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Eligibility Requirements for Individuals who are Directors or Control or Manage Registered Charities and Registered Canadian Amateur Athletic Associations or Applicants for such Status

1. What are the new requirements for eligibility of individuals who are directors or otherwise control or manage registered charities and registered Canadian amateur athletic associations?
2. In what cases could an organization be refused registration or face sanctions or revocation based on individuals that are on its board of directors?
3. How will the CRA apply its administrative discretion in the application of these new rules?
4. Will the eligibility requirements affect who may file an application for registration as a registered charity or RCAAA?
5. What is a relevant criminal offence?
6. What is a relevant offence?
7. What is meant by "conduct that constituted a serious breach of the requirements for registration"?
8. Will registered charities and RCAAAs, or applicants for such status, be required to conduct a criminal records check?
9. What will happen if the CRA determines that an ineligible individual is on the board of a registered charity, an RCAAA or an entity, or controls or manages the operation of the organization?
10. When will these new rules apply?
11. Where will I find more information on the proposed measures?

1. What are the new requirements for eligibility of individuals who are directors or otherwise control or manage registered charities and registered Canadian amateur athletic associations?

Budget 2011 proposes measures that place restrictions on who may be a director, trustee, officer or like official of a registered charity or Registered Canadian Amateur Athletic Association (RCAAA) and on any individual who controls or manages the operation of the organization.

2. In what cases could an organization be refused registration or face sanctions or revocation based on individuals that are on its board of directors?

Budget 2011 proposes that the CRA may suspend authority to issue official donation receipts or revoke registration of a registered charity or RCAAA, or refuse to register an entity where a member of the board of directors, a trustee, officer or like official, or any individual, who controls or manages the operation of the organization, is ineligible because the individual has:

• been found guilty of a relevant criminal offence for which the individual has not received a pardon;
• been found guilty of a relevant offence within the last five years;
• was a director, trustee or like official of a charity or association during a period in which the charity was engaged in conduct that constituted a serious breach of the requirements for registration for which its registration was revoked in the past five years;
• controlled or managed a charity or association during a period in which the charity was engaged in conduct that constituted a serious breach of the requirements for registration for which its registration was revoked in the past five years; or
• been a promoter of a tax shelter that involved a gift to a registered charity or RCAAA the registration of which was revoked within the last five years for participation in the tax shelter.

3. How will the CRA apply its administrative discretion in the application of these new rules?

The CRA will be developing detailed administrative guidance on how these new rules will be applied.

4. Will the eligibility requirements affect who may file an application for registration as a registered charity or RCAAA?

Yes. The CRA may refuse an application for registration by a charity or CAAA if it has been filed by an ineligible individual.

5. What is a relevant criminal offence?

A relevant criminal offence, as it relates to registered charities and RCAAAs, generally refers to a conviction involving a form of financial dishonesty by the individual, such as tax evasion, theft and fraud. In more limited cases the offence might be a criminal offence not involving financial dishonesty, but is nonetheless relevant to the operation of the charity or association (e.g., an offence which if repeated by the individual could inflict harm on the organization or its beneficiaries).

6. What is a relevant offence?

A relevant offence, as it relates to registered charities and RCAAAs, is not a criminal offence, and relates to financial dishonesty including offences under fundraising legislation, consumer protection legislation and securities legislation. In more limited cases the offence might not involve financial dishonesty, but is nonetheless relevant to the operation of the charity or association (e.g., an offence which if repeated by the individual could inflict harm on the organization or its beneficiaries).

7. What is meant by "conduct that constituted a serious breach of the requirements for registration"?

Examples of "conduct that constituted a serious breach of the requirements for registration" include situations where a registered charity's or RCAAA's registration has been revoked for involvement in improper receipting arrangements, abusive tax shelters, or for providing undue private benefits to directors.

8. Will registered charities and RCAAAs, or applicants for such status, be required to conduct a criminal records check?

No. Although organizations often conduct criminal records checks as a good governance practice, particularly where the organization works with vulnerable groups such as the elderly or children, the Income Tax Act will not require these checks.

9. What will happen if the CRA determines that an ineligible individual is on the board of a registered charity, an RCAAA or an entity, or controls or manages the operation of the organization?

In cases where the CRA determines that an individual is not eligible to serve on a board of directors, it will first explain its concerns to the organization. In general, concerns would be related to the control an individual may have over the financial management of the charity and whether reasonable safeguards have been put in place to prevent fraud or abuse. The charity or RCAAA, as the case may be, will be given an opportunity to address the CRA's concerns. The organization may then decide to remove the particular individual or in some cases, may want to respond to the CRA's concerns and explain why it is appropriate for the individual to continue to act as a director or otherwise control or manage the operations of the charity. However, if a charity or RCAAA fails to address the CRA's concerns, sanctions may be applied up to and including revocation of registered status. In the case of applicants for registration, the CRA may refuse to register the organization.

10. When will these new rules apply?

The rules will apply on or after the later of January 1, 2012, and Royal Assent of the implementing legislation.

11. Where will I find more information on the proposed measures?

As further information is developed, it will be added to the Charities and Giving Web pages.

Date modified:

2015-07-15