Law For Non-Profits is a simple and low-barrier digital platform from the Pacific Legal Education & Outreach Society (PLEO). It’s designed to help non-profit leaders understand their legal obligations. This tool was created for non-profits working in BC, however, many of the concepts are general in nature and may apply in other provinces Canada that have similar laws. Read more about using these resources from other regions of Canada here.

Missed Part One in our series? Read it here.

Missed Part Two? Read it here.

It’s important that the directors are at arm’s length from one another.  What does “arms-length” mean?  

The term "at arm's length" describes a relationship where persons act independently of each other are not related. Practically speaking, for a non-profit that means that the directors are not closely related to one another through family ties such as brother, sister, mother in-law. It can also relate to business relationships such as a partner in a law firm.  

Founders are often among the first directors of a non-profit. It is also common that friends and family of the founder are asked to sit on the Board of a non-profit. This can be an issue when applying for charitable status. Directors ought to be at arm’s length from one another as a charity must be seen to operate for the benefit of the public and not confer a private benefit. If only the founder and their family are directors, this may suggest that the family is benefitting personally from the activities of the non-profit in some way. Best practice is to ensure that the majority of the directors are at “arm’s length” from one another. 

What about the artistic director? Or the Director of Programs? Do they count as directors?

Just because the word director is in the title does not mean that the person is a director within the meaning of the word for the purposes of incorporation or applying for charitable status. The artistic, executive and other such directors are positions held by individuals that are paid by the organization. For more on this check out the lawfornonprofits.ca module on Directors.

We have only just incorporated.  Does that matter in an application for charity status?  

Sometimes organizations assume they have to be in existence for a long time before they should apply for charitable status.  The Charities Directorate is more concerned with the description of the charitable activities.  They will want enough information to describe the intended activities and how they fulfill the charitable purposes (see blog on charitable purposes.)

If you’d like to learn more about keeping your non-profit legally compliant, explore the many free resources available on our website. Our Legal Help Guides walk you through a series of plain language questions and provide you with a checklist, sample documents and helpful links for any areas your non-profit may need to address.

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