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Public benefit corporations

This page tells you what Ontario’s Not-for-Profit Corporations Act (ONCA) has to say about a new category of nonprofits called public benefit corporations. It explains which nonprofits fit in this category and what rules they have to follow.

If you incorporated before ONCA was proclaimed on October 19, 2021, your bylaws or articles may not comply with the rules explained below. You have until October 18, 2024 to review, update, and file your governing documents with the Ontario government. Until then, you can continue to use the rules in your articles and bylaws as long as those rules were valid before ONCA took effect.

A nonprofit is a public benefit corporation (PBC) if one of the following is true:

A nonprofit is a public benefit corporation (PBC) if one of the following is true:

  • The nonprofit is a charity.
  • The nonprofit received more than $10,000 in the previous financial year from public sources. This includes:
    1. grants or other similar financial help from the Federal, Provincial, or a municipal government or from an agency of a government, such as the Ontario Trillium Foundation
    2. gifts or donations from people who are not a member, director, officer, or employee of the nonprofit.

Grants or other financial help include subsidies, loans, and amounts given to a nonprofit to support their work. It doesn’t include fees for products or services.

Gifts and donations don’t include money paid for goods and services, like advertising or meals.

If you’re not sure whether your nonprofit is a PBC, you may want to follow the rules for PBCs to avoid problems in the future.

If your nonprofit can’t follow those rules or you decide not to, it’s best to get legal advice.

If a nonprofit is not a charity but has reached the $10,000 threshold in gifts and donations, it becomes a PBC at the annual meeting of members in the next financial year. This gives the nonprofit time to make the necessary changes to their structure before they become a PBC. For example, if the nonprofit has reached the $10,000 threshold in November of the 2020-2021 fiscal year, then it will be PBC for the 2021-2022 fiscal year.

Yes. PBCs have to follow special rules:

 

  • about when they review and report their finances
  • with what they can do with their assets if they dissolve

PBCs that are charities

PBCs that are charities cannot have directors who are also employees of the nonprofit, except in very limited situations. For an employee to be a director, you need to get a court order that allows this and then the order has to be approved by the Office of the Public Guardian and Trustee.

These kinds of PBCs also have to distribute their assets to a charity with similar goals to their own, or to a government, or a government agency. They can’t distribute their assets to members.

PBCs that are not charities

PBCs that are not charities cannot have more than one-third of their directors be employees or ex-officio directors. They must also distribute their assets to another PBC with similar goals, or to a government or government agency, or a municipality. They cannot distribute their assets to their members.

A nonprofit that’s not a PBC in the fiscal year they’re closing down may still have to follow the PBC rules when distributing their assets. They must follow them if they were a PBC in any of their 3 previous financial years.

Nonprofits that are charities will always be a public benefit corporation (PBC). And they always have to follow the stricter rules that apply to PBCs.

But if your nonprofit is not a charity, they may be a PBC one year and a non-PBC the next year. Their status depends on whether or not it got more than $10,000 in funds from the public, the government, or government agencies.

Some nonprofits choose to be a PBC from the beginning even if there may be years when they will not get the funds to qualify as a PBC. This is because they don’t want to worry about changing their structure for the years when they are a PBC. They always follow the stricter rules for PBCs.

Other nonprofits keep careful track of their funding sources to see when a change in status may need to take place. They prepare themselves for the changes they need to make to follow the stricter rules for PBCs.

To follow the rules that apply to a public benefit corporation (PBC), your nonprofit has to make sure that:

  • at least 2/3 of your directors are not employees
  • if your organization is not a charity, your articles say that if your nonprofit dissolves your assets will only be distributed to a PBC with similar goals, a government, a government agency, or a municipality
  • if your organization is a charity, your articles say that if your nonprofit dissolves your assets will only be distributed to a registered charity with similar goals, a government, a government agency, or a municipality
  • they follow the rules for financial audits and financial reviews in years when they cross the $10,000 threshold.