Governing documents
Before applying for registration, your organization must be legally established through a governing document.
A governing document gives your organization its legal existence. It identifies the organization's name, purposes, structure, and internal procedures.
Understanding the different types of governing documents can help you determine which one is appropriate for your organization.
Types of governing document
There are different types of governing documents.
Corporations
Incorporating your organization can offer several advantages. Usually, a corporation:
- becomes a separate legal entity from its members that is generally liable for its own debt and obligations
- can borrow money in its own name
- can own property in its own name
- continues to exist even when its membership or leadership changes
In Canada, your organization can be incorporated under federal, provincial, or territorial statutes. The governing documents you need to provide depend on the statute under which it is incorporated.
- Federal
A registered charity that is incorporated federally can operate anywhere within Canada, subject to provincial or territorial requirements.
For more information: Not-for-profit corporations
- Provincial or territorial
A registered charity that is incorporated provincially or territorially is subject to legislation of that province of territory. These laws can regulate business activities, fundraising, the use of charitable property, the areas where your organization may operate, and internal governance.
Provisions to watch for when incorporating
Some statutes have requirements or standard provisions for incorporating that may create issues when you apply to become a registered charity.
The following highlights some common issues:
Provisions that benefit members, shareholders, or directors
Provisions that benefit members, shareholders, or directors
Avoid clauses that allow your organization to make any of its income available for the personal benefit of directors, shareholders, or members.
For example:
- Share clauses: If your corporation has shares, its governing document must not allow for the payment of dividends to shareholders, and the shares must generally have a nominal value
- Dissolution clauses: If your corporation has a dissolution clause, it must not allow your organization to distribute its remaining assets upon dissolution or winding-up to directors, shareholders, or members
- Remuneration clauses: If your corporation has a renumeration clause, it must not allow directors to be paid simply for being on the board of directors. However, board members can receive reasonable compensation for services rendered to the charity
Where possible, we recommend incorporating under non-profit legislation to mitigate these risks.
Standard objects or purposes
Standard objects or purposes
Some incorporating authorities provide standard purposes or objects that can be used when incorporating a non-profit organization.
Generally, these standard objects fail to meet the requirements for charitable registration, as they are not exclusively charitable.
We recommend not using these standard objects.
Instead, see: How to write charitable purposes.
Other clauses
Provinces often require or recommend other clauses to be included in governing documents, sometimes in the same section as the objects or purposes. These other clauses include:
- authorizing your organization to own property
- explaining how it may raise funds
- giving it other powers that are needed for its day-to-day operations
You can include these clauses where required, provided they do not contravene the requirements for charitable registration.
Jurisdictions that require a "restriction on business"
Jurisdictions that require a "restriction on business"
In some jurisdictions, incorporation documents do not include a section for objects or purposes. Instead, they have restrictions on the type of business the organization will carry out.
If your governing documents has a section titled "Restrictions on business" (or similar wording), do not leave the section blank or enter "N/A." Otherwise, you will not qualify for registration.
Instead, use this section to list your charitable purposes.
Begin with a sentence such as:
The business of the organization is restricted to accomplishing the following charitable purposes:
You can then list your charitable purposes.
Constitution
The information below only applies for unincorporated organizations. Some provinces or territories use the term “Constitution” as part of their incorporation documents. In these situations, refer to Corporations.
A constitution is a governing document that legally establishes your organization. It is adopted by your board and submitted to us as part of your application for charitable registration. It does not create a corporation.
If your organization is incorporated and chooses to separately submit a constitution, the incorporation documents will generally take precedence. In these cases, we may consider the constitution similarly to bylaws.
Factors to consider
Organizations established by a constitution should consider the following:
A constitution does not create a separate legal entity
- Banks and other entities may not recognize an organization created by a constitution for certain purposes, such as opening a bank account.
- If your organization owns—or intends to own—lands or buildings, it should not be established by a constitution. However, you may have the property held in trust by trustees acting on behalf of your organization.
Must be designated as a charitable organization if registered
As a result, such an organization:
- cannot use more than 50% of its income to gift to qualified donees (such as other charities)
- must have more than one director or trustee and more than 50% of its directors and trustees must be at arm’s length with each other.
Trust
This information is not legal advice
The information below is designed to help you understand our requirements for registration as a charity under the Income Tax Act. It is not legal advice and should not be relied upon to determine the validity of a trust. We recommend that you seek independent legal advice before enacting or making changes to a trust.
To be eligible for charitable registration, a trust must be:
- created or established in Canada; and
- resident in Canada; and
- established to further exclusively charitable purposes and/or to benefit registered charities or other qualified donees
To apply for charitable registration, you must provide your trust document or the will that establishes your trust. You must also show, through your trust document or supporting documentation, that the initial trust property has been:
- clearly identified
- transferred to the trustees
- accepted by the trustees
If all of these steps have not been completed, we cannot process your application.
We recommend that you include a clause allowing the trustees to amend the trust to meet the legislative and common law requirements for charitable registration. Proactively including this clause is crucial because we may need you to amend the trust, and altering a trust that is already established may not be possible or may require court approval.
Determining the trust residence
To qualify for registration, your trust must reside in Canada.
Also, the documents you need to provide may vary depending on the province or territory where your trust resides, as detailed in our checklist.
The CRA considers that a trust resides where its central management and control takes place:
- Usually, this is the place where the trustees reside
- If some trustees reside outside Canada, you must show that substantial central management and control of your trust actually takes place in Canada
For more information, see: Income Tax Folio S6-F1-C1, Residence of a Trust or Estate
If you are not sure where your trust resides, we recommend getting independent legal advice.
When you select the required documents, make sure to select the correct option that both reflects your trust's residence and the type of document that established your trust.
Other governing documents
If your organization has other types of governing documents, contact the Charities Directorate before sending your application.
Internal division
An internal division is a branch, section, parish, congregation, or other division of a registered charity (also known as head body). It operates as an extension of and under the authority of the head body. It is not a legal entity in its own right and therefore does not have its own governing document.
However, the internal division can receive donations on its own behalf and issue tax receipts. It must also file its own Registered Charity Information Return (T3010) every year.
If you are applying for registration as an internal division, you must provide a letter of good standing from your head body with your application for registration. You are typically not expected to provide your head body’s governing documents.
If your organization has its own governing document (for example, if it is incorporated), then it is not an internal division even if it operates under the guidance of a central office or its equivalent.
Foundations
If your organization would be designated as a public or private foundation if it was registered (for example, if it is established to gift most of its income to qualified donees, or if 50% or more of its directors, trustees and like officials are related), you can only choose the following types of governing documents:
- Incorporation
- Trust (including those established by will)
We will not register your organization if it would be designated as a foundation with another type of governing document.