Guide to Good Governance: Not-for-Profit and Charitable ...

1 Guide to good governance : Not-for-Profit and Charitable Organizations Second Edition (September 2013). Introduction to the Guide The governance Centre of Excellence (GCE), an The resource materials found in the Guide are intended initiative of the Ontario Hospital Association (OHA), for use by all Not-for-Profit and Charitable organizations. is committed to leading excellence in health care However, they may need to be adapted to meet the governance . Established in 2004, the GCE provides a needs of specific institutions and, as such, organizations broad range of relevant services, educational programs, are encouraged to customize the tools and templates to and resources including the Guide to good governance : meet their unique circumstances. We also anticipate that Not-for-Profit and Charitable Organizations (2009).

2 Organizations may wish to consult the Guide for different Like the first edition, the second edition of the Guide purposes. For example, new board members may utilize to good governance : Not-for-Profit and Charitable the Guide to familiarize themselves with governance Organizations, provides a comprehensive overview of the practices and processes, while more experienced key components of good governance practices, as well board chairs and secretaries may look to the Guide to as templates and tools to implement and support these supplement their practices in a particular area. It is practices. not expected that organizations will adopt the Guide in its entirety. The Government of Ontario's Not-for-Profit Corporations Act is scheduled to come into effect no earlier than six The Guide is not intended, nor should it be construed, months after Bill 85 (Companies Statute Law Amendment as legal advice.)

3 Those concerned about the applicability Act, 2013) is passed. Bill 85 would make a number of specific governance practices to their organization of amendments to the new Act and is expected to are advised to seek legal or professional advice based be debated and passed in the fall of 2013. The Not- on their particular circumstances. Although the Guide for-Profit Corporations Act (Ontario) will replace the contains a list of resources and references, it does not Corporations Act as the governing statute for non-share provide a synthesis of the literature with respect to capital corporations in Ontario. To the best extent governance . For those interested in a review of the possible under the circumstances, this second edition of literature, we would recommend consulting the list of the Guide clarifies how the Not-for-Profit Corporations references provided in Appendix II.

4 Act (Ontario) will affect governance and how to navigate these changes. This Guide has also been updated to As the Not-for-Profit and Charitable sector continues reflect emerging trends and best practices in board roles. to improve its governance processes and practices, The GCE will be completing any necessary updates additional resources will be needed. The OHA and to this Guide once the Not-for-Profit Corporations Act GCE look forward to developing additional tools and (Ontario) is in force. resources that will supplement the contents of the Guide , and to offer educational programming based on the best practices outlined in the Guide . ISBN # 978-0-88621-352-7. previOus view Guide to good governance Not-for-Profit AND Charitable ORGANIZATIONS I. About the Authors Principal Authors Anne Corbett James M. Mackay Anne Corbett is a Senior Partner Jim Mackay is the Managing with the law firm of Borden Ladner Partner of the Berkeley Consulting Gervais LLP in Toronto, where she Group and a member of faculty specializes in the areas of corporate at the Schulich School of Business commercial law and health law, (York University).

5 Formed in 1985, with a special emphasis on corporate governance . the Berkeley Consulting Group, with its network of Anne is involved in providing advice to boards of associates, provides top management leadership advice, Not-for-Profit corporations and pension administrators strategic planning, organization effectiveness, and with respect to governance issues. She has also been governance reviews to private, public and Not-for-Profit involved in several Not-for-Profit amalgamations and sector clients. Jim has personally provided business top restructurings, and in transactions between charities and managers with leadership advice globally. Jim brings the private sector involving partnerships, outsourcing his own blend of fresh ideas and strategic thinking. He and joint venture arrangements. She provides advice to is the co-author of the 2005 Guide to good governance health service providers, education institutions, trade (for hospitals) and co-author of the 2009 Guide to associations, fundraising foundations, research institutes good governance for Not-for-Profit and Charitable and shared service corporations.

6 She is a recognized Organizations, and the 2011 Guide to good governance expert on corporate governance . She frequently (for hospitals). Jim has conducted governance courses conducts board education sessions and facilitates board across the province for the Ontario Hospital Association retreats. Anne is the principal author of the 2005 Guide and the Maytree Foundation since 2006. As an Adjunct to good governance (for hospitals) and co-author of the Professor of Strategy at the Schulich School of Business 2009 Guide to good governance for Not-for-Profit and (York University), he has been teaching part-time in the Charitable Organizations, and the 2011 Guide to good MBA program since 1985. In 2010, Jim became the governance (for hospitals). She is one of the authors of Director, Strategy Field Studies, where he leads the core Quality and Patient Safety: Understanding the Role of second year course taken by 500 MBAs annually.

7 Jim the Board (2008, Ontario Hospital Association). She is a received his from the University of Toronto (Hons. frequent speaker for the Ontario Hospital Association on Economics), his MBA from the Richard Ivey School topics related to directors' fiduciary duties, governance of Business, University of Western Ontario, and he is and accountability. Anne Corbett received her from a Certified Management Consultant (CMC). Laren the University of Windsor in 1976, her from the Stadelman, a Berkeley Senior Associate, assisted Jim in University of Toronto in 1979, and was called to the Bar the research for this edition of the Guide . of Ontario in 1981. previOus view Guide to good governance Not-for-Profit AND Charitable ORGANIZATIONS II. Contributing Author Pamela L. Cross Pamela Cross, a Partner in the Ottawa office of Borden conferences and has co-authored several books on Ladner Gervais, LLP and head of the Ottawa Tax Group, Tax Treaties.

8 In 2006, she received a Forty under 40 . is the contributing author on Chapter 3. She practices in award from the Ottawa Business Journal. She has been the areas of taxation (domestic and international), estate recognized by The Best Lawyers in Canada (Trust and and business succession planning, and tax litigation Estates) and in Canadian Legal Lexpert Directory (Estate and dispute resolution. Pamela works with Charitable and Personal Tax Planning). Pamela is Secretary of organizations, public and private foundations and non- Society of Trust and Estate Planners Canada (STEP), profit organizations, providing advice on structuring Chair of STEP's Tax Technical Committee, Co-chair donations, governance , and the legislative framework of STEP's National Conference and a member of governing these entities. She has been qualified as an the Canadian Venture Capital Association Tax Policy expert before the Ontario Superior Court of Justice Committee (since 2006).

9 And has provided testimony with respect to tax matters. Pamela has also presented at local, regional and national previOus view Guide to good governance Not-for-Profit AND Charitable ORGANIZATIONS III. Table of Contents Introduction to the Guide I. About the Authors II. Chapter 1: Framework for good governance 1. Objective: good governance of Not-for-Profit Corporations 1. The Audience: A Broad Spectrum of Not-for-Profit Boards 1. A Framework for good governance 2. Condition #1 The Board's Role 3. Condition #2 Board Quality 3. Condition #3 Board Structure and Processes 3. Boards Responsible for their Own governance 4. Chapter 2: The Not-for-Profit Corporation 5. What is a Corporation? 5. The Not-for-Profit Corporation 5. Creating a Not-for-Profit Corporation 5. Transitioning to the new Canada Not-for-Profit Corporations Act and Not-for-Profit Corporations Act (Ontario) 6.

10 The Range of Not-for-Profit Entities 7. Soliciting Corporations and Public Benefit Corporations 7. Focus of the Guide 8. Not-for-Profit Corporations and the Income Tax Act (Canada) 8. Corporate governance Structure 8. Best Interests of the Corporation 10. Understanding Corporate Accountability 10. Factors that Impact governance 12. Summary 12. Chapter 3: Legislation Governing Charities 19. What Directors Need to Know 19. What is a Charity? 19. Becoming a Registered Charity 19. Instructions for Issuing a CharitableTax Receipt 20. Losing Charitable Status 22. Intermediate Penalties 25. Improper Gifting Arrangements 25. Provincial Law Ontario 25. Provincial Law Other Jurisdictions 27. Personal Liability of Directors of Charitable Corporations 27. previOus view Guide to good governance Not-for-Profit AND Charitable ORGANIZATIONS IV.