Applying for Incorporation as a Non-Profit

To apply for incorporation as a non-profit, you will need:

1. An Email Address: list an email address at which the non-profit will consistently and regularly be able to receive emails. To ensure continuity for future directors, the applicants for incorporation might consider creating an email account specifically for the non-profit, rather than using a personal email address.
2. A Registered Office: the non-profit’s registered office does not need to be a staffed office. A registered office need only be an address at which the non-profit can receive mail. This address could be the mailing address of a director, a post office (PO) box, or the non-profit’s office. A non-profit can also use the address of another organization. For instance, if the non-profit uses the boardroom of a charity to hold meetings and receive mail, the non-profit, with the charity’s permission, can list that address as its registered office.
3. Name Request: to save time, make sure to review the rules for names before submitting a name request.
4. A YCOR Account: an online account that allows individuals to access a variety of online registry services provided by the government of the Yukon. Further information is available here: https://yukon.ca/en/doing-business/businesses- societies-and-securities/how-use-yukon-corporate-online-registry. YCOR accounts are tied to an individual: all directors and senior staff who need to submit online reports must have their own YCOR account. To submit online reports for filing in YCOR, you will need to request a private filing key, which is sent to a non-profit’s registered office.

Membership

• Create a membership structure that reflects the needs of the non-profit.
• Create and use a form for people to apply for membership in your non-profit.
• Make sure whoever is approving memberships (e.g. Executive Director or
• membership committee) is following the correct procedure and following the membership policy.

Directors

• Must have three directors.
• Create and use a form to indicate a member’s consent and qualifications to act as a
• director to ensure that every director has indicated whether or not they are qualified. (Note, however, that you do not need to add the requirement to sign a consent form in your bylaws).
• If the non-profit budget allows, provide directors liability insurance to encourage people to act as directors.

Records

• Ensure your non-profit keeps records.
• Remember bylaws are an evolving document.
• Create key policies for the society.

Definition

Membership in a non-profit is not a right; it is a privilege. Members have an interest in the governance of the non-profit and are the people to whom the non-profit is ultimately legally accountable.

Members of a non-profit are defined in its bylaws. Members does not mean “directors” who are also known as “members of the board” or “board members”. Members are the individuals who become members to support the society in any number of ways. They are the ones who will vote at each annual general meeting (AGM).

Many non-profits have bylaws requiring the board to have the final say on whether an individual can become a member. However, others have gotten out of the habit of taking this important step. Having a membership policy is a good idea to help keep track of who is a member and how long the membership lasts. In many cases the ideal membership expires annually.

Classes of Membership

Non-profits can have “classes'' of membership. Classes are groups of members that have different sets of rights. For example, some non-profits have voting and non-voting classes of members. If a non-profit has more than one class of members, it is required to describe the class and list its respective rights in the non-profit’s bylaws. At least one class of members must be voting members.

Classes are different from categories of members. Classes define different rights; categories are merely descriptive. For example, your non-profit may have gold and silver memberships. Members within these categories usually have the same membership rights as all other categories.

Rights of Membership

Members elect the directors of the non-profit and have a right to attend members’ meetings. These include the AGM and any special general meetings (SGM). Non-voting members, if any, have the right to come to members' meetings and otherwise participate but they do not vote.

An important right that voting members have is the right to requisition a special members’ meeting, provided they meet the required threshold of 10% of voting members (or less if the bylaws provide). Voting members also have the right to submit a members’ proposal, provided they fulfill the requirements of the Societies Act, including meeting the minimum threshold of two voting members or 5% of members (or less if the bylaws provide), whichever is greater.

All members have the right to inspect (and seek copies of) records listed under section 22 of the Societies Act, though the non-profit may impose a procedure for handling such requests including the time, and place, for providing those records to non-directors. A non- profit cannot charge members or directors, but can charge a reasonable fee for the inspection of records by a person who is not a member or director.

Considerations for Membership

Some non-profits will require prospective members to volunteer before they can apply to become members. Having that in a policy is a good way to establish the ground rules for members. This practice may help protect the non-profit from conflicts that result from individuals joining the organization who do not share its mission or values. Best practice is to have a code of conduct that applies to members as well as the Board and staff.

Expulsion of Members

Once a person is a member, if the bylaws are silent on expulsion, the Societies Act provides that members may only be expelled by way of a special resolution at a general meeting.

The non-profit must give that member written notice of the general meeting that contains the reasons for expulsion. Further, it must allow that member to make reasonable representations to the non-profit regarding their expulsion.

Register of Members

A non-profit must know which memberships are active so it can keep its member register up to date, send notices of general meetings, and know who is eligible to vote. This information can be tracked in a Register of Members. A Register of Members is best kept in the non-profit's official records folder.

Annual General Meeting (AGM)

The Societies Act requires that every non-profit hold an annual general meeting (AGM) once per fiscal 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 needs to hold its first AGM within 16 months of its registration.

The Societies Act requires non-profits to hold their AGM on a date no later than four 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.

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 accountant, the accountant’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, the Registrar can send a dissolution notice to the non-profit. Non-profits can file an Annual Report through YCOR. The fee for filing an Annual Report online is $25.

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. 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 three 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 there must be 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.

• 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.

Non-profits must follow many rules for the management of their 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.

The Societies Act requires that Class A non-profits have their finances reviewed by an accountant.

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). The statement of accounts should include amounts received by government funding and public donations.

Every non-profit is obligated to produce financial statements on an annual basis based on the fiscal year, and provide them to its members at each AGM. The Board approves the statements and two directors will sign off on them before they are provided to the members 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. If 10 or less employees or persons contract with the society, you must report this if it is over the threshold set by regulation, which is currently set at $75,000. If more than 10 employees or persons contracting, statements must include the 10 most highly remunerated. A contract for services is when your non-profit has contracted with a person or company for performing a service such as 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. The fiscal year must be registered at incorporation.

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 except for Class A societies, which are required to have an accountant. 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 debt obligations 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 debt obligation or 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.

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 (and cannot be a member-funded society).

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