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

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.

Soliciting Corporation: Key Facts at a Glance

Before diving into the details, here are the essential facts every non-profit leader should know:

• Annual public funding threshold: $10,000 or more in gross annual revenue from public sources
• Lookback period: Current financial year plus the previous three financial years
• Enhanced reporting requirements: Must file publicly accessible financial statements
• Public accountant requirement: Must appoint a public accountant for audit or review engagement (smaller organizations under $250,000 in annual revenue may opt for a review engagement instead of a full audit)
• Board composition requirement: Must have at least 3 directors, with at least 2 directors who are not officers or employees of the corporation
• Increased accountability: Subject to stricter governance and transparency standards
• Higher penalties: Non-compliance carries more significant consequences

If your organization receives public funding, understanding these requirements isn't optional—it's essential for maintaining compliance and public trust.

A corporation is considered "soliciting" if it receives more than $10,000 in gross annual revenue 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.

What Counts as Public Sources?

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 an $8,000 grant, and you also receive $3,000 in public donations, you'd be considered a soliciting corporation.

How to Calculate Your Public Funding Threshold

Determining whether your organization meets the soliciting corporation threshold requires careful calculation. Here's a step-by-step approach to help you assess your status:

Step 1: Identify Your Financial Years

Review your current financial year and the previous three financial years. For example, if your fiscal year ends December 31, 2025, you'd examine 2025, 2024, 2023, and 2022.

Step 2: Gather All Public Funding Sources

Collect records of all gross annual revenue from:

• Individual donations from non-members
• Government grants at all levels (federal, provincial, municipal)
• Donations from other soliciting corporations
• Crowdfunding campaigns
• Public fundraising events open to the general community

Step 3: Calculate Each Year's Total

Add up all qualifying public funds for each financial year separately.

Practical Example:

2025 Financial Year:

• Public donations: $8,000
• Provincial grant: $3,500
• Grant from soliciting corporation: $1,200
• Total: $12,700 ✓ Soliciting status triggered

2024 Financial Year:

• Public donations: $6,500
• Municipal grant: $2,000
• Total: $8,500 ✓ Below threshold individually

Result: Because 2025 exceeds $10,000, your organization is a soliciting corporation.

Step 4: Document What Doesn't Count

Exclude these sources from your calculation:

• Membership fees from voting members
• Business income unrelated to public solicitation (e.g., rental income from owned property)
• Investment income from endowment funds
• Donations from directors, officers, employees, and their immediate families
• Grants from private foundations that don't themselves receive public funds

Tracking Tips:

• Maintain separate accounting categories for public vs. private funding
• Document the source of every donation over $100
• Review your soliciting status annually as part of your financial year-end process
• Keep clear records for at least four years to support your classification

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 in gross annual revenue 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.

Real-Life Examples: Understanding Soliciting Status in Practice

Sometimes the best way to understand these rules is to see how they apply to real organizations. Here are three common scenarios that illustrate different situations you might encounter:

Example 1: Growing Environmental Group (Transition Year)

Green Future Ottawa started as a small grassroots environmental advocacy group. Here's their funding history:

2022 Financial Year:

• Member donations (15 founding members): $4,500
• Fundraising event for members only: $2,000
• Total Public Funds: $0 (all from members)

2023 Financial Year:

• Member donations: $5,000
• Public fundraising campaign: $3,500
• Total Public Funds: $3,500

2024 Financial Year:

• Member donations: $6,000
• Public donations: $7,500
• Total Public Funds: $7,500

2025 Financial Year:

• Member donations: $7,000
• Public donations: $8,500
• Federal environment grant: $5,000
• Total Public Funds: $13,500 ✓ Threshold exceeded

Analysis: In 2025, they received $13,500 from public sources (public donations + government grant), crossing the threshold for the first time. Even though individually, 2022, 2023, and 2024 were all below $10,000, the 2025 year triggers soliciting status.

Status: Became a soliciting corporation in 2025. They must immediately begin complying with enhanced requirements, including appointing a public accountant for their 2025 financial statements and ensuring their board meets the composition requirements (at least 3 directors, with at least 2 who are not officers or employees).

Example 2: Sports Club with Tricky Funding (Edge Case)

Riverside Soccer Club runs youth soccer programs and thought they were non-soliciting, but their accountant raised concerns.

Revenue Sources:

• Registration fees from 200 youth players: $60,000
• Concession sales at games: $8,000
• Uniform sales to parents: $5,000
• Grant from City Sports Foundation (a soliciting corporation): $7,000
• Community fundraiser (raffle open to public): $4,500

Analysis: This is where it gets tricky. The registration fees are for program participants, not membership fees for voting members of the corporation, so they actually count as revenue from the public. However, they're fees for services rather than donations, which typically wouldn't count toward soliciting status. The concession and uniform sales are business income, not donations.

The critical factors here are:

• Grant from City Sports Foundation ($7,000) - This counts because the grantor is a soliciting corporation
• Community fundraiser ($4,500) - This counts as public solicitation
• Total: $11,500 from clearly public sources

Status: Soliciting corporation. Even though most of their revenue is from program fees and sales, the combination of the grant from another soliciting corporation and public fundraising pushes them over the threshold.

Lesson: Organizations should carefully track where grants come from and whether fundraising events are truly member-only or open to the public.

Example 3: Food Bank with Multiple Funding Streams (Clearly Soliciting)

Lakeshore Community Food Bank serves low-income families in a mid-sized Ontario city.

Revenue Sources:

• Individual donations collected via website: $35,000
• Corporate food donations (in-kind): $20,000 estimated value
• United Way allocation: $40,000
• Provincial poverty reduction grant: $30,000
• Grocery store partnership donations: $15,000
• Fundraising gala open to public: $22,000

Analysis: This organization has multiple streams of public funding:

• Individual donations ($35,000)
• United Way allocation ($40,000) - United Way is a soliciting corporation
• Provincial grant ($30,000)
• Public fundraising gala ($22,000)
• Total: $127,000 from public sources

The in-kind food donations, while valuable, typically aren't counted as monetary revenue for the threshold calculation, though they must be reported on financial statements.

Status: Strongly soliciting corporation. With this level of public funding, they should have robust financial controls, a qualified public accountant (though with revenue well above $250,000, they'll likely need a full audit rather than just a review engagement), comprehensive financial statements, and strong governance practices. Donors and government funders will expect high standards of accountability.

What These Examples Teach Us:

• Size doesn't always determine status - A large religious congregation can be non-soliciting, while a small environmental group can be soliciting.
• Source matters more than amount - It's not about how much money you receive, but where it comes from.
• Track carefully - Organizations near the threshold should monitor their funding sources throughout the year, not just at year-end.
• Plan ahead - Growing organizations should anticipate the transition and prepare governance structures before they're required.
• When in doubt, classify up - If you're unsure whether you're soliciting, it's safer to follow soliciting corporation requirements than risk non-compliance.
• Member-only vs. public matters - Truly restricting activities and fundraising to voting members can help maintain non-soliciting status, but make sure your membership structure legitimately supports this.

Each organization's situation is unique, and these examples illustrate why careful analysis of your specific funding sources is essential for proper classification.

Key Differences: Soliciting vs. Non-Soliciting Corporations

The distinction between soliciting and non-soliciting status affects nearly every aspect of your organization's governance and reporting obligations. Here's a clear comparison:

Why This Matters:

The increased requirements for soliciting corporations aren't arbitrary—they reflect the principle that organizations using public funds must maintain higher standards of transparency. When your local food bank receives a government grant or your arts organization runs a public fundraising campaign, donors and taxpayers have a legitimate interest in how those funds are managed.

For organizations approaching the $10,000 threshold, it's wise to prepare for soliciting status in advance rather than scrambling to meet requirements after crossing the line. This might mean updating your bylaws, establishing stronger financial controls, ensuring your board composition meets the requirements, or engaging a public accountant before it becomes mandatory.

What Happens If You Misclassify Your Corporation?

Incorrectly identifying your organization's status—or failing to recognize when you've transitioned from non-soliciting to soliciting—can have serious consequences. Understanding the risks helps you avoid costly mistakes.

Consequences of Misclassification:

1. Financial Penalties Soliciting corporations that fail to meet their obligations face fines under the NFP Act. These penalties can range from hundreds to thousands of dollars, depending on the severity and duration of non-compliance. Directors may be personally liable for some violations.

2. Loss of Public Trust When a soliciting corporation fails to file required financial statements or appoint a public accountant, it erodes donor confidence. Community members who contributed funds expect transparency. Discovering that an organization hasn't met basic accountability standards can damage your reputation and future fundraising efforts.

3. Impact on Charitable Registration For registered charities, misclassification under the NFP Act can trigger concerns with the Canada Revenue Agency (CRA). While the NFP Act and the Income Tax Act are separate, CRA expects charities to comply with all applicable laws. Persistent non-compliance might affect your charitable registration status.

4. Compliance Orders Corporations Canada may issue compliance orders requiring immediate corrective action. This might include filing overdue financial statements, appointing a public accountant retroactively, correcting board composition issues, or taking other remedial measures within strict deadlines.

5. Involuntary Dissolution In extreme cases of persistent non-compliance, Corporations Canada has the authority to initiate dissolution proceedings. This represents the ultimate consequence—losing your corporate status entirely.

Steps to Correct Misclassification:

If you discover your organization has been operating under the wrong classification:

1. Conduct an immediate review of the past four years' funding to determine your correct status
2. File any overdue financial statements with Corporations Canada as soon as possible
3. Appoint a public accountant if you're actually a soliciting corporation (determine whether a full audit or review engagement is appropriate based on your annual revenue)
4. Review and correct your board composition if necessary—ensure you have at least 3 directors with at least 2 who are not officers or employees
5. Update your bylaws if necessary to reflect soliciting corporation requirements
6. Notify your board and ensure they understand the compliance obligations going forward
7. Implement tracking systems to monitor your public funding threshold annually
8. Consider legal advice if you've missed significant obligations or face penalties

Prevention is Key:

The best approach is conducting an annual status review as part of your year-end financial processes. Many organizations build this into their annual general meeting preparations, ensuring the board formally confirms the organization's soliciting or non-soliciting status each year based on updated financial data.

Transitioning from Non-Soliciting to Soliciting Status

Growth is a positive sign for any non-profit, but it brings new responsibilities. When your organization's public funding approaches or exceeds the $10,000 threshold, proactive planning makes the transition smoother.

When to Anticipate the Change:

Start preparing for soliciting status when:

• You're planning a major public fundraising campaign
• You've applied for government grants totaling more than $10,000
• Your annual public donations have been trending upward toward the threshold
• You're receiving grants from other soliciting corporations that will push you over the limit

Required Governance Changes:

1. Board Composition Review

Critical Requirement: Soliciting corporations must have at least 3 directors, with at least 2 directors who are not officers or employees of the corporation.

Action steps:

• Review your current board composition to ensure compliance
• If you have fewer than 3 directors, recruit additional qualified board members
• If 2 or more directors are officers or employees, you'll need to either:
  
  • Recruit non-employee directors to meet the requirement, or
  • Restructure roles so fewer board members hold officer or employee positions
• Document board member status clearly (director only vs. director who is also an officer/employee)
• Update your board policies and procedures to maintain compliance going forward

Example scenario: If your board has 5 directors and 3 of them are also employees of the organization (Executive Director, Program Director, Finance Director), you'll need to recruit at least one additional non-employee director to meet the "at least 2 non-employee directors" requirement.

2. Bylaw Amendments

Review your bylaws to ensure they include provisions for:

• Appointment of a public accountant or auditor (and specify whether audit or review engagement based on revenue)
• Board composition requirements (minimum 3 directors, at least 2 non-employees)
• Public access to financial statements
• Enhanced financial reporting to members
• Stricter notice requirements for annual meetings

Many organizations update their bylaws preemptively to include soliciting corporation provisions, even before reaching the threshold.

3. Financial Engagement Decision

Determine whether your organization needs a full audit or can opt for a review engagement:

• Full Audit Required: If your gross annual revenue exceeds $250,000
• Review Engagement Option: If your gross annual revenue is under $250,000

A review engagement is less extensive and typically less expensive than a full audit, while still providing appropriate oversight for smaller soliciting corporations. Discuss with potential public accountants which option is most appropriate for your organization's size and complexity.

4. Board Resolution

Your board should formally acknowledge the status change and approve necessary actions. A typical resolution might state:

"BE IT RESOLVED that the Board acknowledges the Corporation has become a soliciting corporation under the NFP Act effective [date], having received more than $10,000 in gross annual revenue from public sources during the [year] financial year. The Board directs management to:

• Implement all required compliance measures
• Appoint a public accountant for [audit/review engagement] of financial statements
• Ensure board composition meets the requirement of at least 3 directors with at least 2 non-employee directors
• File financial statements with Corporations Canada as required"

5. Financial System Updates

Implement or enhance systems to:

• Track public vs. private funding sources separately
• Generate financial statements in the format required for public filing
• Maintain detailed donor records distinguishing public donors from members/insiders
• Monitor your public funding threshold continuously

Implementation Timeline:

Immediately Upon Recognition:

• Notify your board of the status change
• Begin documenting all public funding sources clearly
• Assess current board composition against requirements

Within 60 Days:

• Engage a public accountant and determine whether audit or review engagement is appropriate
• Recruit additional board members if needed to meet composition requirements
• Review and update bylaws if needed

Within 120 Days:

• File amended bylaws if necessary
• Finalize board composition changes
• Establish enhanced financial reporting procedures

Before Next Annual Meeting:

• Present audited or reviewed financial statements to members
• File required documents with Corporations Canada
• Ensure public access to financial statements

Communication with Stakeholders:

Transparency during this transition builds trust:

• Inform your members about the status change and what it means
• Reassure donors that enhanced accountability protects their interests
• Update your website to reflect your commitment to transparency
• Consider highlighting your soliciting status as a mark of organizational maturity and public trust

Many successful organizations view the transition to soliciting status not as a burden, but as a milestone demonstrating their growth and community impact.

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.

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—including board composition requirements and appropriate financial review processes. 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.

Need Help Determining Your Corporation's Status?

Classification as a soliciting or non-soliciting corporation can be complex, especially for organizations with diverse funding sources or those experiencing growth. The consequences of misclassification—from financial penalties to reputational damage—make it crucial to get this determination right.

When to Seek Professional Guidance:

Consider consulting with charity law specialists if your organization:

• Is approaching the $10,000 threshold and needs to prepare for transition
• Has complex funding structures involving multiple government grants, corporate donations, and public fundraising
• Recently discovered it may have been operating under incorrect classification
• Needs to restructure its board to meet soliciting corporation composition requirements
• Is uncertain whether to pursue a full audit or review engagement
• Is planning a major fundraising campaign or capital project
• Needs to update bylaws to reflect soliciting corporation requirements
• Faces compliance issues or communications from Corporations Canada

How B.I.G. Charity Law Group Can Help:

Our team specializes in Canadian charity law and non-profit compliance, offering:

• Status Assessment: We review your funding sources and help determine your correct classification
• Board Governance Review: We assess your board composition and help ensure compliance with NFP Act requirements
• Bylaw Review and Updates: We ensure your governance documents meet NFP Act requirements for soliciting corporations
• Financial Review Planning: We help you determine whether your organization needs a full audit or can use a review engagement
• Compliance Audits: We identify gaps in your current practices and provide actionable recommendations
• Governance Consulting: We help your board understand and fulfill its obligations under the NFP Act
• Transition Planning: We guide organizations moving from non-soliciting to soliciting status

Don't let uncertainty about your organization's status keep you up at night. Contact us today for a consultation, or explore our charity governance resources to learn more about maintaining compliance and building public trust.

Frequently Asked Questions 

Do membership fees count toward the $10,000 threshold?

No, membership fees from voting members don't count as public funds under the NFP Act. The rationale is that members have a direct relationship with the organization and typically have voting rights, making them more than just public donors. However, if someone pays a fee but receives no membership rights or benefits, that payment might be considered a public donation rather than a membership fee.

What if we go over $10,000 one year but stay under the next year?

You remain a soliciting corporation. The NFP Act looks at whether you exceeded $10,000 in the current year OR any of the previous three financial years. Once you become a soliciting corporation, you must continue meeting those requirements until you've stayed below the threshold for four consecutive years (the current year plus three previous years all under $10,000).

Do crowdfunding campaigns count as public solicitation?

Yes, funds raised through crowdfunding platforms like GoFundMe, Kickstarter, or Indiegogo typically count as public donations. These platforms allow anyone from the general public to contribute, which fits the definition of public solicitation under the NFP Act. If your crowdfunding campaign raises $12,000, you've exceeded the threshold and become a soliciting corporation.

What's the difference between an audit and a review engagement?

Both are forms of financial oversight by a public accountant, but they differ in scope and cost:

• Full Audit: More comprehensive, involves testing of financial records, provides highest level of assurance. Generally required for soliciting corporations with gross annual revenue over $250,000.
• Review Engagement: Less extensive than audit, provides moderate assurance, typically less expensive. May be acceptable for soliciting corporations with gross annual revenue under $250,000.

Consult with a public accountant to determine which is appropriate for your organization.

Our board has 4 directors, but 3 are also employees. Are we compliant?

No. Soliciting corporations must have at least 2 directors who are not officers or employees. With only 1 non-employee director, you'd need to recruit at least one additional director who is not an employee, or restructure so that one employee steps down from the board (while retaining their employment role).

Can we voluntarily elect to be a soliciting corporation?

Yes, even if you don't meet the $10,000 threshold, your organization can choose to follow soliciting corporation requirements. Some organizations do this to demonstrate greater transparency and accountability to their stakeholders. This voluntary election can strengthen donor confidence and position your organization as particularly trustworthy, even if it's not legally required.

How does this affect registered charities vs. non-profits?

Both registered charities and non-charitable non-profits incorporated under the NFP Act must determine their soliciting status. The NFP Act governs corporate structure and governance, while the Income Tax Act (administered by CRA) governs charitable status and tax receipting. A registered charity must comply with both sets of rules. This means a registered charity that's also a soliciting corporation under the NFP Act faces requirements from both Corporations Canada and the CRA.

What financial year should we use for calculating the threshold?

Use your organization's designated financial year as stated in your bylaws or articles of incorporation. Most Canadian non-profits use either a calendar year (January 1 - December 31) or a fiscal year ending March 31, but your organization may have chosen a different 12-month period. Whatever period you've established must be used consistently for calculating the threshold and filing requirements.