What Requirements Must Soliciting Corporations Meet in Canada?

In Canada, soliciting corporations are organizations that seek public donations or receive substantial funding from public sources. They must follow specific regulations to ensure transparency and proper governance. Here's a comprehensive overview of the requirements for soliciting corporations and how they compare to non-soliciting corporations.

Key Requirements for Soliciting Corporations

These requirements apply only if the corporation receives over $10,000 from public sources during a financial year. The corporation must determine this amount at the end of its financial year. If it surpasses $10,000, the requirements will be applicable starting from the corporation’s next annual meeting. This allows time for adjustments to meet compliance standards.

1. Board Composition: The corporation must have at least three directors. Out of these, a minimum of two directors must not hold any officer or employee position within the corporation or its affiliates. This rule is meant to ensure that the board remains independent and free from internal conflicts of interest.
2. Financial Oversight: The corporation is required to comply with specific rules related to financial reviews and accounting practices. This includes submitting its financial statements and the public accountant’s report, if applicable, to the Director of Corporations Canada. The level of review or audit required depends on the corporation's annual revenue.
3. Asset Distribution Upon Liquidation: The corporation’s articles of incorporation must specify that any remaining assets, upon liquidation, must be given to a "qualified donee" as defined by the Income Tax Act. This ensures that the corporation’s assets benefit other charitable organizations or causes rather than being distributed to private individuals.
4. Unanimous Members Agreement: Soliciting corporations cannot have a unanimous members agreement. This restriction helps to ensure decisions are made with broader input and transparency, avoiding potential conflicts or concentration of power.

These requirements remain applicable until the corporation does not meet the soliciting corporation criteria for three consecutive financial years. After this period, the corporation may no longer need to follow these specific rules.

Comparing Soliciting and Non-Soliciting Corporations

Here’s how soliciting corporations differ from non-soliciting corporations:

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These regulations are crucial for maintaining transparency and accountability within soliciting corporations. By ensuring an independent board, adhering to financial review standards, and directing assets to qualified donees, these requirements help build public trust and ensure responsible management of public funds.

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