CRA Compliance

Can a Canadian Charity Provide Benefits to its Directors?

Can a Canadian Charity Located in Ontario Pay its Directors?

In Canada, the compensation of directors in charitable organizations can be a complex matter governed by specific provincial regulations. Understanding these regulations is crucial for charities to ensure compliance while fairly remunerating directors for their services. This post highlights the conditions for charities located in Ontario specifically, and which are therefore subject to the Charities Accounting Act, with guidelines for compensating directors or persons connected to directors of registered charities.

Payment for Goods, Services, or Facilities: The payment must be for goods, services, or facilities provided by the director to the registered charity.

Reasonable Amount: The amount of the payment must be reasonable for the goods, services, or facilities provided.

Best Interest of the Charity: The payment for goods, services, or facilities must be in the best interest of the registered charity.

Financial Responsibility: Payments cannot result in the registered charity's debts and liabilities exceeding the value of its charitable property.

Written Agreement: Before a payment is made, the board of directors must permit the payment via a written agreement that includes the maximum amount that can be paid.

Board Resolution: The board of directors must arrive at the written agreement through a resolution at a duly constituted board meeting, with at least four directors (not including those connected to the person providing the goods/services) present.

Exclusion of Involved Directors: Directors receiving payment and those connected to them may not attend or vote at the meeting where the resolution is made.

Limit on Payments: The total number of directors receiving payment under s. 2.1 of O Reg 4/01 of the Charities Accounting Act cannot exceed 20% of the number of voting directors.

Financial Disclosure: Details about the arrangement must be noted in the registered charity's annual financial statements and presented to the members at the annual meeting.

Director's Satisfaction: Each director must be satisfied that the payment is being made in accordance with s. 2.1 of O Reg 4/01 of the CAA. If a charity can fulfill these requirements, it can reasonably compensate its directors for services rendered to the organization. This framework ensures transparency, accountability, and adherence to legal standards in the management of charitable funds.

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