Amalgamations, Mergers, & Consolidations Overview for Canadian Charities

Charities often consider structural changes like amalgamations, mergers, or consolidations to grow, work more efficiently, or better serve their communities. While these terms might sound interchangeable, they each come with unique processes and implications. If you're part of a Canadian charity exploring these options, here's what you need to know.

What Do These Terms Mean?

Amalgamation

• This is when two or more charities come together to form a new organization while maintaining the combined assets, liabilities, and memberships. It's like blending two strong teams into one united force. Each charity brings its strengths and resources, but the combined organization becomes a fresh entity.

Merger

• In a merger, one charity transfers all its assets to another and then winds down its operations. The surviving charity continues with expanded resources and scope. For instance, if a smaller charity struggles to stay afloat, merging with a larger one ensures its mission continues under a stable framework.

Consolidation

• Consolidation involves dissolving two or more organizations to create a brand-new charity. All previous entities cease to exist, and the new charity takes over their roles. It’s a fresh start with a unified mission and structure, ideal for charities ready to reimagine their purpose together.

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Why Do Charities Consider Amalgamating or Merging?

There are many reasons charities might pursue one of these paths:

• Improved efficiency through streamlined operations and shared resources.
• Broader reach to serve more communities by pooling funds and expertise.
• Long-term sustainability in challenging economic conditions.
  
  

Imagine two charities addressing hunger in the same city. By amalgamating, they eliminate overlapping efforts and combine resources to feed even more people effectively.

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What Steps Do Charities Need to Take?

1. Plan and Communicate

Begin with conversations among stakeholders, such as board members, donors, and staff. Transparency about the reasons, goals, and expected outcomes is crucial to build trust and enthusiasm.

2. Update Governing Documents

Your charity’s constitution or articles of incorporation must reflect the new structure. The Canada Revenue Agency (CRA) will need copies of these changes to ensure compliance.

3. Notify the CRA

If your charity undergoes an amalgamation, merger, or consolidation, the CRA must be informed first before making changes any constating documents. You might need to apply for a new charitable registration number, depending on the type of change.

4. Transfer Assets and Liabilities

Ensure all financial assets, liabilities, and obligations—like donor commitments—are properly documented and transferred. This ensures a smooth transition and avoids confusion later.

5. Consult Professionals

Legal and financial experts can guide you through regulatory requirements and help avoid pitfalls. Provincial rules, like those under Ontario’s Not-for-Profit Corporations Act (ONCA), add another layer of complexity.

Real-Life Example

Consider this scenario:

• Two Canadian environmental charities operating in the same region realize they’re duplicating efforts and competing for the same donor base. They decide to amalgamate, forming a single organization with shared leadership, a unified mission, and a stronger impact.
• In another case, a small charity with limited resources merges with a larger one specializing in the same cause. This merger allows the smaller charity’s programs to continue benefiting the community under the larger charity’s well-established structure.

What Are the Benefits and Challenges?

Benefits

• Efficiency: Shared resources reduce operational costs.
• Stronger Impact: A larger, unified organization can take on bigger projects.
• Sustainability: Pooling funds and expertise ensures long-term viability.
  
  

Challenges

• Complexity: Legal, financial, and administrative hurdles can be daunting.
• Cultural Integration: Aligning teams and values takes effort.
• Stakeholder Concerns: Clear communication is essential to address donor or volunteer worries.
  
  

Amalgamations, mergers, and consolidations can help charities grow, adapt, and thrive in an ever-changing world. However, these processes require careful planning, compliance with legal requirements, and a clear vision for the future. If your charity is considering such a change, start by consulting the CRA’s guidelines and seek professional advice to navigate the process smoothly. By taking these steps, your charity can position itself for greater impact and sustainability, ensuring your mission continues to make a difference in the lives of those you serve.

Looking to merge your charity with another? The experienced charity lawyers at B.I.G. Charity Law Group can assist you with this complex process, with due diligence, compliance, and registrations.

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