one or more organizations that carry on similar activities to those of the corporation, as determined by the directors.
In practice, corporations should never leave Box 7 empty. The intended liquidation distribution should always be expressly addressed.
Box 8 (Additional Provisions): See discussion in Part II (Articles of Incorporation - Optional Elements).
Box 9 (Declaration): The articles must be signed by one or more incorporators. An incorporator may be an adult individual who is not an undischarged bankrupt and not found to be incapable by a court. Alternatively, a corporation can act as an incorporator (although this is not as common).