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Legal Issues for Not-for-profits. Derek W. Hillier, Q.C. Easton Hillier Lawrence Preston 61 Elizabeth Drive Gander, NL 1.800.256.4006. Legal Issues for Not-For-Profits. Facilitated by: Derek W. Hillier, Q.C Easton Hillier Lawrence Preston. Non-profit Corporations Workshop.

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Legal issues for not for profits l.jpg

Legal Issues forNot-for-profits

Derek W. Hillier, Q.C.

Easton Hillier Lawrence Preston

61 Elizabeth Drive

Gander, NL

1.800.256.4006


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Legal Issuesfor Not-For-Profits

Facilitated by: Derek W. Hillier, Q.C

Easton Hillier Lawrence Preston


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Non-profit Corporations Workshop

Three Sessions:

Corporations Act and Corporate Procedures

Directors’ Liability

Corporate Liability

Format:

Lecture

Case Study

Questions and answers


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What is risk

management?


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Checklist for Risk

Management


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In law small things

can make a big difference




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Legal Issues for Not-for-Profits

Corporations Act and

Corporate Procedures

http://www.assembly.nl.ca/


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Objectives of Workshop

Statutory basis for corporations without share capital

Liability issues for the corporation

Liability issues for the directors

Minimizing liability through insurance


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Introduction

Importance of non-profit organizations

Meaning of “non-profit”

Comparison between charitable and non-charitable non-profit organizations


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ComparisonCharitable and Non-profit

Similarities:

Operated without a profit basis

Not permitted to distribute profits to members

Resources devoted to carrying out objects

Benefit to public


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Differences betweenCharitable and Non-profit

  • What can be considered a public benefit is more restricted for a charitable organization

  • Four categories of charitable objects

    • Relief of poverty

    • Advancement of education

    • Advancement of religion

    • Any other purpose beneficial to the community


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Understanding the Non-profit Corporation

Alternatives for non-profit groups

Other business entities

The Newfoundland and Labrador Corporations Act

Incorporating the non-profit corporation

By-Laws (Constitution)


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Alternatives for Non-profits

Incorporation under the Newfoundland and Labrador Corporations Act

Incorporation under the Canada Business Corporations Act

An unincorporated association


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Other Business Entities

  • Partnership

  • Co-operatives


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Differences between a partnership and a corporation

Corporation:

Exists as a separate legal entity in its own name

Can sue and be sued in the name of the corporation

Can enter into contracts in the corporate name

Partnership:

Does not have a distinct legal existence apart from the combination of its individual partners


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Co-operatives

Co-operatives Act

Common shares

Members


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When organized on a co-operative basis

A member or delegate has not more than one vote

A member or delegate is not entitled to vote by proxy

Business is carried primarily for the benefit of members


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The Corporations Act general provisions

Applicability to other corporations

“Corporation” – a body corporate incorporated under the Act

“Body corporate” – a body corporate however or wherever incorporated

Application of the Act: “This Act …applies to every body corporate, whether incorporated under this Act, the former Act or an Act of Newfoundland or the province.”. (Section 4(1))


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Corporations to which the Corporations Act does not apply

A body corporate created for a Government or municipal purpose

A body corporate under the Agricultural Societies Act

A body corporate under the Cooperative Societies Act


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Capacity and Powers

The rights, powers and privileges of a natural person

By-law not necessary in order to confer a particular power

Restrictions in articles


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Incorporating the Non-profit Corporation

Articles of incorporation

Notice of registered head office

Notice of directors


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Articles of Incorporation

Name of Corporation

Registered office

Number of directors

Restrictions on the business that the corporation may carry on

Other provisions


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GOVERNMENT OF

NEWFOUNDLAND AND LABRADOR

Department of Government Services

Commercial Registrations Division

The Corporations Act ( Form 1 A )

Articles of Incorporation ( Sections 12, 421 )

(Without Share Capital)

1. Name of Corporation

_______________________________________________________________________________

2. The Place in Newfoundland and Labrador where the Registered Office will be situated

_______________________________________________________________________________


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3. (a) Please indicate a Minimum number of Directors (not less than 3): ________________

(b) Please indicate a Maximum number of Directors : ________________

4. Restrictions, if any, on business the Corporation may carry on ( see schedule A )

_______________________________________________________________________________

5. Other provisions: ( see schedule B )

______________________________________________________________________________


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Incorporators less than 3): ________________

Name Address Signature Phone Number

Registry of Companies, P.O. Box 8700, Confederation Building, St. John.s, NL, A1B 4J6

Telephone (709) 729-3317, Facsimile (7


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By-Laws less than 3): ________________

Members

Meetings of members

Voting at meetings of members

Board of directors

Meetings of board of directors

Officers

Authority to execute documents

Notices

Amendments


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Members less than 3): ________________

Who is eligible

Can corporations be a member

Will there be one or several classes of voting and non-voting members

Is there a fee for membership

Will there be delegates

Under what circumstances can membership be terminated


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Meetings of Members less than 3): ________________

What is the quorum for a meeting

What notice is required for meetings of members

Who has the authority to call a general meeting

What percentage of members can request a meeting of members


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Voting at Meetings of Members less than 3): ________________

Which membership classes have the right to vote?

Is voting by proxy permitted?


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Other Corporate Issues less than 3): ________________

Subsidiary companies

Record keeping

Signing authority – banking

Execution of documents and the corporate seal

Youth presence and voting at board tables

Proxy


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Record Keeping – Corporate Records (Section 36) less than 3): ________________

A corporation shall prepare and maintain, at its registered office or at another place in the Province designated by the directors, records containing:

The articles and by-laws and all amendments to the articles and by-laws

Minutes of meetings and resolutions of shareholders

Copies of all notices of change of directors

A securities register complying with Section 96


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Case Study less than 3): ________________

Corporate Procedures


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Legal Issues for Not-For-Profits less than 3): ________________

Directors’ Liability


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Members less than 3): ________________

Role and responsibilities of members

Difference between director’s liability and member’s liability

How members can lose limited liability


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Role of Directors less than 3): ________________

Nature of Directorship


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To avoid personal liability a director must understand: less than 3): ________________

The legal nature of the corporation

The director’s role in the corporation

The director’s duties under the statute, the by-laws and common law


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Role of Directors less than 3): ________________

Nature of Directorship

Officers of the corporation


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Role of Directors less than 3): ________________

Nature of Directorship

Officers of the corporation

Standard of Care


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Directors have the duty to act: less than 3): ________________

Honestly

In good faith and in the best interest of the corporation

With care, diligence and skill


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Role of Directors less than 3): ________________

Nature of directorship

Role of officers

Standard of care

Conflicts of interest


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Role of Directors less than 3): ________________

Nature of directorship

Nature of officership

Standard of care

Conflicts of interest

Higher standards concerning conflicts in charitable organizations


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Role of Directors less than 3): ________________

Nature of directorship

Nature of officership

Standard of care

Conflicts of interest

Higher standards concerning conflicts in charitable organizations

Ultra vires acts


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Liability of directors less than 3): ________________

Difference between director’s liability and corporate liability

Statutory liabilities (Federal)


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Federal Statutory Liabilities less than 3): ________________

Income Tax Act

Goods and Services Tax Act

Canada Pension Plan

Employment Insurance

Environmental Protection Act


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Newfoundland and Labrador less than 3): ________________Statutory Liabilities

Corporations Act

Occupational Health and Safety Act

Workplace, Health, Safety and Compensation Act

Labour Standards Act


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Specific liability issues less than 3): ________________

Absence when decisions made

Representation on other boards

Serving on unincorporated committees


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Discussion less than 3): ________________

Directors

Issues


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Legal Issues for Not-For-Profits less than 3): ________________

Corporate Liability


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Corporate Liability less than 3): ________________

Introduction

Negligence of the corporation

Vicarious liability

Difference between vicarious liability and negligence of the corporation


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Other Corporate Liability less than 3): ________________

Criminal and quasi-criminal liability

Contractual liability

Statutory liability

eg for business tax or GST


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Case Study less than 3): ________________

Corporate Liability


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Insurance Issues less than 3): ________________


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Protection of Directors and Officers less than 3): ________________

  • Corporation can indemnify

  • Purchase of Directors and Officers Liability Insurance

  • Exercise of Due Diligence


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Directors and Officers less than 3): ________________liability insurance

Does the policy cover:

Employee practices?

Defamation?

Misrepresentation/non-disclosure?

Unpaid wages?

Un-remitted deductions at source?

GST?


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Information required by broker less than 3): ________________

Details of corporation

Revenues

Number of employees and volunteers

Details about activities carried on by the corporation

Previous claims


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Questions to ask your broker less than 3): ________________

Monetary limit?

Is the limit per year or per occurrence?

Excess coverage?

Coverage of actions taken prior to policy being put in place?

Deductible for property damage?

Deductible for personal injury claims?

Who exactly is insured?


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Possible Exclusions less than 3): ________________

Personal profit to which directors not legally entitled

Punitive or exemplary damages

Criminal or deliberate fraudulent acts

Bodily injury

Destruction of property

Acts or omissions of directors acting as directors of another entity

Employee claims

Environmental


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Property Insurance less than 3): ________________

Buildings

Equipment

Inventory

Glass

Personal property of officers and employees


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Some Other Types of Insurance less than 3): ________________

Commercial general liability

Business loss insurance

Travel accident insurance


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Commercial general liability endorsements less than 3): ________________

Employees renting cars in company name

Tenants legal liability

Excess insurance


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Business Loss Insurance less than 3): ________________

Loss of earnings for a specific time

Loss of earnings until building or business reopens

Extra expense


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Discussion less than 3): ________________

Insurance

Issues


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Web sites for reference less than 3): ________________

  • EastonHillierLawrence Preston:

  • http://www.ganderlawyers.com/index.htm

  • Department of Innovation, Trade and Rural Development:

  • lhttp://www.intrd.gov.nl.ca/intrd/regionaldev/capacitybuilding.html


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Useful web sites less than 3): ________________

Newfoundland and Labrador Legislation:

http://www.assembly.nl.ca/

Government of Canada Legislation:

http://laws.justice.gc.ca/en/notice/index.html?redirect=/en/


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More Web Sites less than 3): ________________

  • Canada Revenue Agency -  Non-profit organizations 

  • http://www.cra-arc.gc.ca/tx/nnprft/menu-eng.html

  • An example of a site which contains info on nonprofit practices:

  • http://www.npgoodpractice.org/Default.aspx

  • Risk management info from organization in London Ontario

  • http://www.pillarnonprofit.ca/resources_and_links/risk_management/


Legal issues for not for profits68 l.jpg

Legal Issues for less than 3): ________________Not-for-profits

Derek W. Hillier, Q.C.

Easton Hillier Lawrence Preston

61 Elizabeth Drive

Gander, NL

1.800.256.4006


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