Background: The B.I.G. Charity Law Group was recently approached by a successful charity, which is Federally incorporated under the CNCA, which raises and distributes millions of dollars annually. They were advised by their accountant that they are a Soliciting Corporation and therefore require an audit which will be filed with Industry Canada.
Q. "How could we circumvent the onerous Audit requirements under the CNCA. The accountant would invoice us $15,000.00 annually, and that is $15,000.00 that would have gone to feed the poverty-stricken and needy. What options do we have to avoid being subject to the Audit requirements under the CNCA?"
A. They have several options:
- Reorganize the Corporation as a Charitable Trust or Association. The downside to organizing as a Trust or Association is the the Directors or Trustees would be exposed to personal liability for the actions and debts of the Organization.
- If the Organization wants to retain its Corporate status, it can continue ("Export") under the legislation of another province. Provinces which allow importing from Federal jurisdiction are Ontario, Saskatchewan, Manitoba, and Alberta. But note, if continued under provincial legislation, the Corporation will be required to have a registered office in the province.
- A third option is to go to the root of what makes the Organization a "Soliciting Corporation" and modify and revise the by-laws or Articles accordingly. What do we mean?
For example, if the Organization became a Soliciting Corporation because it received donations of over $10,000.00 from the general public, the Organization can amend the Articles or by-laws to state that anyone who donated in the past year is deemed to be a member of the Corporation (a proficient lawyer will know how to draft the articles in a way that will provide for multiple classes of members, with variant voting powers). That way, donations will have been received from the Corporation's members, and will not satisfy the "Soliciting Corporation" test.
There are other possible methods as well, but more about that in a future blog post.