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Compliance and Restraining Orders under the CNCA

The Canada Not-for-profit Corporations Act provides for compliance and restraining orders. The provision is broadly cast in terms of who may apply for an order, who may be bound by an order, the scope of an order and what types of orders can be made.

1. Possible Applicants

The possible applicants for a compliance or restraining order are:

● members;

● directors and officers;

● holders of debt obligations and other creditors of the corporation;

● the Director appointed under the Act; and

● any other person who, in the discretion of the court, is a proper person to make the application.

2. Persons who may be Bound by an Order

An order may be made binding on the following:

● the corporation; or

● any director, officer, employee, agent, public accountant, trustee, receiver, receiver-manage or liquidator of the corporation.

However, an order cannot be made against a member in her capacity as such.

3. Scope of Order

An order can be directed to ensure compliance with:

● the Act or the regulations made under the Act;

● the articles or by-laws of the corporation; or

● in the case of a non-soliciting corporation, a unanimous member agreement.

4. Possible Orders a Court may Make

Finally, the court, on the application, may make any order it thinks fit, including an order:

● directing any of the persons described under Part 2 above to comply with the order; or

● restraining any of these persons from acting in breach of the legislation or corporate constating documents described under Part 3 above.

In contrast to the oppression remedy, derivative action and liquidation order, a court making a compliance or restraining order is not explicitly prohibited from making an order where the corporation is a religious corporation and the impugned decision of the directors or members is based on a tenet of faith held by members of the corporation. Nevertheless, it is unlikely that a court would override a decision based on a tenet of faith where it was reasonable to base a decision on the tenet of faith, having regard to the religious activities of the corporation.

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