This policy sets out information about applying to the Director appointed under the Canada Not-for-profit Corporations Act (NFP Act) to exempt a corporation from any financial disclosure requirement in Part 11 of the NFP Act (Part 11). It will help you:
- understand the financial disclosure requirements that your corporation must meet
- decide if your corporation should apply for this exemption.
This policy provides information and sets out guidelines. It is not intended to be a binding statement of the decision that will be made in any particular case nor is it meant to replace legal advice. Consider consulting a lawyer or another professional advisor to ensure that your particular needs are being addressed when applying.
Financial disclosure requirements
The NFP Act and the Canada Not-for-profit Corporations Regulations (NFP Regulations) contain various requirements relating to financial disclosure, including those listed in the table below.
|Requirement||Section reference to the NFP Act or the NFP Regulations|
|1. Annual financial statements must be placed before members at annual meeting||NFP Act – 172(1)|
|2. Annual financial statements must be prepared using Canadian generally accepted accounting principles||NFP Regulations – 75|
|3. Annual financial statements must consist of the following statements:
||NFP Regulations – 79(1)|
|4. Financial statements of subsidiaries and of bodies corporate whose accounts are consolidated into a corporation's financial statements must be kept at the corporation's registered office, and these must be made available for examination upon request by members||NFP Act – 174(1) and 174(2)|
|5. Annual financial statements must be sent to members||NFP Act – 175(1)|
|6. Soliciting corporations must send their annual financial statements to the Director||NFP Act – 176(1)|
|7. The Director must be provided with annual financial statements upon request||NFP Act – 177|
|8. Annual financial statements must be approved by the directors and accompanied by the report of the public accountant (see Qualifications of Public Accountant), if any||NFP Act – 178|
This table is only a summary of the requirements. To fully understand your corporation's obligations, refer to Part 11, and Part 5 of the NFP Regulations (which is included in Part 11 by reference).
Financial disclosure requirements are important because they:
- ensure that a corporation is accountable for the use of its funds
- ensure transparency and disclosure
- give members and the public the confidence to continue to support the corporation.
There may be circumstances where it would be detrimental to a corporation to meet one or more financial disclosure requirements. In these cases, the corporation can apply to be exempted from any requirement in Part 11 (refer to section 173 of the NFP Act).
The Director has the power to exempt a corporation from any of the requirements in Part 11, on any terms that the Director thinks fit, as long as the detriment that may be caused to the corporation by the requirement outweighs its benefit to the members or the public.
The exemption discussed here applies only to the financial disclosure requirements in Part 11 but it does not apply to the level of financial review that a corporation must meet as determined by its gross annual revenues. See Financial Statements and Review for more information about the different types of financial review (for example, audit, review engagement).
When a corporation can apply for this exemption
A corporation must apply for this exemption at least 60 days before its annual financial statements are to be placed before members at its annual meeting. The Director can extend the time for making an application as long as no prejudice will result from the extension (refer to paragraph 89(2)(c) and subsection 89(3) of the NFP Regulations).
How long an exemption is effective
An exemption from a financial disclosure requirement can be effective for different lengths of time, ranging from one year to indefinitely.
An exemption is effective for the period indicated on the exemption.
Review of an application
When evaluating an application to be exempt from a financial disclosure requirement in Part 11, the Director will assess the potential detriment that may be caused to the corporation by complying with the requirement as well as the benefit that that requirement normally provides. To grant this exemption, the Director must reasonably believe that the detriment outweighs the benefit.
There are different tests for an application made by a soliciting and a non-soliciting corporation (see Requirements for Soliciting Corporations ).
The Director will ask:
Does the detriment that may be caused to a soliciting corporation by the requirement outweigh its benefit to the members or to the public?
The Director will ask:
Does the detriment that may be caused to a non-soliciting corporation by the requirement outweigh its benefit to the members?
The Director may consider exempting a corporation from a financial disclosure requirement in Part 11 where the detriment caused by the requirement outweighs its benefit.
- Extenuating circumstances, such as the sudden illness of the appointed Public Accountant, result in the corporation having to place incomplete annual financial statements before members at the annual meeting. An exemption could be granted to give the corporation a reasonable time to complete the statements and provide them to members.
- Sending annual financial statements to the Director could demonstrably result in the misrepresentation or misuse of the information by other parties. An exemption could be granted as long as there is alternative and equivalent financial disclosure sufficient to ensure transparency and accountability.
The fact that a corporation will have to spend a certain amount of money to meet a financial disclosure requirement will not be considered as a detriment caused by the requirement except in extraordinary circumstances.
Information that must be included in an application
An application must clearly set out:
- which requirement in Part 11 the corporation is seeking to be exempted from
- how complying with that requirement would be detrimental to the corporation
- who normally benefits from the requirement and how those persons benefit
- why the requirement could not need to be complied with
- what alternative steps, if any, the corporation would take to achieve the benefit that the requirement would normally provide.
All applications will be reviewed on a case-by-case basis.
Issuing an exemption
If the exemption is issued, the corporation will be freed from certain requirements in Part 11 on any terms that the Director thinks fit.
Renewing an exemption
There could be circumstances where a renewal is required. Renewal applications are reviewed on a case-by-case basis.
For more information, see Additional information about decisions made by the Director appointed under the NFP Act.