The Canada Not-for-profit Corporations Act divides corporations into soliciting and non-soliciting corporations, depending on whether they receive more than $10,000 in funding from public sources in the corporation's current fiscal year or its two previous fiscal years. The default rule for both soliciting and non-soliciting corporations is that they must appoint a public accountant and audit their annual financial statements each fiscal year. However, in recognition that, for smaller not-for-profit corporations, the costs of appointing a public accountant and auditing its financial statements may outweigh the incremental benefits, the Act and regulations provide for various exemptions. These exemptions depend on the type of corporation (soliciting or non-soliciting), the aggregate revenue of the corporation in its most recent fiscal periods and annual membership approval.
The Canada Not-for-profit Corporations Act permits the members of non-soliciting corporations to enter into a unanimous member agreement ("UMA"). If the corporation has only one member, it may sign a unanimous member declaration ("UMD") that is deemed to be a UMA. As the name makes clear, all members of the corporation (including non-voting members) must be parties to the UMA. A UMA is an otherwise lawful written agreement that restricts the powers of the directors to manage, or supervise the management of, the activities and affairs of the non-soliciting corporation.
The Canada Not-for-profit Corporations Act permits a corporation, or any director or member of the corporation, to apply to court to determine any controversy with respect to an election or appointment of a director. (The Act also allows an application in respect of the election or appointment of a public accountant, but this would rarely arise and will be ignored for the purpose of this article.) Applications to court involving the election of directors may determine who controls the corporation and, therefore, are much more likely to arise in litigation.
In Keck v. Balgonie Early Learning Centre Inc. (released March 2018), Justice Zarzeczny of the Saskatchewan Court of Queen's Bench found that a non-profit corporation justifiably terminated a services agreement with a member. The case raises the larger question: should provincial courts have jurisdiction to hear matters involving not-for-profit corporations?
In Gill v. Kalgidhar Darbar Sahib Society (released May 2018), Justice Harvey of the Supreme Court of British Columbia refused to grant leave to a former executive member authorizing him to bring a derivative action on behalf of a religious society. The court found, in the circumstances, that the petitioner was not acting in good faith and that the derivative action did not appear to be in the best interests of the society.