Guide for Nonprofit Organizations in Nova Scotia

a.  Unincorporated Non-Profit

A non-profit that is not incorporated is often referred to as an informal non-profit. Often there are no written rules to be followed, nor is there a formal membership. There are no board members or officers. Rather, this kind of organization is often the result of a group of like-minded individuals who have aligned themselves to achieve a very specific, sometimes short term, goal. 

The following scenario is an example of an unincorporated non-profit:

Julie wants to run in an upcoming marathon to raise money to find a cure for leukemia, in honour of her friend, Suzie, who is battling cancer. Julie’s friends, supportive of the initiative, agree to run with Julie and raise money to help the cause. Julie and her friends meet weekly and begin training. They call themselves “Suzie’s Warriors”. In total, they raise over $3000.00. Funds raised are donated to the Leukemia & Lymphoma Society. 

Following the race, although the friends run together occasionally, they no longer have weekly training sessions and they stop fundraising aggressively as they had done in the lead up to the race.  

In this scenario, Julie and her friends have a specific goal – to raise money in order to find a cure for leukemia. To accomplish this goal, they form a running club, to support one another as they train to run a marathon and raise money for cancer research. 

There is no need to incorporate in this scenario as it was a short-term goal with little to no formalities required. The club did not employ anyone, nor did they have volunteers. When the race was over, Julie and her friends abandoned the running club and stopped training as a group. 

An incorporated non-profit is more formal, and this kind of non-profit must get government approval to incorporate. Once incorporated, the non-profit is a legal entity. An incorporated non-profit must have members, directors, and officers and there are specific rules to be followed for each of these parties. This type of non-profit is regulated by applicable legislation and governing documents. Directors must make sure the non-profit pholds all rules to which they are bound. 

The following scenario is an example of an organization that should incorporate: 

Samantha and Matthew are passionate runners from Dartmouth, Nova Scotia. They travel from city to city across Canada competing in different races, always with the goal of raising money for various causes. The pair decided to establish a race weekend in Dartmouth, Nova Scotia called the “Dartmouth Race Weekend” with various races occurring on a Saturday and Sunday in the spring. The purpose of the race will be not only to empower runners and walkers as they achieve their own personal physical goals, but also raise money for various causes in the community. It will be a big challenge to plan an event of this size, but Samantha and Matthew are for up for the task. 

Samantha and Matthew should consider incorporation because:

• A significant amount of money will be raised to benefit charities in the community
• There is always the possibility for injury when participating in a race. Samantha and Matthew are concerned about personal liability and want to protect themselves
• The Dartmouth Race Weekend is intended to be an annual event which will hopefully grow year to year; and 
• Samantha and Matthew will need lots of help to pull this off, including help from many volunteers and a couple employees. 

For the above reasons, Samantha and Matthew are ideal candidates for incorporation. 

Many non-profits apply to become a registered charity under the federal Income Tax Act, R.S.C., 1985. 

The following scenario is an example of a non-profit that should consider becoming a registered charity:

Jack and Charlie founded a non-profit to support families taking care of cancer patients called “Family Support Society” or “FSS”. FSS offers support groups for family members caring for loved ones. They also organize fun events for family members in an effort to relieve some of their stress, such as movie nights, hikes, and dinners. Jack and Charlie incorporated as they were growing rapidly and needed to hire staff and volunteers. 

They would like to be able to offer tax receipts to those who donate to the non-profit. The organization is also looking to take advantage of some of the tax advantages that come with being a registered charity. Lastly, FSS want to be able to receive donations from other registered charities. 

FSS should discuss charitable status with their accountant and lawyer. 

Defining an organization’s purpose sounds like an obvious first step.  However, it often proves more challenging than expected. While a general understanding of an organization’s function is a great starting point, it is important to narrow the focus of an NPO.

Answering the following three questions will help in defining the purpose:

1.    What is the organization’s overarching goal? 

2.    Who will benefit from the NPO’s work? 

3.    How will the organization’s purpose be fulfilled? 

1.  What is the organization’s overarching goal? 

Many organizations looking to incorporate under Nova Scotia law must do so under the Societies Act.  So you must keep the rules under that legislation in mind. 

Section 3(1) of the Societies Act says:

A society may be incorporated under the Act to promote any benevolent, philanthropic, patriotic, religious, charitable, artistic, literary, educational, social, professional, recreational or sporting or any other useful object, but not for the purpose of carrying on any trade, industry or business. 

An organization’s purpose must fall into one of the purposes set out above. Section 3 is quite broad and allows space for many different organizations to incorporate under the Societies Act.

If you want to incorporate, make sure your organization’s purpose is in line with the Societies’ Act. You should also consider whether the purposes meets the requirements for registering a charity under the Income Tax Act. If the organization applies to become a registered charity, even in the distant future, having purposes that already align the Income Tax Act requirements will save time and money down the road. 

2. Who will benefit from the NPO’s purpose? 

Answer this question in as much detail as possible. Knowing exactly who the organization will benefit is important. For example, an organization established to relieve poverty should narrow its focus to determine exactly who will benefit from its work. Poverty is a large problem and there are many ways in which a group could tackle this issue. An example of a narrow focus is an organization created to relieve poverty experienced by impoverished youth between ages 12-18 in Cape Breton Regional Municipality. 

3. How will you advance your goals?

An organization should be able to provide concrete examples of how it’s purpose will be achieved. This type of strategic planning is crucial to accomplishing the organization’s goals. Continuing with the example set out above, the way an organization relieves poverty in the lives of youth ages 12-18 in Cape Breton Regional Municipality might be by operating a soup kitchen on weekdays and offering an after-school drop-in centre for youth to visit after school and enjoy a healthy snack in a comfortable environment. 

Once you have the organization’s purposes/objects clearly established, the next step is to choose a name for the organization. The organization’s chosen name must be approved by the Registry of Joint Stock Companies (the “Registry”) before you can start using it.  Do not order business cards, publish advertisements, create social media accounts, or sign any contracts using the organization’s name until registration has been finalized. 

A name must meet all of the following criteria:

• Be Unique;
• Contain a Distinctive Element;
• Contain a Descriptive Element; and
• Have a Legal Ending.

Be Unique

A name must not be confusing or misleading to the public. If “Dartmouth Area Race Association” is a pre-existing name for another organization, the name “Dartmouth Race Weekend” might not be approved as it is not unique and could easily lead to public confusion. A name should set a group apart from others and while it may share some elements with other names, it should be as unique as possible. 

Contain a Distinctive Element

A name should distinguish one organization from another. The distinctive element in “Dartmouth Race Weekend Association” is “Dartmouth”, as it tells the public knows where this race is situated and distinguishes this group from other similar organizations. It is important to note special permission might be required if an organization wants to use the name of a place (eg. Dartmouth) in their registered name. 

Contain a Descriptive Element

A name should clearly communicate an organization’s purpose and not leave the public guessing about what the group does. Using our example again, in the name “Dartmouth Race Weekend Association” “Race Weekend” is the descriptive element and clearly explains the purpose of this organization. 

Legal Ending

Societies in Nova Scotia must have the word “Society” or “Association”, or the French translation of those words, at the end of their name. To use a different ending, the applicant must seek special approval from the Registry.

A cooperative may use the word “Co-operative” at the end of their name. 

Some NPOs are permitted to use the word “Foundation” at the end of their name. To use this name, the Registry will require proof that the organization has at least $50,000 at its disposal. 

For more information on name reservation and registration, visit “Guide to Choosing a Name”, at www.rjsc.ca, compiled by the Registry.

Using an Individual’s Name 

Often a group will want to use the name of an individual in the name of their organization. For example, Jane Smith may choose to create the “Jane Smith Animal Rescue Society”. 

In that situation you must give the Registry written consent from the person whose name will be used, to make sure they have agreed to allow their name to be used. You must always get consent from someone with that name if you want to use a last name. You do not need consent if the organization just wants to use a first name and no last name in the NPO’s name.

Reserving a Name 

A lawyer can assist in name reservation. However, a group may choose to do so on their own.  There are two steps for name reservation. 

Preliminary Search

Do a search to make sure no other company or organization is already using a name which could lead to confusion with the proposed name. 

First, do a preliminary search. Visit the Registry’s database search, and enter the proposed name to see what other names are similar. 

Next, ask the Registry to do a preliminary search. You can ask for this by mail, by calling the Registry, or in person at an Access Nova Scotia Centre or the head office of the Registry. 

If there is a conflict with your proposed name, search another name. 

Nuans Search

The next step is to do a NUANS Search. If the preliminary search does not find a conflict with the organization’s proposed name, fill out and submit a Name Reservation Request form (available from the Registry) at any Nova Scotia Access Centre, at the Registry, or apply online by visiting accesstobusiness.snsmr.gov.ns.ca [ here.] There is no fee for a name reservation request for Societies in Nova Scotia. 

An organization wanting to incorporate should allow themselves plenty of time to complete this step. Although the average wait time for name approval is 2 business days, the wait could be longer. 

For more information on reserving a name, visit Service Nova Scotia’s information page here. 

Once the name is reserved, you can register and incorporate your society. 

Once a name is reserved, it is reserved for 90 days. Applicants may apply for business name registration by completing and submitting this form.                                                                                                                    

You can register your organization’s name when you apply to incorporate.

If your group wants to incorporate a Nova Scotia Society you must follow the rules in section 5 of the Societies Act:

Any five or more persons, desiring to incorporate a society, may make and subscribe a memorandum in the form in Schedule A, and shall transmit it, with the by-laws of the society agreed upon by them for the administration of the society, and the proper fees to the Registrar, together with a list of the persons appointed by the subscribers to act as first directors, stating their full names, addresses and occupations and the period for which they will so act, the address of the registered office of the society and the place where its activities will be chiefly carried on. 

Your organization’s application for incorporation will be rejected by the Registry if you do not follow all parts of Section 5. 

You must do an incorporation package that contains all of the following information and then submit the package to the Registry: 

• Memorandum of Association
• List of First Subscribers 
• Society classification
• By-laws of the society
• Directors and Officers
• Recognized Agent
• Notice of Registered Office.

Memorandum of Association

A Memorandum of Association must include:

• the exact name on reserve with the Registry
• the objects or purpose of the Society, and 
• the registered office to the Society
• a list of the 5 first subscribers to the Memorandum of Association. 

You will find a sample Memorandum of Association here.

List of First Subscribers

The Memorandum of Association must be signed by at least 5 individuals who are “subscribing” to the Memorandum of Association. These are the first five individuals who are committed to the organization’s purpose and support its incorporation. The Memorandum of Association must include the name, occupation, signature and civic address of each subscriber.  The signatures must be witnessed. 

Society Classification 

If your organization wants to incorporate a non-profit under the Societies Act you must choose which classification best describes your organization’s purpose. The purpose is the very core of your organization. It is the reason your organization exists. Purpose is also sometimes called the objects or the objectives of the Society. 

Options include: 

1. Culture and Recreation – This includes media and communications, performing arts, sports, recreation and social clubs. 
2. Education and Research – This includes higher education, medical research, science and technology, and elementary, primary and secondary education.
3. Health – This includes hospitals, nursing homes, mental health treatments, and crisis interventions.
4. Social Services – This includes child welfare, family services, refugee assistance, and services for elderly.
5. Environment – This includes pollution control, environmental beautification, animal protection and welfare, and natural resources conservation. 
6. Development and Housing – This includes social development, economic development, housing assistance, community and neighbourhood organizations. 
7. Law, Advocacy and Politics - This includes advocacy organizations, civil rights associations, legal services, and victim support. 
8. Philanthropic Intermediaries and Volunteer Promotion - This includes grant-making foundation, fundraising organization, and volunteer promotion.
9. International exchange/friendship/cultural programs - This includes international disaster relief and international human rights efforts.
10. Religion - This includes congregations and associations of congregations. 
11. Business and Professional Associations. 

Other – If your organization has a purpose that will benefit the public but does not fit into one of the categories listed above, your organization should state what category would be more appropriate to define its purpose.

By-Laws 

In order to incorporate, a not-for-profit must be governed by By-Laws which will be reviewed and approved by the Registry. The Nova Scotia Government provides sample By-Laws here. However, these sample By-Laws should not limit an organization in crafting rules and obligations that meet their specific goals and needs. A lawyer can assist Societies in developing By-Laws. 

The Societies Act says By-Laws should include the items set out in Schedule B to the Societies Actand discussed below:

1. Terms of admission of members and their rights and responsibilities - The Societies Act says a Society must have members. By-Laws should set the rules about who may be a member of the non-profit, and how one may become a member. By-Laws may require members pay an annual membership fee. By-laws may also state all directors will also be members. 
   
   
2. Conditions under which membership ceases and manner (if any) in which a member may be expelled – It is not only important to state how one may become a member but also how one may be removed as a member or reasons one might cease to be a member. For example, breaching the By-Laws may be grounds for removing someone as a member. Death will automatically terminate membership. 
   
   
3. Mode and time of calling general and special meetings of the Society – Societies should have members’ meetings and directors’ meetings, all of which should be discussed in the non-profit’s By-Laws. The By-Laws should also clearly say how often meetings will happen, and how notice of meetings will be given.
   
   
4. Number constituting a Quorum - There must be quorum to have a meeting, whether it is a directors’ meeting or a members’ meeting. Quorum means the minimum number of members or directors who must be in attendance for a meeting to be held. The By-Laws should define “quorum”. For example, quorum could simply be a majority of the members or directors. Or, quorum could be 2/3 of the members and directors.
   
   
5. Rights of voting – Becoming a member or director of a Society comes with certain rights and privileges, such as the ability to vote on certain matters. By-Laws should set out how votes may be cast. For example, will parties be permitted to vote by proxy when they are unable to attend? Will votes be accepted via electronic communication? 
   
   
6. Appointment and removal of directors and other officers and their duties, powers, and remuneration –The By-Laws should set out who may serve as a director and how a director may be removed. By-Laws should also consider whether directors may delegate their powers to officers or committees. It is common for directors to delegate certain powers to an executive director, for example, who is responsible for the day-to-day operation of the organization and may be a paid employee of the organization. The same applies to officers. Societies often have a President and Secretary or Chairperson and Treasurer. Some Societies may also choose to have a Vice-Chairperson or Vice-President. Often By-Laws will include a provision indicating that directors will serve without remuneration. 
   
   
7. Exercise of borrowing powers – It is common for not-for-profits to borrow funds. The By-Laws should set out the rules about what approvals must be in place before borrowing funds, and any other rules about borrowing power. For example, By-Laws could say the directors do not need consent of the members to exercise borrowing powers provided funds if the amount being borrowed is under $10,000.
    
8. Audit of accounts – By-Laws should indicate how an auditor will be appointed and say that written reports will be provided to members on an annual basis providing updates about the financial well-being of the Society. 
   
   
9. The seal of the society – Incorporated entities should purchase a seal which is to be used on certain corporate documents and contracts. By- Laws should indicate where the seal is to be kept and who is authorized to use the seal. 
   
   
10. Manner of making, altering and rescinding By-Laws – By-Laws may be amended as a Society develops and their needs change. By-Laws should set out how they may be altered, amended or rescinded. Any change to By-Laws must get approval from the Registry before taking effect. 
    
    
11. Preparation and custody of minutes of proceedings of meetings of the Society and of the directors and other books and records of the Society – Record every meeting amongst the members and directors of a Society. By-Laws should say who will be responsible for record keeping. By-Laws should also say where records should be kept (usually in the Society’s minute book) and how other records of the Society should be maintained. 
    
    
12. Time and place at which the books and records of the Society may be inspected by members – Members are entitled to review the organization’s books and records. The By-Laws should provide some rules about this review. 
    
    
13. Execution of contracts, deeds, bills of exchange and the instruments and documents on behalf of the society – An incorporated NPO is a legal entity. It can enter into contracts, borrow money, and sign cheques in its name. By-Laws should say who may sign documents on the Society’s behalf. 
    
    
14. Members’ Meetings – By-laws should set out the rules for members’ meetings. By-laws should discuss whether members may vote by proxy and how a proxy vote would happen. By-Lawsshould discuss how much notice must be provided to members before a meeting and how notice should be provided to members (letter, e-mail etc.).  By-Laws should also say what items will be discussed at an annual general meeting. 

Notice of Directors and Officers

Using this form, applicants must list all those who will serve as directors and officers. You must include first and last name, middle initial, residential address and occupation for each director or officer. One director or officer must sign the document. 

Recognized Agent 

Every Society must have a recognized agent and their name and address must be filed with the Registry. The recognized agent must be a resident of Nova Scotia (see section 7 of the Societies Act). The recognized agent will receive all communication from the Registry and will be served papers if a lawsuit is  started against the Society. As part of the incorporation package, this form must be filled out indicating the name of the Society, the recognized agent’s first and last name, middle initial and address, and a signature of one of the directors. 

Notice of Registered Office 

The final piece of the incorporation package is to notify the Registry of the Society’s registered office. Section 17 of the Societies Act says:

Every society shall have a registered office in the Province to which all communication and notices may be sent and at which process may be served on the society, and shall file with theRegistry notice of every change of situation of that office within fourteen days of the change. 

Every society must have a registered office located in Nova Scotia. Organizations must fill out this form and include the name of the Society, along with the civic address, and mailing address (if different from civic), the name of an individual who can be contacted by the Registry and a telephone number they may be reached. This form must be completed by an officer or director. 

Successful Application 

If the Registry finds that your group’s application meets all statutory requirements, your Society will get:

·      a certificate of incorporation, and 

·      a certificate of registration for the Society’s name. 

Unsuccessful Application 

If your application does not comply with the Societies Act, the Registrar will reject the application. Amendments may be made, and your group may submit an amended application - hopefully with a successful outcome. 

The name of a federal NPO must:

• be distinctive
• not cause confusion with other names or trademarks
• not include any prohibited items
• not suggest governmental or institutional sponsorship or control
• not be misdescriptive, and
• include a mandatory term, if required.

See below for more information about each of the naming requirements.

Distinctive

Choose a name that differentiates your organization from any other. An example of a distinctive name is Flinn’s Animal Shelter Society. In this name, “Flinn” is the distinctive element that sets the name apart from other animal shelters.

Confusion

Choose a name that will not be confused with that of other organizations. . If the name you choose is too similar to a name for a pre-existing organization, you may be asked to provide additional information to justify using the name. For example, it may help to say more about the type of work the organization will do. Identifying the geographic location where the Society will operate may also help in getting a name reserved.

Prohibited Items

The name must not include the following:

• “Parliament Hill” or “Colline du Parliament”
• “Royal Canadian Mounted Police”, “RCMP”, “Gendarmerie royals du Canada” or “GRC”
• “United Nations”, “UN”, “Nations Unies” or “ONU”
• “Cooperative”, “Co-op”, “Pool” or “Cooperative” (if the name you choose makes it seem like you are setting up a a cooperate venture and you are not actually setting up a co-op); or
• Anything obscene.

Governmental or Institutional Sponsorship or Control

Unless the organization gets written consent, a name should not imply the organization:

• carries on business under royal or governmental patronage
• is sponsored by the Government of Canada, a provincial or territorial government, or a foreign government
• is connected with a university or a professional association
• carries on the business of a financial institution or intermediary, or
• carries on the business of a stock exchange.

Misdescriptive Names

A name cannot mislead the public about:

• the business, goods or services the name relates to;
• conditions under which the goods or services will be produced or supplied;
• people who will work to produce or supply the goods or services; and
• place of origin of the goods or services.

Nuans Name Search Report

When you apply to register a name, your organization should first order a name search report. The report will tell you existing names and trademarks that are either the same as or similar to the proposed name. To order a report, click here to visit Corporations Canada’s online tool. You will get a reservation number along with the name search report.

Pre-Approval

Your organization may choose to get your chosen name pre-approved before you incorporate. Pre-approval runs out 90 days after the date you get approval. You must get a Nuans Name Search Report first before requesting pre-approval. Pre-Approval can be requested here.

Registering A Name

When your organization is ready to incorporate, Corporations Canada will need the following information in addition to your application for incorporation:

• Confirmation the name meets requirements set out above
• Nuans name search report reservation number
• Extra information about the name, like more detail about the nature of the group, and
• Any supporting documents Corporations Canada may ask for.

Applicants must complete Form 4001 - which will be your organization’s Articles of Incorporation.

Applicants must complete Form 4001. Form 4001 is the organization’s Articles of Incorporation.

Organizations should think about the requirements to become a registered charity if they are thinking about federal incorporation. Doing that now will save time and money if your organization later decides to apply to become a registered charity.

The Articles of Incorporation must include:

• Name – The corporate name may be submitted in French, English, or both. The name must be distinctive, and not misleading or confusing. For more information about naming a federal entity, click here.

• Registered Office – the province or territory where the registered office will be located.

• Minimum and Maximum number of directors – Once this number is set, the not-for-profit must not have fewer or more than the range of directors set out in the Articles of Incorporation.

• Purpose – Set out the purpose of the organization. If the organization wants to apply for charitable registration, this statement should coincide with the charitable purposes required for charitable registration.

• Activities – Include any restrictions on the organization's activities.

• Classes – Categorize how members will be organized and set out voting rights of each class. Every organization must have at least one group of members. If there is only one group, it must be a voting group.

• Statement regarding distribution of property remaining on liquidation –a federal not-for-profit may choose to dissolve and give up its status as a legal entity. The articles must say how the property held by the not-for-profit should be distributed on dissolution.

• Non-Profit Basis – CRA recommends a corporation’s articles include a statement indicating the corporation will operate on a non-profit basis. However, this is not a requirement.

• Remuneration for Directors – CRA recommends corporations that want to get charitable status include a statement saying directors must not be paid for acting as a director.

• Borrowing Powers - Under the NFP Act, an organization may borrow and grant security on property without prior approval from members. Limits may be placed on these powers to provide for member consent.

• Majority Vote – The NFP Act states an ordinary resolution must have a majority of members’ consent. A special resolution must have 2/3 majority. These requirements may be amended in the Articles of Incorporation.

• Declaration – Articles must be signed by the those incorporating the corporation (the incorporators)

To see a model Articles of Incorporation, visit Corporations Canada website here.

Form 4002 – Initial Registered Office

You must complete Form 4002 and provide the address of the initial registered office of your not-for-profit. You must also provide the first and last name of the initial directors, and their addresses.  

Fee

You must submit the incorporation fee with your application. At the time of publishing this Guide, the fee charged by Corporations Canada is $200. Applicants should confirm the fee requirements at the time of incorporation.

By-Laws must be approved by Corporations Canada to make sure they comply with the NFP Act. However, By-Laws are not required at the time of incorporation. Your organization has 12 months form the date members confirm By-Laws to submit the By-Laws to Corporations Canada for approval.

Corporations Canada offers a By-Law builder for not-for -profit corporations on their website. You can use this tool to write your organization’s by-Laws but make sure you craft your By-Laws to meet your group’s specific needs, so do not feel limited by By-law builder. A lawyer will be able to assist in drafting By-Laws.

By-Laws for federal NFPs should include clear details about:

• Membership – Who may be a member and how members are chosen. Also important is how members are removed or when membership will end.

• Meetings of Members – A general guide about how often member meetings will happen and the way meetings may be called.

• Voting – Rules about how members and directors may exercise their vote.

• Directors – Similar to members, who may become a director and how one may become a director. Also, details about how a director may be removed or resign.

• Directors’ Meeting –Set out how often directors’ meetings will happen, who will chair the meetings, and what notice must be provided before directors’ meetings.

• Officers –Identify what officers a NFP will have (such as President and Secretary) and set out their roles.

• Amendments – By-Laws should evolve with a non-profit’s evolution. How an NFP amends their By-Laws should be explained, recognizing that any changes made are subject to Corporations Canada’s consent.

There are several advantages to becoming a registered charity. Mainly:

• An organization can issue donation receipts for gifts it receives
• A charity is exempt from paying income tax under Part I of the Income Tax Act
• Registered charities can donate gifts to other registered charities
• The public tends to trust organizations with charitable status and may be more
  inclined to donate
• Many goods and services your organization offers are exempt from goods and
  services tax/harmonized sales tax.

To be or not to be a charity?

Not every organization will be permitted to be registered as a charity. The CRA is a gatekeeper,
admitting only those groups who meet the strict qualifications in the Income Tax Act.
A group could have a noble, admirable purpose but not be considered “charitable” under the
Income Tax Act.

Before deciding to apply for charitable status, organizations should be able to answer ‘yes’
to all three of the questions below:

1. Is your organization resident in Canada?
2. Are all of your organization’s purposes charitable as that term is defined in the
Income Tax Act?
3. Are all of your organization’s resources dedicated to the furtherance of charitable
activities?

If the answer is no to one or more of the above questions, CRA will not permit your
organization to become a registered charity.

If your organization wants to become a registered charity the organization must fulfill one of
the charitable purposes listed below:

• the relief of poverty
• the advancement of education
• the advancement of religion, or
• other purposes that benefit the community.

The Relief of Poverty

Organizations created to relieve the difficulties of those who lack necessities such as food
and water fall in this category. Interestingly, courts have found groups established to prevent
poverty do not fall within this purpose. Rather, this purpose is reserved for those assisting
individuals and groups already living in poverty (Credit Counselling Services of Atlantic
Canada v Minister of National Revenue.)

Examples of activities which may fulfill this purpose include operating food banks, offering
clothing to those in need, or assisting individuals who have lost their belongings following a
natural disaster such as a hurricane or earthquake.

Advancement of Education

This purpose is quite broad. Activities which might be found to support this purpose include
the establishment of a school, outreach programs aimed at educating Nova Scotians about
African Nova Scotian issues, or doing research to find a cure for heart disease. Scholarships
and bursaries also fall into this category.

Advancement of Religion

CRA applies a two-pronged test when determining whether a group is advancing religion:

1. The organization must be sharing its beliefs, by preaching or otherwise.
2. The members must uphold the teachings on which their faith or beliefs are based.

Examples of an organization fulfilling this purpose would be a group that operates a place of
worship with regular gatherings for services, workshops, or musical gatherings. A religious
school would also qualify.

Other Purposes Beneficial to the community

This purpose appears to be a bit of a catch all but is far from open-ended. If an organization
is not relieving poverty, advancing religion, or advancing education, they may fall into this
last category. However, to qualify, the organization must be able to clearly explain how it will
benefit the community.

Examples of organizations that might fall into this category:

• an organization offering counselling to relieve loneliness for older adults
• a hotline for youth with mental health issues
• a foundation established to make donations to other “qualified donees”. The Income
  Tax Act defines a qualified donee as an organization that is a registered charity. For
  example, an organization could be created with the sole purpose of raising funds to
  then donate those funds to charities of its choosing.

You apply for charitable status online. Applicants must first set up a “My Business Account”
through the CRA and apply online here.

Once your group has decided to apply for charitable status, it is a good idea to create
a “Application Checklist”, which you can do online here.

Just answer a series of questions and the website will generate a checklist of items to consider before applying for charitable registration.

The Application is detailed, so you should be prepared to provide the following:

• Organization's Name
• Organization’s Purpose – the organization’s purpose/objects must be limited to
  those purposes deemed to be charitable under the Income Tax Act
• Activities – The application should include a list of activities which will specifically
  fulfill each purpose listed
• Fundraising Activities – CRA wants to know activities the organization will engage
  in to fulfill its purpose
• Financials – Even an organization that incorporated and then immediately applied
  for charitable registration must provide financials representing a 12-month period.
  For an organization that has not been in existence that long, the financials should
  show the group’s targets. This will include the total amount raised by fundraising
  efforts, amounts spent on fundraising, other expenses such as staff, legal fees, or
  accounting fees and office supplies
• Supporting Documentation – Newspaper articles, minutes from director and member
  meetings, and any other supporting documentation that shows the organization’s purpose
• Directors – Submit a list of directors. The list must include the name, address, phone
  number, date of birth, and occupation of each director
• By-Laws – If By-Laws have been created, they must be submitted
• Constating Documents – The constating documents mean the documents that
  established the organization such as Articles of Incorporation or By-Laws.
  Certificates of Incorporation and Registration should also be submitted, along with
  the Memorandum of Association, as applicable.

The path to charitable registration can be long and you should expect to wait at least 3-6
months before hearing a response from a CRA representative.

CRA will only review complete applications. If CRA determines your organization’s
application is incomplete, your application will be rejected and returned to you.
If an application is complete, CRA will send the applicant an acknowledgment letter. The
letter will let you know about how long it will be before the application is sent to an examiner
for a detailed review.

The examiner may contact the applicant to get further information or clarification. This
should not put you off. Rather, if your organization wants to go ahead with the application
process, respond fully to the examiner’s questions. The applicant has 60 days to respond to
the examiner’s request, from the date the examiner asks.

If your organization does not respond, CRA will consider the application abandoned and
close the file.

If your organization responds by saying the information has already been provided, this will
be taken into consideration when making a final determination.

Lastly, if your organization’s response does not show a charitable purpose or provide
activities in support of a charitable purpose, the application will be rejected, and you will be
notified accordingly.

If CRA finds your organization’s application is in line with the Income Tax Act and
corresponding laws, your organization will be granted charitable registration and issued a
registration number and an effective date of registration.

CRA is a gatekeeper for charitable registration. Not every application is successful. Common
reasons for unsuccessful applications include:

• Non-Charitable purposes – An organization might have a purpose that many would
  consider charitable but if those purposes are not in line with the strict interpretation
  of “charitable purpose” in the Income Tax Act, the organization will not get
  charitable status.
• Personal purposes – CRA will carefully review an application to make sure an
  organization has not been established to benefit only its members. For example, a
  group of musicians looking to raise public awareness of solely their own music would
  not be considered charitable.
• Private benefit – An organization granted charitable status must be able to
  demonstrate how it will benefit the greater public, or at minimum, a substantial
  segment of the public. A non-profit established to benefit a particular family who lost
  all their belongings in a fire will not be granted charitable status. Or, a group created
  to raise money for an elderly person to be able to pay their medical bills, would most
  likely not be considered a public benefit.
• Political Interest – Non-profits must not directly support or oppose political parties
  or candidates.
• For-Profit Activities – An organization established to operate a revenue generating
  business, with the goal of making a profit, will not get charitable status.

If an organization wants to persevere and re-apply to register as a charity, they may do so.
However, CRA may stipulate that the organization must wait a certain period of time before
reapplying. A new application must be submitted, and they will be subject to all the same
rules set out above.

If CRA rejects an application after determining the applicant’s purposes or activities are not
charitable, the applicant may file a notice of objection, appealing the decision. The notice
may be mailed to:

Assistant Commissioner
Appeals Branch
250 Albert Street
Ottawa ON K1A 0L5

As discussed above, a registered charity can issue donation receipts, often called “tax
receipts”. Donation receipts must include the following:

• Name of CRA
• Website Address of CRA. If the website changes, charities’ donation receipts should
  be updated
• A statement indicating this is an official receipt for income tax purposes
• Name and address of the charity. This name and address must match the information
  provided to CRA
• Serial number
• The city, town or municipality where receipt is being issued
• The date the donation was made (year is enough but specifics are encouraged)
• The date the receipt was issued
• The full name and address of the donor
• The amount of the donation
• The amount and description of any advantage received by the donor (see discussion
  below about meaning of “Advantage”
• The eligible amount of the gift (see discussion below about meaning of “Eligible
  Amount of Gift”); and
• Signature of an authorized representative of the charity.

Non-Cash Gift Receipts

In addition to all items listed on a cash-gift receipt, a non-cash gift receipt must also include:

• The date the gift was received
• A description of the donation
• The name and address of an appraisal, if the gift was appraised.

Advantage to Donor

An “advantage” means the value of anything received by the donor in consideration for the
gift. For example, some charities will provide calendars to its donors, or perhaps items are
auctioned off to raise money for a charity. The advantage is the total value of goods or services
provided to the donor, not inclusive of any applicable tax.

Eligible Amount of Gift

An “Eligible Amount of Gift” is about what amount of a donation is eligible for a donation
receipt. If a donation of $100 is made to a local theatre and in return for this gift, the donor
received tickets valued at $50 to a production put on by the theatre, the “eligible amount of
gift” is $50 as that is the amount that exceeds the “advantage” (see above for the definition
of “advantage”).

Once a non-profit becomes a registered charity, it must continue to comply with all
requirements and obligations set out in the Income Tax Act. Failure to do so could result in
the following:

• Letter of Instruction – These letters will inform the charity how to comply with the
  Income Tax Act
• Compliance Agreements – This Agreement will outline the charity’s failure to comply
  with the Income Tax Act. The charity must agree to correct any defaults and comply
  on a go forward basis
• Sanctions – Status as a registered charity could be temporarily suspended which
  means the organization would not be considered a “qualified donee” throughout
  the suspension and would be unable to issue tax receipts. CRA could also enforce
  financial penalties at its discretion
• Revocation – An organization’s charitable status could be revoked.
  More details about penalties and suspension may be found at here.

Who is required to file a NPO Information Return?

Some non-profits may be required to file a NPO Information Return with CRA.  

See the Income Tax Guide to the NPO Information Return guide here.

Filing Form T-1044 is required if:

• The NPO was entitled to receive taxable dividends, interest, royalties, or rentals totalling more than $10,000 in the fiscal period
• The NPO’s total assets were more than $200,000 at the end of the immediately
  preceding fiscal period; or
• The NPO had to file an NPO information return in a previous fiscal period.

Timeline for Filing a Non-profit Information Return

NPOs must file the NPO Information Return no later than 6 months after the end of their fiscal
period. Returns may be mailed to:

Jonquiere TC
T1044 Program
PO Box 1300 LCD Jonquiere
Jonquiere QC G75 0L5

If the NPO has more than one fiscal period, the NPO Information Return must be filed for
each fiscal period.

If an organization misses the deadline to file the NPO Information Return, there is a penalty
of $25 for each day the filing is delayed. However, there is a minimum penalty of $100 and a
maximum penalty of $2500.

Organizations should discuss all filing requirements with their accountant or financial advisor
to ensure compliance.

Directors have been referenced several times in this Guide but deserve a more in-depth discussion. Directors must be elected pursuant to the guiding legislation, Articles of Incorporation and By-Laws governing the non-profit. Directors are often coined the ‘operating mind’ of a non-profit and they are charged with operating the non-profit in accordance with its governing documents. 

Although every Society is different, common roles held by directors include: 

• Accountability to members 
• Hiring staff 
• Choosing accountant and legal advisors 
• Approving the budget 
• Approving strategic plans of various committees 
• Ensuring society is meeting its mandate 
• Continued review of memorandum of association and By-laws to make sure they continue to meet society needs. 

A non-profit’s By-laws should set out the way directors are chosen. Usually, directors are elected at the AGM and then approved at a directors meeting. 

While By-laws may provide a range in terms of how many directors an organization may have, a board and a nomination committee will need to consider on an annual basis what the exact number should be. There may be years when a lower number will suffice due to the expertise and commitment on the part of current board members. Other times, more directors may be required to properly fulfill the board’s mandate. 

By-Laws often grant directors the ability to delegate their powers to other individuals or bodies, such as executive directors, or committees. Committees are typically composed of directors and individuals who are not on the board of directors. As non‑profits grow directors may find that running the organization is too great a challenge for them alone and delegating to committees is often worthwhile. 

The powers held by an executive committee vary and depend on what powers they are given by the directors. Officers (President, Secretary, Vice President) often form the executive committee. 

The directors may set up a nominating committee. A nominating committee may recruit potential board members based on the group’s needs. For example, the board may be seeking a new member with experience in accounting. The Board would then give the nominating committee the job of finding such an individual. Nominating Committees often take the following factors into consideration when evaluating whether someone should be nominated as a board member: 

• The cultural diversity of the board 
• Representation from the legal community 
• Representation from financial experts 
• Regional diversity 
• Competency of proposed nominees and their commitment to the board and organization as a whole. 

One main advantage to incorporating over not incorporating is limiting one’s liability. Directors are charged with the responsibility of operating the non-profit and in the course of fulfilling their duties, they may expose themselves to liability. 

If an individual or group wants to start a court action (lawsuit) against a non-profit, it is generally the organization named as the party being sued, and not the directors personally. In the case of an unincorporated non-profit, a law suit will be against the individuals running the club, group or organization as there is no legal entity to name. 

It is possible for a director to be named personally, despite being on the board an incorporated non-profit. If the director went beyond the scope of their authority pursuant to the non-profit’s governing documents, or if it can be shown that the director exercised gross negligence in performing their duties, they may be named personally. 

It may be possible to insure a non-profit and its directors against liability. Practically speaking the cost of insurance premiums are often so high that many organizations simply cannot afford to get the insurance. That said, it is important to know what insurance is available.

Organizations should speak to an insurance agent who can provide all available options. Some of those options include: 

Comprehensive General Liability (CGL): protects the organization and its directors against claims for bodily injury (injuries from a slip, a fixture falling down and injuring someone at a public event, a motor vehicle accident), and property damage (damage to the roof of the building) 

Environmental Liability Insurance (ELI): protects the organization and its directors against some environmental claims (as limited by provincial statute) such as conservation damage (harm to wildlife as a result of damage to a stream), spills (heating oil escaping from a control), and waste (hazardous substances poured down the drain and emptied into a watercourse) 

Director’ and Officers’ Liability (D&O): protects the organization and its directors against claims for obligations such as unpaid mandatory remittances for Employment Insurance and Canada Pension Plan for employees. 

Errors and Omissions Insurance (E&O): protects organizations and directors through two basic types of coverage. The first is corporate reimbursement coverage, which provides coverage to the non-profit for the amount it is forced to reimburse directors for legal fees and judgments. The second provides coverage for directors and officers in the event the organization is unable or unwilling to indemnify them. Generally, E&O policies are claims made policies (for claims made during the time of the policy only) and not occurrence-based policies (for claims arising out of incidents that took place during the time the policy was in place, regardless of when the claim was made). This can be a problem in the case of sexual harassment and abuse lawsuits for incidences that occurred many years earlier. 

Directors must be mindful when a conflict of interest arises. A conflict of interest occurs when a director puts their own benefit ahead of the organization’s, or, the director has obligations to other organizations which conflict with the work of the organization at hand. 

An example of the first conflict is if a director recommended his accounting firm handle the non-profit’s finances, even though the organization does not have the budget to pay the high fees of the director’s firm. 

An example of the second conflict is if a director is on the board of the Canadian Cancer Society and also on the board of a tobacco manufacturers trade association. 

If a conflict comes up, the director should notify the others on the board of the conflict and remove themselves from certain votes or discussions on certain matters. If the conflict becomes impossible to compartmentalize, the director may consider resigning from the board.

Independent contractor or Employee: What's the difference? 

Independent Contractor

An independent contractor is a separate, independent entity and not an extension of an employer. An independent contractor has their own business and provides services to other individuals, groups or organizations. 

Employees and independent contractors can be very similar, and it might be hard to distinguish between the two at times. 

The following characteristics set independent contractors apart from employees. 

An independent contractor: 

• Uses their own tools to do a job 
• Determines how work will be performed and when 
• Submits invoices for payment 
• May use subcontractors to do a job, and 
• May be responsible for Harmonized Sales Taxes. 

Hiring independent contractors instead of hiring employees can be attractive to some employers. For example, costs are reduced as the non-profit is not responsible for offering benefits, such as health and dental coverage, to independent contractors. There is no need for payroll in a contract for service arrangement, so there are added cost savings. Independent contractors often mean greater flexibility. For example, an organization may choose to hire an independent contractor during a busy season and end the relationship or put the arrangement on hold during a slower period. 

Employees

The Labour Standards Code (the “Code”) sets out the parameters of an employer’s relationship with their employees and provides the minimum requirements to be followed in Nova Scotia, including wages, vacation pay, overtime pay, and termination. 

The following characteristics set employees apart from independent contractors: 

• An employee’s pay is subject to statutory deductions 
• An employee is subject to the Code 
• An employer dictates what hours an employee must work, and 
• An employee will typically use their employer’s tools (such as computer, phone, photocopier) to fulfill their duties.  

Many non-profits consider there to be many advantages to hiring employees. For example, many employers believe an employee has a greater sense of loyalty to the organization than an independent contractor. This loyalty can lead to greater productivity and a greater commitment to fulfilling the organization’s goals. Another advantage is employers typically have greater control over scheduling and the flow of work when they hire employees. Additionally, employees in small organizations often fulfill many roles and their job description may be broader than the limited scope of an independent contractor. 

Put it in writing!

Whether your organization chooses to hire an independent contractor or an employee, the nature of the relationship should be set out in writing. It is important to establish expectations, roles, and responsibilities, regardless of the nature of the relationship. 

Ideally, the Agreement will state whether the individual is an independent contractor or employee. Independent contractors will sometimes have their own contracts for service which they will want customers to sign before providing services. 

The Agreement should also address remuneration and set out how often payments will be made, in what amounts, and the method of payment. 

An employment agreement should also include the following: 

Vacation – How much vacation is the employee entitled to and how do the vacation days accrue? 

Sick Days – How many sick days is the employee entitled to and how do the sick days accrue? 

Benefits – In addition to vacation, what benefits will the organization offer? Is health and dental care covered by an employee group plan? 

Rules and Responsibilities – What are the employee’s duties? 

Termination – Why might the employer terminate the employment arrangement? 

Once a non-profit chooses to hire employees, it may wish to establish policies on various matters, to make sure employees are aware of the employer’s expectations and standards. 

Policies should meet a group’s specific needs and reflect the group’s unique values. Policies must also comply with all applicable laws including the Code and Human Rights Act. Policies a group might consider putting down in writing include: 

• Harassment Policy 
• Privacy Policy 
• Dress code Policy 
• Leave Policy (including, but not limited to, parental leave, sick leave, bereavement leave, reservist leave), and 
• Confidentiality Policy.  

It is important to remember that the Code sets out the minimum standards to be followed and a group’s policies may exceed those standards. As a general rule, provided an employer is meeting the minimum standards in the Code, they are in compliance. 

Contact the Nova Scotia Labour Standards Division for more info about minimum standards in the Code:  

novascotia.ca/lae/employmentrights/
1-888-315-0110 or 902-424-4311

An employee must receive remuneration for all time spent working. The Code states employees must be paid at least twice a month and must be paid within 5 days after the end of the pay period. 

Employees must, at the very least, be paid minimum wage. Minimum Wage is set by government and subject to change. Employers should make sure they are meeting the minimum requirement and be aware of any changes to minimum wage. 

An employer must make sure statutory deductions are applied to their employees’ wages. Deductions must be made for income tax, Canada Pension Plan, and Employment Insurance. If the employer offers benefits, there will typically be additional deductions to apply. 

Employees are entitled to 2 weeks’ vacation after each 12-month period of work. Employees should be permitted to use this vacation time within 10 months after such 12-month period. 

Following 8 years of service, an employee must be given 3 weeks’ vacation. 

Although employees are entitled to take vacation, it is ultimately the employer who approves when vacation time may be taken and vacation should not interfere with the organization’s work. 

If an employee works more than 48 hours in one week, they are entitled to receive 11/2 times their regular pay for each additional hour worked. 

The above is the general rule and can vary. If you are not sure whether your employees are entitled to overtime, you should contact an employment lawyer or Nova Scotia Labour Standards. 

In Nova Scotia, qualifying employees receive the following days as holidays with pay: 

• New Year’s Day 
• Heritage Day 
• Good Friday
• Canada Day 
• Labour Day 
• Christmas Day; and 
• Remembrance Day 

To qualify for the above holidays, an employee must be entitled to pay 15 days out of a 30-day period prior to the holiday and must have worked on their last scheduled shift or day prior to the holiday and on the first scheduled shift following the holiday. 

Terminating an Employee

If an employer decides to terminate an employee the employer must make sure it meets or exceeds the standards set out in the Code. Notice of termination must be in writing. This does not mean an employer cannot have a face to face meeting with the employee, but it should be accompanied with written notice. 

Depending on how long an employee has been working for the organization, different notice periods, or pay in lieu of notice, must be provided. The following table sets out the minimum requirements with respect to notice. 

Length of Employment	Notice Period
More than 3 months, less than 2 years	1 Week
2 years or more, less than 5 years	2 Weeks
More than 5 years, less than 10 years	4 Weeks
More than 10 years	8 Weeks

 

Often employers will pay the employee their wages for the notice period, instead of having the employee work that amount of time. For example, an employee who worked for 7 months with an organization could be offered 1 week of pay instead of working for a final week. 

In certain scenarios notice is not required, and an employee may be terminated immediately, without any obligation on the part of the employer to make any further payments. An employer may choose to terminate an employee for cause, which means the employee’s acts are so egregious that the employer may terminate immediately and will be under no obligation to pay the employee anything further. 

If an employee is terminated for cause, the employer must set out the reasons why they are being terminated. For example, if the employer has documented evidence the employee is stealing money from the organization, this may be grounds for termination for cause. However, the employer must set out the details of the theft in the termination letter, which must include as much detail as possible including specific dates theft took place and amounts of money taken. 

Given the complexities of termination, it is often a good idea for an employer to discuss termination with a lawyer prior to enforcing the termination. 

Employee Providing Notice

An employee must also provide notice to the employer if they wish to leave their employment. How much notice an employee must provide depends upon their length of service as set out below:

Length of Employment	Notice Period
3 months or more, less than 2 years	1 Week
2 years or more	2 Weeks

 

An employee is entitled to take leave form work for numerous reasons. 

In Nova Scotia, the following leaves are available to employees: 

• Compassionate Care Leave 
• Critically Ill Adult Care Leave 
• Critically Ill Child Care Leave 
• Pregnancy and Parental Leaves 
• Domestic Violence Leave 
• Crime-related Child Death or Disappearance Leave 
• Emergency Leave 
• Reservist Leave 
• Bereavement Leave 
• Sick Leave 
• Citizenship Ceremony Leave, and 
• Court Leave. 

The minimum amount of time an employee should be given for each leave is set out in the Code, however, an employer may choose to exceed these standards in certain circumstances. 

An employer must not fire, lay off, or discriminate in any way against an employee who has taken, or has said they intend to take, a leave the employee has a right to take under the Code.