The new Canada Not-for-profit Corporations Act ("CNCA") sets out specific qualifications for directors of corporations incorporated or continued under the CNCA.
Directors must be:
- individuals (not corporations or other persons);
- at least 18 years old;
- not bankrupt; and
- not declared incapable by a court in Canada or in another country.
In addition to these statutory qualifications, the CNCA allows
a corporation to specify additional qualifications for directors in
the corporation's by-laws. For example, the CNCA does not
require a director to be a member of the corporation or a Canadian
resident, but the corporation's by-laws can add these
requirements.
Registered charities should also be aware of the
"ineligible individual" provisions under the Income
Tax Act (Canada) which enable the Canada Revenue Agency
("CRA") to revoke the charitable status of charities that
have ineligible individuals acting as directors. Directors
are ineligible individuals if they have been:
- found guilty of a "relevant criminal offence" (criminal offences that relate to financial dishonesty or are otherwise relevant to the operation of a charity, including fraud, tax evasion and theft) that has not been pardoned;
- found guilty of a non-criminal "relevant offence" (offences that relate to financial dishonesty or are otherwise relevant to the operation of a charity, including violations of fundraising, consumer protection or securities legislation) within the preceding five years;
- a director of a charity during a period in which the charity engaged in conduct that was a serious breach of the requirements for registration for which the charity had its registration revoked within the preceding five years; or
- a promoter of a gifting arrangement or other tax shelter in which a charity participated and the registration of the charity has been revoked within the preceding five years.
In sum, a not-for-profit corporation should identify basic
information about its directors, consider having a
screening policy or background checks in place to ensure that its
directors are qualified and add any additional relevant
qualifications for directors to its by-laws. In addition,
registered charities should be aware of the ineligibility
provisions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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