The following are legal Q and A's asked by Ontario organizations and answered by VLS volunteers. These legal questions and answers are posted here to assist other organizations with similar questions. Any information provided here should not be considered legal advice and does not take the place of consulting with a lawyer.

Q: Can an Executive Director also be a Board Member? If so, does the ED have a "vote" as a Board Member? For example, if the Board policies state that decisions are made by majority, would the ED's vote count?

The preferred practice is that the ED not be a Board Member so there is separation between management and the Board. The ED can certainly attend all or some of the Board's meetings, provide regular reports to the Board and answer any questions the Board may have. You can consider a situation where the ED is an "ex officio" member of the Board of Directors with no voting power, which would have to be set out in your by-laws. Finally, you should note that if you are a charity, common law in Ontario prohibits members of a Board of Directors of a charity from receiving any remuneration from the charity, unless the charity gets court approval. Without this approval, this would preclude the ED of a charity (as a paid employee) from sitting on the charity's Board.

Q: "Our organization owes $25,000 to a foundation that funded a specific project, but the project objectives were not fulfilled. Since the money has since been used to pay employees and other operational costs, our organization does not have the ability to refund the money at this time. Could individual Board members be liable for the $25,000 owed to the foundation?"

In general terms, the board members may be personally responsible if they misappropriated the grant money for a different purpose. If they attempted in good faith to apply the grant money for the intended purpose, but the purpose simply didn't succeed, that may be a different story. A great deal may depend upon the terms of the grant, which should be read carefully. The organization should try to work out some arrangement with the funder.

Q: "Are there a minimum number of board meetings required if not stated in our by-laws?"

For Ontario incorporated non-profit corporations, the Ontario Corporations Act (ss.129 (1)), indicates which matters may be included in its by-laws, among which is "(i) the time and place and the notice to be given for the holding of meetings of the members and of the board of directors….." There is no comparable statement in the Canada Corporations Act for federally incorporated organizations.

That said, the directors are legally responsible under both legislative regimes for the management of the corporation and can be held liable for failure to discharge this very fundamental legal obligation. This necessarily requires that the Directors meet periodically to review the activities of the Corporation and to make the required decisions by voting on properly constructed resolutions.

Therefore, as a practical legal matter the Board will invariably be required to establish a minimum schedule for Board meetings in order to discharge their legal obligations. There is no legally required minimum number of meetings and their frequency will be dependent on the nature of the Corporation and the Directors' perception of how much of their time is required in order to discharge their legal obligations.

Q: "We are setting up a website and want to know if we can post archival photos that were taken over the last 35 years to the present. Do we need permission from each individual in the pictures before doing so? Secondly, in future, is it sufficient to announce at events that we are taking pictures that may or may not end up on our website, and ask if anyone has any objections to let us know so we do not take their photo? Is this enough or do we need to get a release form from every participant for every event?"

When a non-profit (or anyone else for that matter) wants to post photographs of participants in the non-profit's activities or fundraising activities on their website, there are two important issues to consider: (1) the rights of the individuals who appear in the pictures (the "Subjects"); and (2) the rights of the photographer (or copyright owner).

The Rights of the Subjects: In Canada, individuals enjoy certain rights which may be invoked to prevent (or claim damages from) the unauthorized posting of a photograph of the individual. Individual rights may be asserted through an action for invasion of privacy (which is recognized to be a tort or legal wrong) and/or an action for appropriation of personality (which applies generally only to celebrities).

In some provinces, the tort of invasion of privacy has been recognized by statute, in others it is a common law tort. For example, in British Columbia, under the Privacy Act, it is a tort, is a tort, actionable without proof of damage, for a person, willfully and without a claim of right, to violate the privacy of another. It is also a tort, actionable without proof of damage, for a person to use the name or portrait of another for the purpose of advertising or promoting the sale of, or other trading in, property or services, unless that other, or a person entitled to consent on his or her behalf, consents to the use for that purpose. There are exceptions for shots of groups and where the individuals are not specially identified. For example, the BC Court has found that an employer who utilized the photograph of a former employee in promotional materials without the employee's consent was liable to damages of $15,000 for invasion of privacy. The BC Privacy Act will likely help to inform and shape the ambit of the common law tort of invasion of privacy in provinces like Ontario where there is no such legislation.

Additionally, because images available on the Internet are available throughout the world, potential liability under foreign legal rules must also be considered.

Appropriation of personality may give a celebrity a cause of action where his or her personality (in this context, a photograph) is used to endorse a product or service without his or her consent. A celebrity has a commercial property right with regard to his or her photograph or likeness when it is used in advertisements, however, where a photograph is not used for commercial purposes there is likely no cause of action.

The best way to minimize risk is to ensure that you have the consent of the Subjects to the use of their images on the website. While the sort of "negative option" consent of requiring participants to expressly opt-out of having their picture posted may go some way to showing that the individual did not have a reasonable expectation of privacy, the better option is express consent to the posting of the actual photograph in question. Of course, where there are large group shots and no individual is particularly identified or singled out, the need to obtain consent would not be as significant. As a general practice, you should provide notice to those being photographed at events of the uses the photographs may be put to. You should not take surreptitious pictures. The Subjects should be asked if they would like to be photographed prior to photographing them and, in an ideal world, that consent would be in writing. Practically, a charity should consider whether the benefit of posting the pictures is outweighed by the potential embarrassment and or legal costs associated with having to take them down.

The Rights of the Photographer (or Copyright Owner): According to section 13 of the Copyright Act, the owner of the initial negative is deemed to be the photograph's author and the owner of the copyright in the photograph. In the case of commissioned photographs however, and in absence of any agreement to the contrary, the person who orders a photograph for valuable consideration is the owner of the copyright in the photograph. Copyright includes the exclusive right to make, or authorize the making of copies of a work. In the case of photographs, before any photograph is posted to a website (and thus copied), a non-profit should make sure that it owns the photograph or has permission from the copyright owner to post the photograph to its website.

Q. "Can an unincorporated non-profit association be sued?"

No. However the members and directors can be sued and be held liable for debts of the unincorporated association.

Q. "It is my understanding that individuals without "legal status" should not be considered as volunteers and organizations may engage only volunteers who are "in status" (i.e. landed immigrants, visitor/student visa) or have the legal authority to be in Canada. Is this true?"

Citizenship and Immigration Canada ("CIC") at 1-888-242-2100 may be contacted to discuss an organization's responsibility in this regard. This question was recently asked of a CIC representative who stated that although persons physically present in Canada must have legal status to be in Canada, there is no legal obligation for an organization to report an illegal immigrant to CIC or for an organization recruiting volunteers to inquire if the applicant has legal status in Canada. Note that this is the case only if the volunteer activity does not qualify as 'work'. An organization will not face a fine for offering a volunteer position to an illegal immigrant, but may face a fine for employing an illegal immigrant or having the volunteer perform 'work'.

However, the CIC representative advised that organizations should ask volunteer applicants if they have 'valid status' or 'legal status' to be in Canada. The CIC representative also stated that organizations should not offer a volunteer position to a person without legal status to be in Canada, because this would encourage the person to remain in Canada without legal status. The organization should instead encourage the person to take steps to obtain legal status to be in Canada. For more information on this topic, download this resource.

Q. "Our group is non-profit charity and is thinking of amalgamating with another non-profit charity. Both our groups are theatre arts groups with pretty much the same objects of incorporation. If we amalgamate, does the new corporation need to re-apply with the CRA to be a charity and, if so, until then are we able to issue tax receipts under one of the former charities?"

Before issuing any tax receipts, you should speak with the CRA to confirm which charitable registration number the amalgamated entity should use. The CRA may have further recommendations and requirements. Most likely, the amalgamated charity may select one of the charitable registration numbers to continue using. The other charitable registration number will be terminated as of the date of the amalgamation. The remaining charitable registration number may be used to issue tax receipts. To obtain answers to other questions about the how amalgamated charities need to be reported to the CRA, contact the CRA Charities office at 1-800-267-2384. For further analysis of this question, download this resource.

Q. "How can a foreign charity register to do work in Canada?"

For a foreign organization to register to do charitable work in Canada it must first apply for incorporation as a not-for-profit corporation within Canada, and then it should apply for charitable status with the Canada Revenue Agency (CRA). Although minor "charitable work" can be done in Canada without applying for charitable status with the CRA, if an organization wants to do significant charitable work and to receive all the benefits available to charities from the governments of Canada, then it must register for status with the CRA. However, only Canadian "resident organizations" may apply for charitable status with the CRA-they cannot be subsidiaries of foreign organizations-so it is important that your organization first incorporate independently within Canada.

To incorporate as a not-for-profit, an organization can apply either through the Province it will be operating in, or if it's likely to operate in more than one province, then it might be best to apply through the Canadian Federal Government. Either way, a not-for-profit must comply with all the regulations governing charities in the province(s) in which it operates.

Provincial applications are done through different ministries and agencies. In Ontario, applications are processed through the Ministry of the Attorney General. Please visit their website dealing with charities for the "Not-for-Profit Incorporator's Handbook" which will guide you through the process. This website can be found at: http://www.attorneygeneral.jus.gov.on.ca/english/family/pgt/charities/

To learn how to incorporate through the Federal Government, please visit Corporations Canada's website on incorporating a not-for-profit at: http://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs03440.html

Once your organization has received its "letters patent" signifying that it has become incorporated, then an organization may apply for charitable status with the CRA. To find out more information about this process, please visit the CRA's website at: http://www.cra-arc.gc.ca/tx/chrts/pplyng/menu-eng.html

For more general information on this process for foreign charities, it might be helpful to consult the webpage of Mark Blumberg, a Canadian Lawyer who has written an online article entitled: Foreign Charities Operating in and from Canada. It is available for free at: http://www.blumbergs.ca/articles_more.php?id=114_0_2_0

Q. "If a non-profit chooses to incorporate in a province, does it then have to register in every other province it decides to work in?"

Non-profits can operate in any province after incorporating through a single Provincial Government or through the Canadian Federal Government. Unlike businesses, they do not have to register separately in every province they operate. However, a non-profit's activities still has to abide by all provincial rules and regulations that govern non-profits in each of the provinces it works in. In other words: if a non-profit was incorporated and has headquarters in Nova Scotia and then sets up an operation in Ontario, whatever it does in Ontario has to comply with Ontario's rules for non-profits.
There are different fees, forms, regulations and benefits for incorporating with the different provincial governments or with the federal government. It is helpful to review these differences before deciding which to incorporate with, because although the federal government's incorporation procedure is supposed to be the best for non-profits wanting to work in a variety of provinces, it may not necessarily be the best method for your non-profit.

Q. "Regarding NPO's and charities, does the board have to decide on a fiscal year end date in order to file for information return (with the CRA), or is it assumed to be December 31?"

Unless otherwise declared by the NPO or charity, the default end of fiscal year assigned by the CRA is December 31. Declaration of fiscal year end date is not required to file for information return. For information on changing the fiscal year end date please visit Canada Revenue Agency's website "Change of fiscal year-end": http://www.cra-arc.gc.ca/tx/bsnss/tpcs/lf-vnts/fy/menu-eng.html

Q. "Regarding NPO's and charities, what is the deadline for filing the information return relative to the fiscal year end date?"

Annual Information Return - Must be filed no later than six months after the fiscal year end date. Please visit the following Canada Revenue Agency's website for guidelines on how to file information returns:
Guideline for Non-Profit Organizations - http://www.cra-arc.gc.ca/E/pub/tg/t4117/
Guideline for Charities - http://www.cra-arc.gc.ca/tx/chrts/prtng/rtrn/menu-eng.html
Initial Return - Must be filed within 60 days after the date of incorporation, (see section 2 of the Corporations Information Act) setting out the prescribed corporate information (e.g. head office address, directors and five most senior officers) with the Companies and Personal Property Security Branch. For more details, please visit the Ontario Ministry of the Attorney General's website's Not-for-Profit Incorporators Handbook: http://www.attorneygeneral.jus.gov.on.ca/english/family/pgt/nfpinc/

Q. "For an NPO in the process of obtaining charity status, which CRA form should be used to file for information return (T1044 or T3010)?"

Until successful registration of charity status has been confirmed, NPOs in the process of obtaining charity status shall continue to operate as NPO's and file the information return using CRA form T1044. For further clarification for case specific issues, please contact the Charities Directorate:

1 800 267 2384 for toll-free, long distance calls (English)
1 888 892 5667 for toll-free, long distance calls (bilingual)
1 800 665 0354 for toll-free TTY service for persons with a hearing or speech impairment

Q. Specific Case - Risk Management: "The Association is made up of member agencies that use volunteers. The Association itself is not incorporated. Each agency is represented by the staff person responsible for volunteers. If each agency has its own insurance but is it necessary for the Association to be insured as well? The Association's (relevant) activities include holding a professional development day every year, a volunteer workshop, an event to recognize community volunteers and host a website that provides information on volunteering opportunities."

As the Association serves only a coordination role for the member agencies, there are ways in which it can limit its risk liability without necessarily obtaining insurance. The fact that the association is unincorporated is important because in order to get insurance, it would first have to incorporate. This may not be necessary for the activities the association is engaging in. In regards to events, member agencies could agree to take turns being the official host and thereby extend their insurance coverage to those events. As for the liability stemming from information and training, this must be evaluated in regards to the activities the volunteers will be engaging in, as well as the potential risks they may be exposed to. If training involves general subject matters as opposed to technical or practical skills, then the risk is minimal. For example, the potential liability for giving a workshop on job search skills would be less than a workshop concerning personal safety or the correct manner in giving Cardio Pulmonary Resuscitation (CPR). Furthermore, a general liability disclaimer stating that the association cannot guarantee or endorse the quality of the volunteer opportunities posted on its website or forum may be able to allay liability concerns, signalling that potential volunteers should use with greater discretion when considering a potential volunteering placement than they would when considering paid employment.

Q. "Can a charity legally operate with 2 membership types (with and without annual dues) both of which have full voting rights?"

Charities may operate with several membership classes with varying membership conditions and privileges. The charity must outline conditions of membership and membership classes in its constitution. For more information, please refer to Policy Statement 13.2 regarding the Canada Corporations Act Part II - Incorporating a Not-For-Profit Corporation. [http://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs03440.html#registered]

Q. "A non-profit organization passed a new motion mandating membership fees to dispense as donations. Are there any potential issues associated with this action?"

A non-profit organization may impose membership fees as part of its membership requirements. The organization may change conditions of membership and membership classes only in a manner that is consistent with its constitution (in some cases, this may involve amending its constitution). For example, membership fees could either be annual or collected once for lifetime membership. If membership fees are annual, than any non-compliant member can be expelled from the organization. For more information, please refer to Policy Statement 13.2 regarding the Canada Corporations Act Part II - Incorporating a Not-For-Profit Corporation. [http://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs03440.html#registered]

On a separate issue, if the non-profit organization is not a registered charity, it cannot issue tax receipts to its members. The organization is acting only as a conduit between its members and the charities that would benefit from the collected funds. Only registered charities may issue a tax receipt.

Q. "I am a director for a charity that raises funds for other charities, several of which I volunteer or serve as a director. Am I in a conflict of interest? If so what can I do?"

Directors of a registered charity are legally required to avoid conflicts of interest. A conflict of interest exists for a director when their involvement in various organizations creates competing duties or interests that undermine their duty of loyalty as a director. For example, a director of a charity who also owned a business would be in a conflict of interest if the two organizations did business with each other. Such a director would have conflicting interests in the sense that she would have the business interest of charging her charity as must money as she could for a contract, while having the opposing interest as a director of ensuring that her charity pays as little as it can for the business contract.

Although a person who is the director of different charities which exchange funds may not have a personal financial interest in the exchanges taking place, there still may be a conflict of interest in the sense that the director could have conflicting duties between the charities. For you this is especially the case, as a director or a volunteer for charities you have an interest in ensuring that they are well-funded, but as a director of another organization which fundraises for them, you may have an interest in seeing that these funds are distributed impartially.

Nonetheless, you might be able to keep your positions in these organizations by doing the following.
1. If your organizations' have conflict of interest policies, make sure you are in compliance with them. (Charitable organizations should also have conflict of interest policies that provide guidelines regarding how conflicts are dealt with.
2. Disclose your conflict of interest to the boards of directors and recuse yourself from voting on matters for which you are conflicted or could be perceived as being conflicted.
3. Limit your involvement in these organizations. In the charity that fundraises you could limit yourself to fund-raising activities and not involve yourself with decisions regarding the distribution of funds to other charities (which would include the ones you have the conflict of interest with). Your organization should consider making this official by passing a by-law barring such actions by people in your position.

Q. "What can be done if a director or president of a non-profit is suspected of using funds for personal gain?"

All board members have a duty to ensure that the funds of a non-profit organization are used for gratuitous or charitable purposes. This duty involves making sure that all board members and the president are using funds for such purposes. If there is a suspicion that a member or the president is acting dishonestly, then the rest of the board should investigate this behaviour, and if necessary dismiss the offending director. This can be done only in line with the organization's constitution. The procedures for doing this will be contained in the organization's constitution or by-laws. This may involve an impeachment/removal process by other directors, or an election involving the organization's members.

Furthermore, it must be noted that a director who is misappropriating funds of a non-profit or charitable organization for personal profit is breaking the law and could be criminally liable. The provincial and federal governments have extensive investigatory powers which they can use to determine if such activities are being conducted. The implications of such an investigation could severely impede the day-to-day running of an organization, and could seriously damage its reputation or jeopardize its continued status as a non-profit or charitable organization. Discrepancies in a non-profit's accounting should be reported to either the Ministry of the Attorney General or Corporations Canada depending on which ministry the organization was incorporated through while registered charities' should also report to the Canadian Revenue Agency.

Q. "Can a charitable organization issue tax receipt to US donors for tax deductible purposes in the US while the organization is registered in Canada and having charitable BN?"

Whether or not US donors will receive a tax deduction depends on how the US tax system treats donations to Canadian charities. There may be reciprocity between the US and Canada regarding tax deduction for charitable contributions made outside the country. It is recommended that further clarification be obtained from the Internal Revenue Agency in the US [link: http://www.irs.gov/contact/index.html]. Please note that each state may have additional restrictions, in addition to federal requirements.

For further clarification for Canadian issues, please contact the Charities Directorate:
1 800 267 2384 for toll-free, long distance calls (English)
1 888 892 5667 for toll-free, long distance calls (bilingual)
1 800 665 0354 for toll-free TTY service for persons with a hearing or speech impairment

Q. "In a non-profit corporation can the chairman of the board request for a sum of money from the financial secretary out of the organization's funds without board approval?"

The answer here is highly dependent on the details of the situation. It may help to consider general business best practices in coming to an answer.
The first point to consider is the organization's procedures:
• What is the organization's procedure for accessing funds by the chairman?
• Do these procedures satisfy accounting requirements mandated by law?

The second point to consider is the division of responsibilities:
• What division of responsibilities is required to prevent conflicts of interest?
• What safeguards are in place to prevent fraud or embezzlement?
Lastly, where the organization is less complex, the requirements of incorporation may provide guidance in the proper course of action in such situations.
As the answer to this question is highly contextual, please refer to the Ontario's Ministry of the Attorney General under corporate maintenance: http://www.attorneygeneral.jus.gov.on.ca/english/family/pgt/nfpinc/corpmaintain.asp

Q. "If an employee or a volunteer is in a driving accident wherein client-passengers are injured, who can be sued?"

In some cases, employees and volunteers can be found personal liable. However, when an employee or volunteer is working for the employer, and causes damage to another, then the employer is liable as well and can be sued.

Q. "Can a non-profit own a business or vice-versa? What should a non-profit and a for-profit organization do if they are considering amalgamation? What name should be used?"

A non-profit cannot own a business, nor can a business own a non-profit. While non-profits and businesses can have business relations, a non-profit's mandate must be wholly philanthropic.
If you wanted to amalgamate a non-profit with a for-profit you would have to choose one of the two organizational models to adopt. A request for such an amalgamation in Ontario has to be approved by the Public Guardian and Trustee. For instructions, see Section 6.6.4 in the Not for Profit Incorporator's Handbook available at: http://www.attorneygeneral.jus.gov.on.ca/english/family/pgt/nfpinc/default.asp
In the meanwhile, no two corporations can have an identical name. So, you would have to adopt a new name for the new corporation and not use that name with the old corporations while they are in existence.

Q. Privacy Legislation - "Surveillance cameras were installed by a multiservice community agency for the protection of their facility and its users. The cameras cover a portion of the sidewalk near the premises where a crime is said to have occurred. The police who are investigating ask to view the tapes. Do they require a search warrant?"

For the most part police would require a search warrant if they are not voluntarily given access to evidence that might be helpful in their investigation. However there are exceptions to this rule, which depend on the subject of the investigation as well as the type and sensitivity of information requested. These determine which statutes apply to the investigation and what powers are authorized. If there is an interest to limit access to the surveillance tapes, a good approach may be to express this interest to the police officer and ask for the authorization behind the request. This information along with the police officer's badge number will at least provide some recourse against unauthorized searches. Please refer to the links below for further reference:
Personal Information Protection and Electronic Documents Act
http://laws.justice.gc.ca/eng/P-8.6/20090818/page-1.html#anchorbo-ga:l_1-gb:l_1

Police Services Act (Ontario)
http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_90p15_e.htm

Public Inquiries Act
http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_90p41_e.htm

Q. "Is it a requirement to hold a general members meeting within 15 months of incorporation to elect a board of directors? Does it have to be publicly announced and how many general members are required to attend?"

The first annual members' meeting has to be held within 18 months after incorporation. After the first meeting, annual meetings must be held within 15 months of the previous one. According to the Ontario Corporations Act s287, election of directors should be done annually at the general members' meeting, unless by-laws provide otherwise. This general rule is subject to several exceptions, please consult the following link and refer to s.287:

Ontario Corporations Act
http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_90c38_e.htm#BK1

The number of members required to attend is set by the quorum requirements in the by-laws. Where none is specified, then the default rule is that the majority of members eligible to vote must be present. This is specified under s164 of the Canada Not-for-Profit Corporations Act (see link below). Notice to all members eligible to vote is to be given according to the procedures set in the by-laws. Please refer to s162 for more details.

Canada Not-for-Profit Corporations Act
http://www.canlii.org/en/ca/laws/stat/sc-2009-c-23/latest/sc-2009-c-23.html

Q. "Are board members directors? Can they have special status? Does this have to be filed with government?"

All board members are directors.
Board members can have special statuses, for example:
If the board is larger than six members, it can pass a by-law to create an "executive committee" composed of at least three directors. This committee's powers must be stipulated in a bylaw, which needs to be approved by at least two thirds of the members of the non-profit at a general meeting.
Such a bylaw can also be passed to create special director positions that are representative of specified territories or common interest groups within the membership. These bylaws do not have to be submitted to the government, but must be available to the public.
A board can also appoint "honorary directors." It should be noted that the board should be very clear in establishing the role of such directors.

Q. "What is the minimum age for a director? What is the minimum age for a voting member of the organization?"

Directors must be at least 18 years of age. The members submitted the original application for incorporation (the letters patent) must be at least 18 years of age. Ordinary members can be of any age.

Q. "If by-laws changes were ratified at an annual general meeting, do the changes need to be forwarded to the Ministry of Consumer and Business Services for ministerial approval?"

After ratification of a by-law amendment, the director issues a certificate of amendment to put the amendment into effect (s197 to s202 of the Canada Not-for-Profit Corporations Act). s201 and s276 requires that a notice of issuance be published in a publication generally available to the public. There is no requirement to send the changes to the Ministry of Consumer and Business Services under the Act.

Canada Not-for-Profit Corporations Act
http://www.canlii.org/en/ca/laws/stat/sc-2009-c-23/latest/sc-2009-c-23.html

Q. "Are not-for-profit corporations subject to the audit requirements outlined in the Ontario Corporations Act?"

All not-for-profit corporations must comply with the audit requirements in the Ontario Corporations Act unless they fall under the criteria in s96.1 of the Act. An exemption to auditing is granted under this section where (a) the company is not a public company; (b) the annual income of the company is less than $100,000; and (c) all of the shareholders consent, in writing, to the exemption in respect of the year. Please refer to the links provided below for more details.

Ontario Corporations Act
http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_90c38_e.htm#BK1

Not-for-Profit Incorporators Handbook
http://www.attorneygeneral.jus.gov.on.ca/english/family/pgt/nfpinc/