It's a very good question. When we debate it as lawyers, that's what we wonder: what is the essence of a non-share capital corporation? That's been the problem in drafting the legislation since the beginning of the century, both in Canada and the U.S.
The approach that's taken in this legislation we think is a good one. It has two components. It doesn't appear in the definitions section, but it's part of the basic architecture of the law. It's two rules. One, the corporation itself cannot make any distributions of any of its assets to its members while it exists. Second, at the end of the corporation's existence, when it's liquidated, it can't make a distribution to its members if it's charitable. If it's not charitable, it can make a distribution to its members.
It's those two parts—distribution of property during the existence of the corporation and distribution of the corporation's property at the end—and really just one rule: no distributions during the existence of the corporation. That prohibition means that the corporation has to be pursuing something other than the benefit of its members, therefore the non-profit goal.
The other approach is to identify—this is what the Canada Corporations Act does—a list of purposes that could be pursued through a non-share capital corporation. The trouble with that approach is that you're never going to get them all. You would have to capture them under a general expression--i.e., non-share capital purposes, or non-profit purposes, such as religion, charity, etc.
We think it's a good approach not to have a definition in the statute, but the definition is there. It's part of the architecture of the statute all the way through. Then the idea is that individuals will choose this legislation versus the share capital legislation, depending on how they want to answer that question: should there be distributions during the existence of the corporation? No, because we are pursuing together a non-share capital or non-profit purpose.
So they'll choose this statute if that's their mentality. If they want to operate a business and make distributions of dividends during the course of the business, they'll choose the Canada Business Corporations Act federally.
