On June 14, 2023, Corporations Canada announced that, as of next month, it will begin the administrative dissolution process for federal not-for-profit corporations (or “NFPs”) that have failed to file their annual returns for three years.
Under the Canada Not-for-Profit Corporations Act, NFPs are required to file an annual return with Corporations Canada within 60 days of the corporation’s anniversary date. The annual return provides up-to-date information about a NFP and, once filed, is made available to the public online.
A NFP that fails to file its annual return(s) can be dissolved by Corporations Canada, which can have very serious consequences for the organization. For example, dissolved corporations are prohibited from conducting activities and may be unable to secure bank loans. Moreover, dissolved corporations that are registered charities may lose their registration under the Income Tax Act. Although Corporations Canada is permitted to dissolve a NFP after only one year of failing to file its annual return, its current policy is to only do so after three years.
Importantly, NFPs in default of filing their annual returns for the last three years still have an opportunity to course correct before being subject to administrative dissolution. In fact, in its announcement, Corporations Canada indicated its intention to send a final warning to NFPs in default in the form of a Notice of Intent to Dissolve (the “Notice”) and to provide such organizations with 120 days from the date of the Notice to file their outstanding annual returns. It is only where an NFP does not comply within the 120-day period that Corporations Canada will proceed with the issuance of a Certificate of Dissolution in respect of the corporation.
In Our View
NFPs can not only file their annual return online on Corporations Canada’s website, but can also easily verify when their annual return is due.
As an unintended dissolution can create significant headaches for an organization, federal NFPs who are presently behind in their corporate filings should take immediate steps to rectify the situation.
For more information, please contact Raquel Chisholm at 613-940-2755.