Casual Legal: Societies and Non-Profits

By Tamara Korassa
Reynolds Mirth Richards Farmer LLP
Alberta Municipalities Casual Legal Service Provider

Municipalities may decide to form not-for-profit (NFP) corporations or societies (each a “NFP organization”) so they can accomplish certain municipal purposes like historical societies, recurring community festivals and recreation facilities.

A municipality may choose this option to increase involvement of the community in the provision of the service, allow for a focus on the specific objects, diversify funding sources or to create some separation between the municipality and the NFP organization.

The Municipal Government Act also acknowledges the unique relationship between a municipality and NFP organizations in the community by including, among other things, exemptions to advertising the disposal of land.

There are a few options to choose from when setting up an NFP organization, and although there are subtle differences, each option has an incorporating document (Objects, Articles of Incorporation or Memorandum of Association) and governing rules (by-laws, Articles of Association). Societies are incorporated under the Societies Act and non-profit corporations can be incorporated under the Companies Act (Alberta) or the Canada Not-for-Profit Corporation Act.

The other similarity between the types of organizations is that there are typically two groups responsible for running the non-profit organization – the members and the directors. The default role for members is to elect the directors and the default role for the directors is to run the operations of the NFP organization. However, each non-profit has some discretion to amend these roles in their governing documents. For example, members can also play the role of advisors, advocates and supporters.

An NFP organization can also use discretion to design the membership of the NFP organization in a way to further its purposes. For instance, an NFP organization can establish different classes of membership in its incorporating document. An NFP organization may want to do this to distinguish between members who will have the right to vote and other members.  By way of example, the municipality may want to be the voting member but may want to encourage community involvement by allowing individuals interested in supporting the NFP to participate as non-voting members. An NFP organization can also be a way for multiple municipalities, each holding a membership, to collaborate on a common purpose.

The directors of the corporation can also be selected to suit the purposes of the NFP organization – subject to the members vote and the rules of the incorporating documents. For instance, the municipality may want to have one or more municipal councillors serve as directors as a way to maintain the link between the NFP organization and municipality. Or, the municipality may want to have community representation on the board from different locations or even directors with specific expertise that may align with the purpose of the NFP organization.

A municipality can support an NFP organization with the allocation of grant or transfer funding or advancing a loan to an NFP organization. Some NFP organizations may also be eligible for grant funding in areas specific to their purpose.

NFP organizations are one tool a municipality can use to accomplish its municipal purposes and the NFP organization can be established to either have close ties to the municipality or be turned over to a board of skilled and passionate individuals to carry out the purposes the municipality outlines in the governing documents.

To access Alberta Municipalities Casual Legal Helpline, Alberta Municipalities members can call toll-free to 1-800-661-7673 or send an casuallegal [at] abmunis.ca (email) to reach the municipal legal experts at Reynolds Mirth Richards and Farmer LLP. For more information on the Casual Legal Service, please call 310-MUNI (6864) or send an riskcontrol [at] abmunis.ca (email) to speak to Alberta Municipalities Risk Management staff. Any Regular or Associate member of Alberta Municipalities can access the Casual Legal Service.

DISCLAIMER: This article is meant to provide information only and is not intended to provide legal advice. You should seek the advice of legal counsel to address your specific set of circumstances. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this article to be outdated.