This Fact Sheet provides information about the differences between federal non-for-profit and BC non-profits.

In the non-profit sector there are a number of ways to become legally established (aka incorporated): federally or provincially.  Federal not-for-profits are incorporated under the Not-for-profit Corporations Act.  In British Columbia, non-profits are usually incorporated under the Societies Act.  The table below explains the key differences.

Key Differences Between Federal Not-for-Profit and BC Societies (Non-Profits)

Charities

Once an organization is legally established (incorporated), it can apply for charitable status.

Charities are those non-profits registered with the Canada Revenue Agency (CRA) that can issue tax receipts for donations. There are also only four purposes the CRA accepts for charities: advancement of education; relief of poverty; advancement of religion; or other purposes beneficial to the community (e.g. health, environment, arts, community economic development). An organization will usually have to be legally established (i.e. incorporated) before it can apply for charitable status. The non-profit’s purposes and activities must both be charitable to qualify for charitable status.  Societies with appropriate charitable purposes and activities can register later for charitable status.

Becoming a registered charity is a major undertaking and can take 9-12 months. The CRA has strict rules regarding, when a charity can run a business aka social enterprise, it must be either run substantially by volunteers or linked and subordinate to the charity’s purpose. More information on the process can be found on the Charities Directorate website (link on the Helpful Links page).

This Fact Sheet provides information about holding meetings of a non-profit in British Columbia.

Annual General Meeting (AGM)

The Societies Act requires that every non-profit hold an annual general meeting (AGM) once per calendar year. The Registry can provide an extension to the non-profit if it has been unable to do so. There may also be special rules from time to time, such as those during the pandemic.  A non-profit does not need to hold an AGM in the calendar year during which it was incorporated.

Best practice is for non-profits to hold their AGM on a date that falls within six months following the last day of the non-profit’s fiscal year (see below). This date allows members to review and accept the full and complete financial statements for the previous year, as well as discuss the non-profit’s activities of the previous year. Another reason for this suggested AGM timing is that the financial statements are meant to be presented to members within six months of the end of the financial year.

The non-profit’s financial statements must be presented at the AGM. The members of the non-profit must vote to accept, as presented, the non-profit’s financial statements and, if the non-profit has an auditor, the auditor’s report. This vote does not mean that members approve the financial statements: that is the job of the Board.

The non-profit must also deal with any matters that are required to be dealt with at an AGM as set out  in the non-profit’s bylaws. For example, many non-profits’ bylaws state that director elections must occur at the AGM. However, these minimum requirements do not limit what non-profits may do at an AGM. For example, some non-profits use AGMs to gain member input on programs and report on key activities for the year.

A non-profit must file an Annual Report every year, 30 days after the AGM is held. If a non-profit fails to file an Annual Report two years in a row, the Registrar may take steps to dissolve the non-profit.

Notice of an AGM

A non-profit’s bylaws can require the notice be sent to members anywhere between 7 and 60 days before the AGM. Many bylaws use 14 days as that was the previous Society Act standard. If a non-profit’s bylaws do not specify a notice period, the default in the Societies Act is between 14 and 60 days before the AGM. Days means business days, not calendar days.  The calculation of days means 14 days is actually 17 days.

The best way to send AGM notices is the method that will be easy, flexible, and convenient. For most non-profits, the best and most convenient method is via email. For non-profits with more than 250 members, it is also permitted (and may be easier) to post the notice about the AGM on the non-profit’s website. Best practice would be to do both ie., send an email and post on the website.

Voting

A non-profit’s bylaws may state that members are only eligible to vote when certain conditions are met.  Some non-profits only let members vote if they have been members for at least 30 days, are in good standing, or have paid membership dues. A non-profit should  keep track of who is (and is not) eligible to vote in its Register of Members.

If a non-profit has more than one class of members, it must have at least one class that is voting members.

Electronic Meetings

Electronic meetings are meetings where members use technology to virtually participate in the meeting without being present in-person. Virtual includes telephone, internet video calls, and other methods of communication that allow all members to fully participate in the business of the meeting. Email, on the other hand, does not allow full participation.

Electronic meetings are allowed by the Societies Act however it is best practice to ensure that there is specific language in the bylaws to allow for them. Best practice is to amend the bylaws if they do not allow for electronic meetings of members.

How to Conduct a Meeting

A non-profit decides which decision-making procedures are most appropriate to meet the non-profit’s needs. For example, Robert's Rules of Order are a very popular set of rules for running meetings. These rules describe who runs the meeting (chairperson) and how things get decided (motions and voting). Many non-profit’s bylaws say that they “may” use Robert’s Rules of Order for meetings. Some say they “shall” use those rules which means it is mandatory. Robert’s Rules can be tricky to use and are not needed to have a productive meeting. There are many different types of rules to help run meetings (see our Helpful Links page, Meeting Rules).

Quorum

One of the key requirements of  holding a general meeting is to have a quorum. Quorum is the minimum number of voting members present required in order to conduct the business of the  non-profit. Unless the non-profit’s bylaws state otherwise, the Societies Act sets quorum at three voting members. The bylaws may be amended so that quorum is greater than three voting members.

Meeting Resolutions

Resolutions (motions) passed at a general meeting of a non-profit can authorize conduct in future years, such as a yearly donation that increases by a set amount each year. However, the current members of the non-profit can seek to have any ordinary resolution repealed if the circumstances no longer warrant continuing the practice.

Special Resolution

A special resolution is required when the result  will have particular impact  on the structure or ethics of the non-profit. The Societies Act sets out when a special resolution is required:

● the constitution or bylaws of the non-profit are altered

● a member or director is removed from the non-profit or disciplined

● other significant financial changes, such as liquidation, sale or leasing of assets

If a general meeting will discuss matters relating to a special resolution, the text of the special resolution for the meeting must be provided with the notice of the general meeting. A special resolution is passed at a general meeting by receiving 2/3 of the votes cast by present voting members unless otherwise specified by the non-profit’s bylaws. The Act provides that the bylaws can increase the threshold of required votes needed for a Special Resolution (up to 100% or unanimity) except in cases dealing with the removal of directors.

This Fact Sheet provides information about dissolving a non-profit in British Columbia.

Dissolving or dissolution means the process of a non-profit ceasing to exist as a legal entity. Dissolving is the opposite of incorporating the non-profit. Most dissolutions will happen voluntarily, at the request of the members. For example, a non-profit may be unable to find willing volunteers to participate i.e. the non-profit becomes dormant.  More commonly, dissolution is related to financial issues that appear insoluble.

To voluntarily dissolve a non-profit, the following steps must be taken:

1. Best practice for a board considering the dissolution of a non-profit is to first convene an informal meeting of members to discuss the issues. This meeting is particularly important for non-profits with a lot of members. This meeting should canvas ideas and information without the added stress of a formal meeting. Current financials should be disclosed and the winding up and dissolution provision in the non-profit bylaws reviewed.
2. Whether or not the first step is followed, the winding-up and dissolution provisions in the bylaws will govern the process.  Liabilities must all be taken care of and assets distributed in accordance with those terms.  Most bylaws require the dissolution decision be made by members, some give the final say to directors.
3. The non-profit’s members must pass an ordinary resolution at a members’ meeting empowering the board to seek voluntary dissolution by  the Registry.
4. Once the members’ ordinary resolution has been passed, the directors must pay or make arrangements to pay all the non-profit’s liabilities. In some cases, this may already have occurred.
5. After the liabilities have been paid, any remaining assets must be distributed to the qualified recipient listed in the non-profit’s bylaws. If the non-profit’s bylaws do not specify the qualified recipient, the remaining assets must be disbursed to a qualified recipient or recipient  specified by a resolution of the members.
6. Once arrangements have been made to settle the non-profit’s liabilities and distribute the non-profit’s remaining assets, the directors must submit a request for dissolution to the Registrar. With the request for dissolution, the directors must provide a copy of the members’ ordinary resolution authorizing dissolution. The directors must also provide an affidavit sworn by at least two directors (or sworn by one director if there is only one director), declaring that to the best of their knowledge, the non-profit has no liabilities or has made adequate arrangements for the payment of the non-profit’s liabilities and that the remaining assets of the non-profit, if any, have been distributed to the qualified recipient.

*A qualified recipient is an organization that is eligible and designated by the non-profit’s bylaws or a resolution of the members or directors of the non-profit to receive the non-profit’s remaining assets upon dissolution. The Societies Act states that a qualified recipient may only be another society (cannot be a member-funded society), a community service cooperative, a registered charity, or a trust for a charitable purpose.

Registered charities are obligated to distribute any remaining assets only to qualified donees within the meaning of the federal Income Tax Act.

This Fact Sheet provides information about the legal rules non-profits must follow related to finances in British Columbia.

Non-profits must follow many rules for the management of its financial affairs. For example, the Societies Act requires that a non-profit keep sufficient accounting records and be able to produce a set of financial statements for its members. Sometimes, a non-profit’s treasurer can keep sufficient accounting records and produce financial statements.

While the Societies Act does not require that the non-profit get professional help, to manage finances effectively, many non-profits hire an accountant or bookkeeper.

Financial Statements

Financial statements and accounting records are not the same thing. Financial statements are a broad overview of a non-profit’s financial position, presented for member approval at each AGM. Financial statements generally include four documents: Income Statement, Balance Sheet (Statement of Financial Position), Statement of Cash Flows, and Equity Statement (Statement of Retained Earnings).  Financial statements are generated from the General Ledger.

Every non-profit is obligated to produce financial statements on an annual basis and provide them to its members, usually at an AGM.  The Board approves the statements and two directors will sign off on them before they are provided to the member’s at an AGM for their consideration.  Members do not approve Financial Statements.

Non-profit financial statements must report the amount paid under contracts for services if any of them are for more than the threshold set by regulation. The threshold is currently $75,000 per year. A contract for services is when your non-profit has contracted with a person or company for performing a service such a bookkeeping or cleaning.

Non-profits are not permitted to restrict access to financial statements.

Accounting Records

Accounting records are the records that track financial transactions of the non-profit. These records include details on individual financial transactions such as the date and amount of deposits or withdrawals, cheque numbers, bank account numbers, daily balances, etc. Normally these details are called the general ledger or “the books.”

Accounting records such as the general ledger of the non-profit and supporting documentation such as bank statements and donation receipts contain  a great deal of personal sensitive information. For that reason, access to accounting records should be restricted in a non-profit’s bylaws.

Fiscal Year

Financial statements are prepared based on a non-profit’s fiscal year. A fiscal year is the one-year period of time that a non-profit uses for accounting purposes and for preparation of its financial statements. For example, some non-profits have their fiscal year aligned with the calendar year (January 1 to December 31) while others to the government year end (April 1 to March 31). Some non-profits set their fiscal period to align with a natural break in their operations, such as a summer camp with a fiscal year of September 1 to August 31.

Audits

An audit is when a non-profit’s financial statements are reviewed by a third party to ensure they fairly and accurately represent the non-profit’s financial position. Audits are intended to help non-profits ensure financial accountability.

The Societies Act does not require audits. Audits are only mandatory if required by a non-profit's bylaws or by funders. Usually, it is funders that require non-profits to have their finances audited. If an audit is not required in the bylaws or as a condition of funding, an audit is optional. The more revenue a non-profit has, the more an audit is needed to maintain public confidence. If a non-profit chooses to have their books audited, the Societies Act sets out the qualifications for the auditor.

For many small non-profits, an audit may be too expensive to voluntarily undertake. Some non-profits that are not required to have an audit, choose instead to have a review engagement. A review engagement is a review of the financial statements to determine if any material modifications need be made for them to conform to the financial reporting framework. A review engagement is less expensive than an audit, but it only tells the non-profit if its financial statements are properly formatted/organized.

Borrowing and Debentures

Under the Societies Act, non-profits can borrow funds and issue debentures whenever the directors determine, unless it is prohibited by the bylaws. There can be negative consequences if the directors borrow without the proper authority.

A debenture is a debt instrument used to raise capital. Debentures are typically used to raise short term capital for specific purposes such as an expansion of services. Debentures are unsecured by collateral or assets and are generally backed up by the creditworthiness of the borrower. The term debenture is found in many non-profit bylaws because the old Society Act did not permit the issuing of debentures without a special resolution.