This workshop is open to everyone and will be of interest to: People thinking of setting up a non-profit corporation, members of the boards of directors of non-profit corporations, management of non-profit corporations. Most of the people in attendance are expected to be directors of Keewaytinok Native Legal Services which is a non-share capital corporation set up under the Ontario Corporations Act.

Non-profit (non-share capital) corporations are one way for community based organizations to structure themselves. This workshop will focus on making people aware of the strengths and limitations of the corporate model.

1. Introduction to corporations
2. Advantages
1. Limited liability
1. Unincorporated body (sole proprietorship, partnership or unincorporated association): owners or members liable for debts of body, even if they were not involved in what caused them
2. Corporation’s members, shareholders and directors not liable for corporate debts except in special circumstances.
2. Permanence, as long as the forms get filed, corporation persists.
3. Funding
1. Some funders prefer or require
2. Legal Aid Services Act s2 defines community clinic as a corporation without share capital.
3. Disadvantages
1. Paperwork and cost
1. Basic cost about $400 plus legal fees
2. Ongoing record keeping and reporting
2. Taxation and debts
1. Corporations are taxed separately from their owners
2. Corporations generally must pay tax on profits
3. Indian Act taxation and seizure exemptions do not apply to corporations. Corporations that make a profit may be required to pay tax. If someone sues a corporation and wins, assets on reserve that belong to the corporation can be seized to satisfy the judgment.
4. Business or share capital corporations
1. Profit motive, set up to make money for individual investors
2. Investors have shares, partial ownership
3. In many small corporations, investor, owner, operator all the same
4. Variety of share structures possible. Most stringent requirements for corporations that offer their shares to the public. Less regulation for private corporations (smaller numbers of investors, may be sophisiticated investor requirements).
5. Non-profit corporations
1. No shares, members instead of shareholders, members are not owners
2. Generally no profit motive, no profit for individuals, no personal benefit (some incidental benefits may be ok)
3. Separate legislation for federal and provincial corporations
1. Canada Corporations Act
2. Ontario Corporations Act
3. Ontario Corporations Information Act, reporting requirements for all corporations that operate in Ontario
6. Charities
1. Special rules
2. Income tax issues, tax receipts
3. Types of charities: foundations and active
7. Setting up a corporation
1. Name, meaningful, not confusing and not objectionable
2. Objectives, what is the corporation to accomplish as opposed to the means by which it will accomplish its objectives
3. Membership Structure
1. Who can be a member
2. What role do members play (selection of directors, removal of directors).
3. Removal of members
4. Board of Directors
1. Responsible for management of corporation
2. May be elected by members, sometimes appointed by other bodies (e.g. First Nations) or be required to be nominated by other bodies. Issues of control by other bodies may arise. Important to make decision at onset to avoid later problems.
3. Must use due care, while not necessarily trustees, may be held to high standard in decision making, need to be carefully consider corporate matters, keep informed
4. Decision making process. Voting or other system (consensus) needs to be defined.
5. Term may be longer than one year. Rotating board where not all directors elected or selected each year is also possible.
6. Personal liability. Directors may be held responsible to pay six months of back wages and remittances for employees. Other liability also possible with bad faith.
7. No alternate directors, especially due to personal responsibility
8. Acts as board not as individuals. Individual directors are not in charge of things unless specified.
5. Officers
1. Not always directors
2. Usually President/Chair, Vice, Secretary, Treasurer
3. Duties and powers should be defined
6. By-laws
1. Usually will be at least one general or organizational by-law
2. Important that it be:
1. Internally consistent
2. Unambiguous
3. Comprehensive
4. Readable, use of plain English.
3. Structure should include:
1. Definitions
2. Membership and membership meetings
3. Board and board meetings
4. Committee, e.g. executive committee
5. Officers and duties
6. Audit
7. Protection from liability (indemnity)
8. Borrowing (may be separate by-law)
9. Amendment of by-law
8. Operating a corporation
1. Meetings of members
1. Annual General Meeting, usually to elect board, audit report, selection of auditors
2. Special General Meeting, special business that arises that requires decision by members, notice must include information about any special business (e.g. fundamental change).
3. Quorums
4. Procedures for requisitioning a meeting of the members.
2. Meetings of directors
1. Notice, materials
2. Quorum
3. Committees including executive committee
4. Electronic meetings
3. Changes to by-laws, three step process
1. Approval by board
2. Approval by members
3. Approval by Minister (not always required)
4. Conflicts of interest
1. Defining "interest", personal pecuniary, organizational, systemic
2. Problems in small communities and with government bodies
3. Disclosure of conflicts of interest
4. Consequences of non-disclosure
5. Problems
1. Defining role of board, avoiding inversion / micromanagement
2. External issues affecting board
3. Resolving internal disputes on board
4. Loyalty: accepting decision of majority of board
9. Tax Issues (overview only)
1. GST – band empowered entities
2. Income Tax
1. General requirements for non-profits, these cover many First Nation situations, e.g. corporations set up to provide services.
2. Indian Act exemption applies to individuals, purpose of exemption is not to shield profits earned in commercial mainstream.
3. Corporations owned by municipalities or First Nations providing municipal services (and making profits)
10. Problems with corporate structures, limitations and alternatives
1. Limitations of legislation
1. Designed for private organizations
2. Governments often set up special corporations with specific legislation (e.g. Legal Aid Services Act for Legal Aid Ontario)
3. Rules for corporations may not work for governmental bodies
2. Relationship with First Nation
1. Corporation is a separate body
2. Effective control by control of funding
3. Direct control through appointment of all or part of board
4. First Nations Governance Act
   
11. Discussion