The COVID-19 pandemic has caused an immediate economic downturn. Charities and not-for-profit corporations have been hit particularly hard, and while there are numerous measures that can help these organizations survive, if your charity or not-for-profit corporation is unable to survive the current pandemic, then you may wish to consider dissolving the organization.
Steps To Take Before Dissolution
Prior to dissolution, we strongly recommend that your charity or not-for-profit corporation consider amalgamation in order to continue to help serve the public interest. We would also advise that, prior to any major decisions regarding dissolution and/or amalgamation, your charity or not-for-profit corporation seeks advice from accounting and tax advisors. If the advice of your professional team is not to amalgamate, here are some considerations for your organization to make prior to dissolution:
- Have all corporate returns been filed?
- Have all T3010s been filed with CRA?
- Are the organization’s minute book and financial records up to date?
- Have employees been given notice of termination in accordance with their employment contracts and the Employment Standard Act?
- Review any service contracts and other long-term commitments
- Set out a plan for the disposition of any assets of the corporation
- A charity must distribute its remaining assets to other charities whereas a not-for-profit corporation may distribute its assets to its members, provided that the letters patent and/or the by-laws permit the not-for-profit to do so.
A voluntary dissolution is generally approved by the members. At the time of the voluntary dissolution, the corporation has, or will have, no liabilities and has, or at the time of dissolution, will have, distributed all its remaining property.
The decision to dissolve must be approved either by:
- Special resolution of the members of each class or group, regardless of whether they are otherwise non-voting.
- The process is different depending on whether the corporation has property or liabilities. If the corporation has property and liabilities, then the special resolution must authorize the directors to cause the corporation to distribute any property and discharge any liabilities, and the corporation must distribute its property and discharge its liabilities before it sends articles of dissolution to the Director.
- If the corporation has not issued any memberships, unanimous resolution of the Board of Directors is required
Once the decision to dissolve is properly authorized, then the articles of dissolution must be filed with the appropriate government ministry.
If you are a charity, there are additional considerations, including notifying the Canada Revenue Agency of your charity’s intention to voluntarily give up its charitable registration.
Your organization may also wish to obtain certain insurance coverage and must maintain tax and corporate records for a minimum period. Finally, a final tax return must be completed.
If you are a charity or not-for-profit organization and need assistance dissolving, please contact the team at SV Law and we will help you navigate this challenging time.
The content of this article is intended to provide a general guide to the subject matter and is not legal advice. Specialist advice should be sought regarding your specific circumstance.