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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

Legal Issues forNot-for-profits

Derek W. Hillier, Q.C.

Easton Hillier Lawrence Preston

61 Elizabeth Drive

Gander, NL



Legal Issuesfor Not-For-Profits

Facilitated by: Derek W. Hillier, Q.C

Easton Hillier Lawrence Preston


Non-profit Corporations Workshop

Three Sessions:

Corporations Act and Corporate Procedures

Directors’ Liability

Corporate Liability



Case Study

Questions and answers


What is risk



In law small things

can make a big difference

legal issues for not for profits9

Legal Issues for Not-for-Profits

Corporations Act and

Corporate Procedures

objectives of workshop
Objectives of Workshop

Statutory basis for corporations without share capital

Liability issues for the corporation

Liability issues for the directors

Minimizing liability through insurance


Importance of non-profit organizations

Meaning of “non-profit”

Comparison between charitable and non-charitable non-profit organizations

comparison charitable and non profit
ComparisonCharitable and Non-profit


Operated without a profit basis

Not permitted to distribute profits to members

Resources devoted to carrying out objects

Benefit to public

differences between charitable and non profit
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
understanding the non profit corporation
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)

alternatives for non profits
Alternatives for Non-profits

Incorporation under the Newfoundland and Labrador Corporations Act

Incorporation under the Canada Business Corporations Act

An unincorporated association

other business entities
Other Business Entities
  • Partnership
  • Co-operatives
differences between a partnership and a corporation
Differences between a partnership and a 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


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

co operatives

Co-operatives Act

Common shares


when organized on a co operative basis
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

the corporations act general provisions
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))

corporations to which the corporations act does not apply
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

capacity and powers
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

incorporating the non profit corporation
Incorporating the Non-profit Corporation

Articles of incorporation

Notice of registered head office

Notice of directors

articles of incorporation
Articles of Incorporation

Name of Corporation

Registered office

Number of directors

Restrictions on the business that the corporation may carry on

Other provisions




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



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 )




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

by laws


Meetings of members

Voting at meetings of members

Board of directors

Meetings of board of directors


Authority to execute documents




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

meetings of members
Meetings of Members

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

voting at meetings of members
Voting at Meetings of Members

Which membership classes have the right to vote?

Is voting by proxy permitted?

other corporate issues
Other Corporate Issues

Subsidiary companies

Record keeping

Signing authority – banking

Execution of documents and the corporate seal

Youth presence and voting at board tables


record keeping corporate records section 36
Record Keeping – Corporate Records (Section 36)

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


Case Study

Corporate Procedures

legal issues for not for profits35

Legal Issues for Not-For-Profits

Directors’ Liability


Role and responsibilities of members

Difference between director’s liability and member’s liability

How members can lose limited liability

role of directors
Role of Directors

Nature of Directorship

to avoid personal liability a director must understand
To avoid personal liability a director must understand:

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

role of directors39
Role of Directors

Nature of Directorship

Officers of the corporation

role of directors40
Role of Directors

Nature of Directorship

Officers of the corporation

Standard of Care

directors have the duty to act
Directors have the duty to act:


In good faith and in the best interest of the corporation

With care, diligence and skill

role of directors42
Role of Directors

Nature of directorship

Role of officers

Standard of care

Conflicts of interest

role of directors43
Role of Directors

Nature of directorship

Nature of officership

Standard of care

Conflicts of interest

Higher standards concerning conflicts in charitable organizations

role of directors44
Role of Directors

Nature of directorship

Nature of officership

Standard of care

Conflicts of interest

Higher standards concerning conflicts in charitable organizations

Ultra vires acts

liability of directors
Liability of directors

Difference between director’s liability and corporate liability

Statutory liabilities (Federal)

federal statutory liabilities
Federal Statutory Liabilities

Income Tax Act

Goods and Services Tax Act

Canada Pension Plan

Employment Insurance

Environmental Protection Act

newfoundland and labrador statutory liabilities
Newfoundland and LabradorStatutory Liabilities

Corporations Act

Occupational Health and Safety Act

Workplace, Health, Safety and Compensation Act

Labour Standards Act

specific liability issues
Specific liability issues

Absence when decisions made

Representation on other boards

Serving on unincorporated committees





corporate liability
Corporate Liability


Negligence of the corporation

Vicarious liability

Difference between vicarious liability and negligence of the corporation

other corporate liability
Other Corporate Liability

Criminal and quasi-criminal liability

Contractual liability

Statutory liability

eg for business tax or GST


Case Study

Corporate Liability

protection of directors and officers
Protection of Directors and Officers
  • Corporation can indemnify
  • Purchase of Directors and Officers Liability Insurance
  • Exercise of Due Diligence
directors and officers liability insurance
Directors and Officers liability insurance

Does the policy cover:

Employee practices?



Unpaid wages?

Un-remitted deductions at source?


information required by broker
Information required by broker

Details of corporation


Number of employees and volunteers

Details about activities carried on by the corporation

Previous claims

questions to ask your broker
Questions to ask your broker

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?

possible exclusions
Possible Exclusions

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


property insurance
Property Insurance





Personal property of officers and employees

some other types of insurance
Some Other Types of Insurance

Commercial general liability

Business loss insurance

Travel accident insurance

commercial general liability endorsements
Commercial general liability endorsements

Employees renting cars in company name

Tenants legal liability

Excess insurance

business loss insurance
Business Loss Insurance

Loss of earnings for a specific time

Loss of earnings until building or business reopens

Extra expense





web sites for reference
Web sites for reference
  • EastonHillierLawrence Preston:
  • Department of Innovation, Trade and Rural Development:
  • l

Useful web sites

Newfoundland and Labrador Legislation:

Government of Canada Legislation:

more web sites
More Web Sites
  • Canada Revenue Agency -  Non-profit organizations 
  • An example of a site which contains info on nonprofit practices:
  • Risk management info from organization in London Ontario
legal issues for not for profits68

Legal Issues forNot-for-profits

Derek W. Hillier, Q.C.

Easton Hillier Lawrence Preston

61 Elizabeth Drive

Gander, NL