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Keeping on top of legal requirements: How can I identify legal risks?

There are hundreds of thousands of federal, provincial and municipal statutes and regulations. As a result, organizations of all sizes need to be aware of their legal environment and regulations and laws that affect them. Laws and regulations exist for virtually every aspect of an organization’s operations—incorporation, employment, safety, environmental, contracts, intellectual property, privacy and so forth. Your field may have additional regulations governing particular aspects of your operations. For example, a homeless shelter will need to adhere to local public health regulations, and an animal shelter will need to follow regulations related to specific breeds or reporting diseased animals.

Despite the daunting number and array of laws and regulations, governments and other regulating authorities (such as licensing bodies) make it as easy as possible for small organizations to stay abreast. Government websites provide easy access to pertinent, user-friendly information. Some sites offer notice mechanisms that you can register for. In addition, governments know that dissemination of information takes time and they frequently build notice and warning mechanisms into their implementation plans. If there is an umbrella association for your industry, it may also be an important source of information about the regulatory environment.

You can also apply common sense. For example, over the years, various promoters have engaged in gifting schemes whereby a donor purchases items such as artwork and immediately donates it to a charity for a stated value of several times its purchase price. Despite letters provided by some law firms opining that such schemes were valid, the CRA does not agree and will disallow the donation as a credit for the donor, and the participating charity may lose its status as a registered charity. This is a good example of applying common sense: if a scheme seems wrong it probably is.

How can I identify legal risks?

Organizations will want to consider the following points in their efforts to identify legal risks:

  • Identification and management of legal risks
  • Utilizing multiple corporations
  • Board management issues
  • Reducing board liability
  • Insurance considerations
  • Third party use of not-for-profit organization property
  • Real property issues
  • Intellectual property issues
  • Employment and volunteer matters
  • Fiscal management issues
  • Investment management issues
  • National/international relationships
  • Anti-terrorism/money laundering legislation
  • Crisis management issues

Readers can find a “Legal Management Checklist for Not-for-Profit Organizations” in Not-for-Profit PolicyPro, available for a free trial from First Reference.

Jeffrey D. Sherman
BComm, MBA, CIM, FCA

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Jeffrey Sherman

Chief financial officer, author, lecturer and professor focussing on corporate finance at Atrium Mortgage Investment Corporation, Canadian Mortgage Capital Corp., Trimel Pharmaceuticals Corporation, and Anagram Services
Jeffrey D. Sherman, BComm, MBA, CIM, FCA, is a director or CFO of several public companies and has had over 20 years of executive management experience. He is the author of Finance and Accounting PolicyPro, Not-for-Profit PolicyPro and Information Technology PolicyPro (guides to governance, procedures and internal control, all published by First Reference and the CPA). Read more
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