What are Soliciting Corporations Under the Canada Not-for-Profit Corporations Act?

Published January 18, 2025 By Dov Goldberg

Understanding the requirements for soliciting corporations under the Canada Not-for-profit Corporations Act (NFP Act) is crucial for any charity operating in Canada. Let’s break down the essentials of what defines a soliciting corporation, the responsibilities it entails, and how it differs from a non-soliciting corporation.

What is a Soliciting Corporation?

A corporation is considered "soliciting" if it receives more than $10,000 in income from public sources in a single financial year. Think of this as a threshold that determines how much public accountability your organization must maintain. Once you cross this line, you're essentially telling the government and the public that your organization relies on community support and therefore must be transparent about how those funds are used.

Public sources that count toward this $10,000 threshold include several key categories:

Donations and Gifts: These are contributions from individuals who aren't closely connected to your organization's inner circle. If you receive money from people who aren't members, directors, officers, employees, or their immediate family members, these donations count toward your threshold. For example, if your local animal shelter receives $500 donations from 25 different community members throughout the year, that $12,500 total would make you a soliciting corporation. Even smaller amounts add up quickly when you're raising funds from the general public.

Government Grants: Any financial assistance from federal, provincial, or municipal governments counts toward this threshold. This includes obvious sources like grants from Health Canada or your provincial ministry of social services, but also less obvious ones like funding from local arts councils or regional development agencies. Even a $5,000 grant from your city's community development fund combined with $6,000 in public donations would push you over the threshold.

Funds from Other Corporations: This category can be tricky to understand, but it's crucial. If you receive money from another corporation that has itself received significant public funds (more than $10,000), their donation to you counts toward your soliciting status. For instance, if a large charity that receives substantial government funding gives your organization a $8,000 grant, and you also receive $3,000 in public donations, you'd be considered a soliciting corporation.

What is a Non-Soliciting Corporation?

In contrast, a non-soliciting corporation operates below the public funding radar. These organizations have either received no public funds or have stayed under $10,000 from public sources over the previous three financial years. Notice that it's not just one year—the calculation looks back over three years, so even if you had a quiet year, previous years' public funding might still classify you as soliciting.

Non-soliciting corporations typically fund their operations through private sources closely connected to the organization. This might include membership fees from a small group of dedicated members, donations from board members and their families, or income from business activities that don't involve public fundraising. For example, a small religious congregation that relies entirely on member tithing, or a private foundation funded solely by its founding family, would likely qualify as non-soliciting.

Understanding this distinction is crucial because soliciting corporations face much stricter reporting requirements, higher penalties for non-compliance, and greater public scrutiny. The government's logic is simple: if you're asking the public for money, the public deserves to know how you're spending it.

Why is Identifying Soliciting Corporations Important?

Identifying whether a corporation is soliciting or non-soliciting is important because soliciting corporations are subject to stricter regulations to ensure transparency and accountability. Since they handle public funds, it’s essential to have measures in place that protect the interests of the public and maintain trust.

Additional Requirements for Soliciting Corporations

1. Financial Disclosure: Soliciting corporations must file detailed financial statements with Corporations Canada, which are available for public inspection. This includes information on all sources of income and expenditures.
2. Governance: They must have a minimum of three directors, with at least two directors not being officers or employees of the corporation. This ensures a level of independent oversight.
3. Audits: Depending on the amount of revenue, soliciting corporations may need to have their financial statements audited or reviewed by an independent accountant.
4. Member Meetings: They are required to hold annual meetings where members can ask questions and review the financial status and governance of the corporation.

To sum up, understanding the requirements for soliciting corporations under the NFP Act is essential for ensuring compliance and maintaining public trust. Soliciting corporations, which receive significant public funds, must adhere to stricter financial reporting, governance, and accountability standards. Identifying whether your corporation falls under this category is the first step towards meeting these obligations and operating transparently.

By ensuring that soliciting corporations are held to these higher standards, the NFP Act helps to maintain the integrity and trustworthiness of charitable organizations in Canada, ultimately benefiting the public and the communities these organizations serve.

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