Charity FAQs
What are Soliciting Corporations Under the Canada Not-for-Profit Corporations Act?
Understanding the requirements for soliciting corporations under the Canada Not-for-profit Corporations Act (NFP Act) is crucial for any charity operating in Canada. Let’s break down the essentials of what defines a soliciting corporation, the responsibilities it entails, and how it differs from a non-soliciting corporation.
What is a Soliciting Corporation?
A corporation is considered "soliciting" if it receives more than $10,000 in income from public sources in a single financial year. Public sources include:
- Donations and Gifts: These are contributions from individuals who are not closely related to the corporation. If these donations or gifts come from anyone who is not a member, director, officer, employee, or their close relatives, they are counted towards the $10,000 threshold.
- Government Grants: Financial assistance provided by federal, provincial, or municipal governments or their agencies. Any grants or similar financial aid from various levels of government add to this threshold.
- Funds from Other Corporations: Money received from another corporation that itself has received significant public funds. If another corporation that has received more than $10,000 in public funds donates to your corporation, this also contributes to your status as a soliciting corporation.
What is a Non-Soliciting Corporation?
In contrast, a non-soliciting corporation is one that has not received public funds or has received less than $10,000 from public sources over the previous three financial years. This means their funding primarily comes from private sources or members closely associated with the corporation.
Why is Identifying Soliciting Corporations Important?
Identifying whether a corporation is soliciting or non-soliciting is important because soliciting corporations are subject to stricter regulations to ensure transparency and accountability. Since they handle public funds, it’s essential to have measures in place that protect the interests of the public and maintain trust.
Additional Requirements for Soliciting Corporations
- Financial Disclosure: Soliciting corporations must file detailed financial statements with Corporations Canada, which are available for public inspection. This includes information on all sources of income and expenditures.
- Governance: They must have a minimum of three directors, with at least two directors not being officers or employees of the corporation. This ensures a level of independent oversight.
- Audits: Depending on the amount of revenue, soliciting corporations may need to have their financial statements audited or reviewed by an independent accountant.
- Member Meetings: They are required to hold annual meetings where members can ask questions and review the financial status and governance of the corporation.
To sum up, understanding the requirements for soliciting corporations under the NFP Act is essential for ensuring compliance and maintaining public trust. Soliciting corporations, which receive significant public funds, must adhere to stricter financial reporting, governance, and accountability standards. Identifying whether your corporation falls under this category is the first step towards meeting these obligations and operating transparently.
By ensuring that soliciting corporations are held to these higher standards, the NFP Act helps to maintain the integrity and trustworthiness of charitable organizations in Canada, ultimately benefiting the public and the communities these organizations serve.
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