New legislation spurs big-picture thinking for non-profits

As the CEO of a national charity, Gillian Smith recently worked with her board to make sure the organization complies with new legislation governing not-for-profits in Canada.

This puts the Institute for Canadian Citizenship (ICC) in select company; to date, only 12 per cent of active non-profits have met their obligations under the new rules, which require all federally incorporated non-profit organizations to make the transition to the Canada Not-for-Profit Act (NFP Act). If they don't do so by October 17, 2014, they will be dissolved.

Kate Lazier, a partner at Miller Thomson LLP, a national firm with a charity and not-for-profit practice that assists clients across Canada, says that complying with the NFP Act requires non-profits to consider a range of issues. Previously, these entities were regulated by the Canada Corporations Act, which she says gave them considerable scope in how they organized themselves.

"The NFP Act is more prescriptive – for example, it outlines set term limits for directors and does not allow ex-officio directors. There are more changes to the rules, and I haven't yet come across a corporation that could leave its bylaws as they are and be in compliance."

One of the major challenges for non-profits in meeting the NFP Act is simply finding the time to review the new legislation and understand how it affects their governance practices.

"Many of these organizations are so busy working to fulfill their mandate that they don't always take the time to look at their governance material," says Ms. Lazier. "This is an opportunity to ask some important questions. Is the governance structure outdated? Do the bylaws need to be tuned up? Is the organization's purpose still accurate?"

Ms. Smith says that one of the benefits of the compliance process was that it enabled her organization to review these big-picture questions.

"The process got our board thinking about being a board, about how it meets the needs of the organization, and how it meets its governance, fiduciary and other obligations. It's one of those rare moments when you can pause and take stock, evaluating whether you need to make changes to how you operate."

She also says that working with legal counsel was extremely helpful. "Miller Thomson had established a smooth process to take organizations like ours through the transition. They made the easy parts easy, and let us focus our time and effort on the more substantive issues."

For the ICC, one such issue was addressing the NFP Act's restrictions around board members.

"Our founding co-chairs are so essential to our organization," says Ms. Smith. "The question was how to balance the need to retain and honour this rich institutional memory while ensuring the practice of good governance."

The answer was to draft bylaws that formalized the lasting legacy of the two individuals who created the organization – the Right Honourable Adrienne Clarkson and John Ralston Saul.

As someone who has been through the process, Ms. Smith says that those non-profits who have yet to make the transition should take heart and take action. "It's a great opportunity to think about your organization and its governance structure function. It's a detailed process that you need to take seriously, but it doesn't need to be overly complicated."

Kate Lazier SUPPLIED