When a director or member chooses not to vote either for or against a motion at a meeting, they’ve abstained from voting. Your nonprofit’s bylaws may say whether such votes are counted in the vote count. If they count, they are treated as “No” votes and that means you need more votes to pass a motion.
To adjourn means to end a meeting:
- permanently, because you’ve finished all the items on the agenda, or
- temporarily, because you’ve run out of time or for some other reason.
If you adjourn a members’ meeting temporarily, your bylaws may say that you have to give your members notice of the date and time when the meeting will continue.
A nonprofit must have at least one meeting every 15 months for its members to elect their board of directors, review financial statements, select an auditor, and vote on any changes to their bylaws. That meeting is called an annual meeting, annual general meeting (AGM), or annual members’ meeting.
Annual meetings are not the same as special members’ meetings. Special members’ meetings are like annual meetings, but they can take place at any time and they usually have a specific purpose, for example, an emergency vote on a certain issue.
These are documents filed with the Ontario government that say:
- what your nonprofit’s legal name is,
- the province where your headquarters is located,
- your nonprofit’s purposes or goals, and
- the names of the people who started your nonprofit, which is usually your first board of directors.
Articles are also known as articles of incorporation or letters patent.
If your nonprofit’s name or purposes changes after it incorporated, you have to change the articles you filed with the government. These are called articles of amendment.
An audit is the process of checking your nonprofit’s financial statements and accounting records, to see if they are accurate. The Not-for-Profit Corporations Act says only a certified public accountant who is not connected to the nonprofit can do an audit.
An auditor is a public accountant, or a person trained and licensed to audit or check an organization’s financial statements. A nonprofit’s members must decide whether they will appoint an auditor each year. This usually happens at the annual meeting, but can happen at a special members’ meeting too.
Board of directors
A board of directors, also called the board, is a group of people that have a legal duty to make sure a nonprofit is well managed. They also have a legal duty to act in the best interest of the nonprofit.
Members of the board are called board members or directors. Board members are usually elected by the nonprofit’s voting members at its annual meeting. But if the board doesn’t have all the members it needs to have, a nonprofit’s voting members can elect directors at a special meeting or the board can appoint board members if the nonprofit’s bylaws allow it.
A board committee is a group of people that a board of directors brings together to do jobs that usually benefit from a smaller team doing it. For example, a board may create a committee to work on its annual budget or update its bylaws.
The board can give a committee many of its powers, but not all of them. For example, a board can’t give a committee the power to appoint new directors.
These are the rules the directors and members of a nonprofit agree to follow to determine who can make important decisions and how they make those decisions. For example, a nonprofit’s bylaws will say how its board of directors are elected and how long a director stays on the board.
The Not-for-Profit Corporations Act (ONCA) says some rules must be included in your bylaws, but it allows you to decide whether or not to include other rules. For example, your bylaws must define who is a member. But you can decide whether or not you want to include the rule about whether your annual meeting must take place in Ontario.
Your bylaws can also include rules on issues that the ONCA doesn’t mention. For example, the process to nominate candidates to the board.
Canada Revenue Agency
The Canada Revenue Agency (CRA) is the federal government department that decides whether or not a nonprofit is a charity for the purpose of taxes. If CRA decides it is a charity, it gives it a registered charitable number. CRA also checks to see whether charities are following the rules that apply to them.
A casting vote is the vote a chair of a meeting gets to break a tie vote. A tie vote means there are an equal number of votes for and against the issue being voted on. Your bylaws will say whether or not a chair of a meeting at your nonprofit gets a casting vote.
A charity is a nonprofit that only has charitable goals or purposes, and all its activities further those goals.
A goal or purpose is charitable if it does one or more of the following:
- relieves poverty, for example, food banks, soup kitchens, and nonprofits focused on low-cost housing have this goal
- advances education, for example, colleges, universities, and research institutes have this goal
- advances religion, for example, places of worship have this goal
- has any other purpose that the courts have found to benefit the public, for example, animal shelters and libraries
A nonprofit whose purposes are charitable may apply to the Canada Revenue Agency (CRA) to become a registered charity. Registered charity status gives nonprofits the right to give their donors a tax receipt. Even if a charity does not apply to the CRA, they may still be considered a “charity at common law” which will affect the rules they have to follow.
A compilation is when you take your unaudited financial information and records and put them into standard financial statements, such as a balance sheet, income statements, and statements of cash flow.
The Canada Not-for-profit Corporations Act says a nonprofit must at least do a compilation if it’s not doing an audit or review engagement. This can happen when the nonprofit’s members vote not to do them.
Consensus decision making is one of the ways a group of people can make decisions. When you decide by consensus it means everyone in the group supports or agrees with the decision. It’s different from making a decision based on a simple majority vote, which means 51% of the people voted in favour of the decision.
Conflict of interest
A conflict of interest is a situation where a person in an official position can benefit themselves or someone they are close to, from something they can do in that position. For example, a director is in conflict of interest if they vote on a contract from a company that is owned by a family member.
Corporations without share capital
When a corporation’s goals don’t include gain or profit for its members, it’s known as a corporation without share capital. This means that any profit that the corporation makes, is used to support its goals and it’s not given to its members. A corporation without share capital has members, not shareholders.
In contrast, a for-profit corporation or company has shareholders instead of members. These shareholders may get profits paid in the form of dividends.
Debt obligations, also called bonds or debentures, are promises made by an organization to pay a certain amount of interest in addition to the principal in exchange for a loan. Debt obligations are sometimes also called community bonds. Your bylaws or articles can say whether or not your nonprofit can issue debt obligations, which means they can borrow money and agree to pay interest on it.
The Act or your bylaws may “deem” one thing to be another. For example, you may deem someone who is participating by phone to be present at the meeting.
These are bylaws the Ontario government wrote that are based on the Ontario’s Not-for-Profit Corporations Act (ONCA). They’re called default bylaws because they apply to every new nonprofit that incorporates under the ONCA, unless that nonprofit passes its own bylaws within 60 days of the date it incorporated.
Nonprofits that incorporated before the ONCA also have to make sure that their bylaws follow the ONCA.
Ontario’s Not-For-Profit Corporations Act has rules that apply to a nonprofit even if its articles or bylaws don’t include them. For example, if a nonprofit’s bylaws doesn’t say what the quorum is for board meetings, the default rule says it will be 51% of the number of directors listed in its articles.
A member of a nonprofit’s board of directors.
If a director, or someone close to them, could personally profit from a contract or transaction the board is thinking about, then they have to tell the board about their conflict of interest. This is called disclosure.
This is the official way to close down a nonprofit. A nonprofit may decide to dissolve or close down voluntarily. It may also be forced to dissolve if the court orders it to, or if a director appointed by the Minister of Government and Consumer Services, decides it should.
Executing a legal document means completing it in a way that makes it take effect. For example contracts usually take effect once they are signed.
Ex-officio is a Latin term that means “by virtue of one’s office”. An ex-officio director is a director who wasn’t elected to a board, but is on it because of an office or position that they hold. For example, the executive director of a particular organization may be an ex-officio director on your nonprofit’s board of directors.
The Canada Not-for-profit Corporations Act doesn’t allow a nonprofit to have ex-officio directors. But Ontario’s Corporations Act does.
A fiduciary duty is a duty to act in the best interests of a nonprofit and not your own best interests. Directors of nonprofits have a fiduciary duty to decide issues based on what would be best for the nonprofit and not best for themselves.
A financial review engagement is when a certified accountant that is independent of your nonprofit goes through your financial statements to see if they follow accounting rules and can be believed. A financial review engagement isn’t as detailed and as expensive as an audit. It also takes less time.
Financial statements are records that show how a nonprofit is doing financially. Financial statements usually include:
- Balance sheets that tell you about a nonprofit’s assets and liabilities.
- Income statements that tell you about the money the nonprofit took in and spent.
- Statements of cash flow that tells you when the money came in and went out.
Nonprofits have to make their financial statements available to members at least 21 days before a members’ meetings. This gives members’ enough time to review them.
A fiscal year is the period of time a nonprofit uses to make their budgets and pay taxes. A nonprofit can begin and end its fiscal year whenever it chooses, as long as the Canada Revenue Agency agrees to it. Fiscal years usually start January 1 and end on December 31, or start April 1 and end March 31.
Good faith basically means that you did something honestly and fairly, and not for a reason that is against the law. For example, if a board signed a contract with a company, and didn’t know the company was going to go bankrupt soon after, it signed the contract in good faith. Or if it a nonprofit ends a membership, it was ended because the member did something against the bylaws and not because the board didn’t like the member.
An in-camera meeting is a type of board meeting that is usually attended only by its board directors. Other people, for example, a member, non-member, or employee, might attend an in-camera meeting only if they’ve been invited to it. But they don’t have a right to attend. An in-camera meeting is sometimes called an executive session.
To incorporate means to make your nonprofit an independent legal body. An incorporated nonprofit can do anything, as long as what it does:
- helps it to achieve the goals in its letters patent, and
- is allowed under its articles, bylaws, and all laws.
A nonprofit doesn’t have to incorporate. If it does not, it stays as an unincorporated association.
When you apply to the government to incorporate, you have to list the people who will be your nonprofit’s first board directors. These directors are also called incorporators.
Indemnify means to compensate someone financially for damage, injury, financial loss, or legal liability. For example, if a board member is sued for something they did or didn’t do that was part of their role as a board member of a nonprofit, then the nonprofit may cover some or all of their legal costs. Many nonprofits indemnify their board members.
If a nonprofit cannot pay the money it owes on time, it’s insolvent.
Liable means to be legally responsible for your actions. For example, if a director of a nonprofit does something that they’re not allowed to do in that role, they may be held personally liable for what they did. They may get sued by the nonprofit or by those impacted by what they did.
A motion is a formal step you take to ask a group of people to consider something. For example, when a member makes a motion at a meeting to approve a meeting agenda, it means they’re asking the other members present at the meeting to decide whether they agree with what’s planned to happen at the meeting.
A managing director is a person to whom a nonprofit’s board of directors have given some of its powers to. Nonprofits don’t have to have a managing director. And if they have a managing director, they don’t have to get them specific powers.
The board can never give a managing director certain powers. For example, the power to:
- appoint directors or auditors
- approve financial statements
- approve bylaws
Mandatory rules are rules that Ontario’s Not-For-Profit Corporations Act (ONCA) says a nonprofit must follow even if they are not in its bylaws, or if its bylaws say something else. For example, the ONCA has a mandatory rule that says members have a right to see the nonprofit’s financial statements.
Nonprofits can have different kinds of members. Each kind of membership is called a member class. Your articles must describe each member class. For example, they should say how a person can join each member class and whether they have the right to vote.
A notice is information a nonprofit must give certain people or organisations, for example, its members. There are rules about when some notices must be sent. For example, a nonprofit must give all its voting members notice of a members’ meeting at least 10 day before the meeting takes place.
NUANS stands for Newly Upgraded Name Search. It is a computer-based search system that checks to see if the proposed name of an organization that wants to incorporate is similar or identical to the name of an existing organization.
A nonprofit in Ontario must get a NUANS report before it incorporates. If the search finds a similar name, then the nonprofit has to change its proposed name.
An officer is a person who holds a certain position or office. For example, a person who is the president, chair of the board of directors, vice-president, secretary, assistant secretary, treasurer, assistant treasurer, or manager of a nonprofit is an officer of that organization. A person in another position in a nonprofit can also be an officer if the bylaws of that nonprofit say they are.
Some officer positions may have conditions. For example, the president and the chair of the board of directors must also be directors or members of a nonprofit.
The first time a nonprofit’s first set of board of directors meets officially, is called an organizational meeting. The board is expected to do many important things at this meeting including:
- make bylaws
- decide on how to keep its corporate records
- appoint officers
- appoint one or more auditors
- make banking arrangements, and
- issue memberships.
Policies are a set of plans that say what a nonprofit has officially agreed to do in a particular situation. They guide how a nonprofit is run. Unlike bylaws or articles, policies don’t have to be approved by a nonprofit’s members. They can be made and changed by a nonprofit’s board or employees.
Prescribed in regulations
Besides following what the Not-for-Profit Corporations Act (ONCA) says, nonprofits must also follow government regulations. ONCA gives the government the power to make regulations. For example, it could make a regulation on what forms a nonprofit has to fill out, or one on when they have to send financial statements to its members.
To proclaim means to announce or publish. All new laws, like the Not-for-Profit Corporations Act (ONCA), only take effect after they’ve been proclaimed. So, for example, even though the ONCA was debated and passed by the Ontario government in 2010, it isn’t in force as it hasn’t been proclaimed.
The ONCA is expected to be proclaimed in early 2020, which is when it will apply to new nonprofits. Existing nonprofits have 3 years from the day ONCA is proclaimed, to follow it.
A proposal is any matter that a nonprofit’s member wishes to discuss at an annual members’ meeting. Only members with voting rights can submit proposals, and they have to submit them at least 60 days before the date of the meeting.
A proposal must also meet certain conditions. For example, it must:
- relate to the affairs and activities of the nonprofit
- not be about a personal claim or complaint against the nonprofit or its directors, officers, members, or against anyone else
- not abuse the right to put forward a proposal in order to get attention or publicity.
If a voting member cannot go to a members’ meeting, they may be able to ask someone to vote for them at the meeting. The person who votes for the member is called a proxy holder, or proxy for short. Members can have a proxy holder only if their nonprofit’s articles or bylaws allow it. Some bylaws may say that only members of the nonprofit can be a proxy holder.
Public benefit corporation
The Not-for-Profit Corporations Act (ONCA) divides nonprofits into 2 types:
- Public benefit corporations are
nonprofits that are
- registered charities or
- any nonprofit that gets more than $10,000 in funds from government or the public.
- Non-public benefit corporations are nonprofits that mainly serve their members. For example, clubs and trade associations. And they also have to get less than $10,000 in public funds.
Public Guardian and Trustee
This is another name for the Office of the Public Guardian and Trustee (PGT). The PGT is part of Ontario’s Ministry of the Attorney General. The PGT regulates charities and protects the public interest in charitable property.
A nonprofit’s purposes are its goals. For example, a nonprofit’s purposes or goal could be to end hunger or to encourage young children to read. Nonprofits must say what their purposes are in their articles. Everything a nonprofit does must support its purposes.
Quorum is the minimum number of people that must be present at a directors’ or members’ meeting before any voting can take place. Only those with the right to vote at that meeting can be counted for quorum. The default quorum for directors’ and members’ meetings under Ontario’s Not-for-Profit Corporations Act is a majority of directors or members. But your bylaws can have a different quorum for them.
To remunerate is to pay someone for the work they did. For example, if your nonprofit is not a charity, you’re allowed to pay or remunerate your board members. If you don’t want board members to be paid, you must say so in your articles or bylaws.
A resolution is a formal plan or suggestion that a nonprofit’s directors or members have to vote on at a board or members’ meeting. For example, you might vote on a resolution to elect or remove a director, or change your bylaws.
A special resolution is a resolution that needs a certain amount of support to be passed. The Not-for-Profit Corporations Act (ONCA) says certain things must be passed by special resolution. For example, if you want to move your office to another town, you need to pass a special resolution.
The ONCA says a special resolution passes if:
- 67% of members voting at a members’ meeting that is being held to vote on the resolution, vote in favour of it, or
- all members who have the right to vote, support the resolution outside of a meeting.
Stocks, bonds, and other types of investments are called securities. Nonprofit may own securities if their bylaws allow them to.
Any corporation that gets more than $10,000 in income from public sources in a single financial year is a soliciting corporation. Public sources include:
- gifts or donations from non-members
- grants from government
- funds from another corporation that also got income from public sources
Visit Corporations Canada for information on the special rules that soliciting corporations have to follow. For example, rules on financial reporting, and what happens to a soliciting corporation’s property if they close down.
Special members’ meeting
These are members’ meetings that take place between a nonprofit’s annual general meetings. A nonprofit’s board of directors may call for a members’ meetings for many reasons. For example, to remove a director, vote on a merger, or deal with business that couldn’t be finished at the annual meeting. These members’ meetings are called special members’ meetings.
Members who hold 10%, or less if the bylaws allow it, of voting rights can force a nonprofit’s board to call a special members’ meeting.
A tax receipt is an official document that proves to Canada Revenue Agency that a person donated to a registered charity. Charities give people a tax receipt when they’ve donated something of value to the charity. A tax receipt may help the donor reduce their taxes.
Title means that a person has some rights to a certain piece of property. For example, they may own it or have a right to use it.
A tortious act is anything that you do or don’t do that harms someone in a way that violates their rights and that you can be held legally responsible for. An act does not need to be intentional in order to be tortious. Directors who commit tortious acts may be personally responsible. Sometimes a non-profit may be found responsible for the act too. Within certain limits, a nonprofit can indemnify their board members if they commit a tortious act while acting in their capacity as director.