Can you buy a non-profit organization in Canada?

Corporations Canada’s pages cover not-for-profits created under the Canada Not-for-profit Corporations Act and their members’ rights. Under section 154(8) of the Act, unless the by-laws otherwise provide, a membership may be transferred only to the corporation itself, so check the by-laws first. Registered charities face further limits under the Income Tax Act.

Who can receive its profits or property

Section 34 of the Act says that, subject to its exceptions, no part of a corporation’s profits or property may be distributed, directly or indirectly, to a member, director or officer, except in furtherance of its activities or as otherwise permitted by the Act. If a listing offers a non-profit for sale, ask what is being transferred and who would receive the price.

What happens to its property

Section 214 requires the members’ authorization, by special resolution, for a sale, lease or exchange of all or substantially all of the corporation’s property outside the ordinary course of its activities. On liquidation, section 235 applies to registered charities and soliciting corporations, among others. Under subsection 235(2), their articles must provide that any property remaining on liquidation after liabilities are discharged, other than property referred to in section 234, goes to one or more qualified donees, a term defined in the Income Tax Act.

Registered charities and the revocation tax

Under section 188 of the Income Tax Act, once the Minister issues a notice of intention to revoke a charity’s registration under the listed provisions, the charity’s taxation year is deemed to end at the end of that day and the charity is liable to a revocation tax, unless an exception in subsection 188(2.1) applies, such as the Minister abandoning the intention. The formula subtracts an amount for property transferred to an eligible donee within the winding-up period and the section’s time limits. Anyone who receives property from the charity after the time 120 days before the end of that deemed year is jointly and severally, or solidarily, liable with it for the tax, up to a limit set in that subsection.

What a buyer can ask about instead

Someone who wants a program, a facility or equipment, rather than the entity, can ask a lawyer whether the members and directors can authorize a sale of those specific assets, on what terms, and who must approve it. Ask for the articles, by-laws and, for a charity, its registration status. The Act defines a corporation as one incorporated or continued under it, so for a non-profit incorporated under provincial law, ask a lawyer which provincial statute applies; this page does not cover those.