Annual meeting
A nonprofit must have at least one meeting every 15 months for its members to elect their board of directors, review financial statements, select an auditor, and vote on any changes to their bylaws. That meeting is called an annual meeting, annual general meeting (AGM), or annual members’ meeting.
Annual meetings are not the same as special members’ meetings. Special members’ meetings are like annual meetings, but they can take place at any time, and they usually have a specific purpose, for example, an emergency vote on a certain issue.
Articles of incorporation
For most nonprofits, these are documents filed with the Government of Ontario that say:
- what your nonprofit’s legal name is,
- the province where your headquarters is located,
- your nonprofit’s purposes or goals, and
- the names of the people who started your nonprofit, which is usually your first board of directors.
Articles of incorporation are also known as letters patent.
If your nonprofit’s name or purposes changes after it incorporated, you have to change the articles you filed with the government. These are called articles of amendment.
Audits
An audit is the process of checking your nonprofit’s financial statements and accounting records, to see if they are accurate. The Not-for-Profit Corporations Act says only a certified public accountant who is not connected to the nonprofit can do an audit.
Auditor
An auditor is a public accountant, or a person trained and licensed to audit or check an organization’s financial statements. A nonprofit’s members must decide whether they will appoint an auditor each year. This usually happens at the annual meeting, but can happen at a special members’ meeting too.
Board of directors
A board of directors, also called the board, is a group of people that have a legal duty to make sure a nonprofit is well managed. They also have a legal duty to act in the best interest of the nonprofit.
Members of the board are called board members or directors. Board members are usually elected by the nonprofit’s voting members at its annual meeting. But if the board doesn’t have all the members it needs to have, a nonprofit’s voting members can elect directors at a special meeting, or the board can appoint board members if the nonprofit’s bylaws allow it.
Board committee
A board committee is a group of people that a board of directors brings together to do jobs that usually benefit from a smaller team doing it. For example, a board may create a committee to work on its annual budget or update its bylaws. The members may or may not be board members.
The board can give a committee many of its powers, but not all of them. For example, a board can’t give a committee the power to appoint new directors. If a committee exercises board powers, it can only have directors as members.
Bylaws
These are the rules the directors and members of a nonprofit agree to follow to determine who can make important decisions and how they make those decisions. For example, a nonprofit’s bylaws will say how its board of directors are elected and how long a director stays on the board.
The Not-for-Profit Corporations Act (ONCA) says some rules must be included in your bylaws, but it allows you to decide whether to include other rules. For example, your bylaws must define who is a member.
Your bylaws can also include rules on issues that the ONCA doesn’t mention. For example, the process to nominate candidates to the board.
Canada Revenue Agency
The Canada Revenue Agency (CRA) is the federal government department that decides whether or not a nonprofit is a charity for the purpose of taxes. If CRA decides it is a charity, it gives it a registered charitable number. CRA also checks to see whether charities are following the rules that apply to them.
Chair
A chair is an officer position. Under ONCA, nonprofits are required to have a chair. The chair position must be filled by an individual who is also a director. ONCA does not set out a specific job description for the chair. It is up to each nonprofit to decide what their chair may be required to do.
Charity
A charity is a nonprofit that only has charitable goals or purposes, and all its activities further those goals.
A goal or purpose is charitable if it does one or more of the following:
- relieves poverty, for example, food banks, soup kitchens, and nonprofits focused on low-cost housing have this goal
- advances education, for example, colleges, universities, and research institutes have this goal
- advances religion, for example, places of worship have this goal
- has any other purpose that the courts have found to benefit the public, for example, animal shelters and libraries
A nonprofit whose purposes are charitable may apply to the Canada Revenue Agency (CRA) to become a registered charity. Registered charity status gives nonprofits the right to give their donors a tax receipt.
Conflict of interest
A conflict of interest is a situation where a person in an official position can benefit themselves or someone they are close to, from something they can do in that position. For example, a director is in conflict of interest if they vote on a contract from a company that is owned by a family member.
Default bylaws
These are bylaws the Ontario government wrote that are based on the Ontario’s Not-for-Profit Corporations Act (ONCA). They’re called default bylaws because they apply to every new nonprofit that incorporates under the ONCA, unless that nonprofit passes its own bylaws within 60 days of the date it incorporated.
Nonprofits that incorporated before the ONCA also have to make sure that their bylaws follow the ONCA.
Default rules
Ontario’s Not-For-Profit Corporations Act has rules that apply to a nonprofit even if its articles or bylaws don’t include them. For example, if a nonprofit’s bylaws doesn’t say what the quorum is for board meetings, the default rule says it will be 50%+1 of the number of directors listed in its articles.
Director
A member of a nonprofit’s board of directors.
Fiduciary duty
A fiduciary duty is a duty to act in the best interests of a nonprofit and not your own best interests. Directors of nonprofits have a fiduciary duty to decide issues based on what would be best for the nonprofit and not best for themselves.
Financial statements
Financial statements are records that show how a nonprofit is doing financially. ONCA requires that nonprofits prepare the following financial statements:
- Balance sheets that tell you about a nonprofit’s assets and liabilities.
- Retained earnings statement explains how an organization’s earnings are distributed where they need to go after the nonprofit pays taxes. The earnings that the organization keeps after these movements are called retained earnings.
- Income statements that tell you about the money the nonprofit took in and spent.
- Statements of cash flow that tells you when the money came in and went out.
- Nonprofits have to make their financial statements available to members at least 5 days before a members’ meetings. This gives members’ enough time to review them.
Fiscal year
A fiscal year is the period of time a nonprofit uses to make their budgets and pay taxes. A nonprofit can begin and end its fiscal year whenever it chooses, as long as the Canada Revenue Agency agrees to it. Fiscal years usually start January 1 and end on December 31, or start April 1 and end March 31.
Good faith
Good faith basically means that you did something honestly and fairly, and not for a reason that is against the law. For example, if a board signed a contract with a company, and didn’t know the company was going to go bankrupt soon after, it signed the contract in good faith. Or if it a nonprofit ends a membership, it was ended because the member did something against the bylaws and not because the board didn’t like the member.
Mandatory rule
Mandatory rules are rules that Ontario’s Not-For-Profit Corporations Act (ONCA) says a nonprofit must follow even if they are not in its bylaws, or if its bylaws say something else. For example, the ONCA has a mandatory rule that says members have a right to see the nonprofit’s financial statements.
Member
A member is an individual or corporation who does important things in the nonprofit including electing the Board, appointing an auditor, receiving the financial statements, approving any changes to the governing documents, and voting on important decisions for the organization. All nonprofits must have at least one group of members. The articles and bylaws of a nonprofit should explain who the members of the nonprofit are.
Member classes
Nonprofits can have different kinds of members. Each kind of membership is called a member class. Your articles must describe each member class. For example, they should say how a person can join each member class and whether they have the right to vote.
Notice
A notice is information a nonprofit must give certain people or organisations, for example, its members. There are rules about when some notices must be sent. For example, a nonprofit must give all its voting members notice of a members’ meeting at least 10 day before the meeting takes place.
Officer
An officer is a person who holds a certain position or office. For example, a person who is the president, chair of the board of directors, vice-president, secretary, assistant secretary, treasurer, assistant treasurer, or manager of a nonprofit is an officer of that organization. A person in another position in a nonprofit can also be an officer if the bylaws of that nonprofit say they are.
Policies
Policies are a set of plans that say what a nonprofit has officially agreed to do in a particular situation. They guide how a nonprofit is run. Unlike bylaws or articles, policies don’t have to be approved by a nonprofit’s members. They can be made and changed by a nonprofit’s board or employees.
Prescribed in regulations
Besides following what the Not-for-Profit Corporations Act (ONCA) says, nonprofits must also follow government regulations. ONCA gives the government the power to make regulations. For example, it could make a regulation on what forms a nonprofit has to fill out, or one on when they have to send financial statements to its members.
Public Guardian and Trustee
This is another name for the Office of the Public Guardian and Trustee (PGT). The PGT is part of Ontario’s Ministry of the Attorney General. The PGT regulates charities and protects the public interest in charitable property.
Purposes
A nonprofit’s purposes are its goals. For example, a nonprofit’s purposes or goal could be to end hunger or to encourage young children to read. Nonprofits must say what their purposes are in their articles. Everything a nonprofit does must support its purposes.
Resolution
A resolution is a formal plan or suggestion that a nonprofit’s directors or members have to vote on at a board or members’ meeting. For example, you might vote on a resolution to elect or remove a director, or change your bylaws.
Slate of electors
When holding an election for the board of directors, instead of voting for individual candidates, a nonprofit can offer a bundle of candidates together. This bundle is called a slate of electors. Members have a right to vote on directors individually and so may request that directors not be presented in a slate format.
Special members’ meeting
These are members’ meetings that take place between a nonprofit’s annual general meetings. A nonprofit’s board of directors may call for a members’ meetings for many reasons. For example, to remove a director, vote on a merger, or deal with business that couldn’t be finished at the annual meeting. These members’ meetings are called special members’ meetings.
Special resolution
A special resolution is a resolution that requires at least 2/3 of the votes cast at a members’ meeting in order to pass. The special resolution can also pass outside a members’ meeting if it passes unanimously by every member entitled to vote on it. A special resolution is usually required because the vote is something important, such as a change to the purposes of the organization or its name. ONCA says any changes to the articles requires a special resolution.
Tax receipt
A tax receipt is an official document that proves to Canada Revenue Agency that a person donated to a registered charity. Charities give people a tax receipt when they’ve donated something of value to the charity. A tax receipt may help the donor reduce their taxes.