Policy - Borrowing Powers By-Law  Home

1. Purpose
The purpose of this policy is to establish clear guidelines and limitations on the borrowing powers of the Board of Directors (the "Board") of Scots of Canada (the Corporation) in accordance with the Canada Not-for-profit Corporations Act (NFP Act), the Income Tax Act, and the bylaws. This policy ensures that any borrowing decisions are made responsibly, in the best interests of the Corporation, and in furtherance of its charitable purposes. This policy provides a framework for responsible borrowing while safeguarding the charitable status and financial health of the Corporation.

2. Authority to Borrow
The Board of Directors is authorized to borrow money on behalf of the Corporation, as permitted under its bylaws and the Canada NFP Act. This authority is subject to the restrictions outlined in this policy and any applicable laws or regulations.

3. Limitations on Borrowing Powers

a. Charitable Purpose Restriction: Any borrowing must be for purposes that further the Corporation's charitable objectives as defined in its governing documents and registered with the Canada Revenue Agency (CRA). 

b. Debt Limits: Unless otherwise approved by a special resolution of the members, the total amount of debt incurred by the Corporation shall not exceed the lesser of:

    1. 25% of the Corporation's annual revenue
    2. $50,000 CAD

c. Repayment Capacity: The Board must ensure that the Corporation has the financial capacity to repay any borrowed funds, including interest, without jeopardizing its ongoing operations or charitable activities. 

d. Compliance with CRA Guidelines: Borrowing must not result in the Corporation providing an undue benefit to any person or entity, as prohibited under the Income Tax Act.

4. Approval Process

  1. Board Approval: All borrowing decisions must be approved by a resolution of the Board of Directors at a duly convened meeting. The resolution must specify:
    1. The purpose of the borrowing. 
    2. The amount to be borrowed. 
    3. The terms of repayment, including interest rates and timelines. 
    4. The source of repayment funds.
    5. The risks associated with borrowing, including interest rate fluctuations and repayment obligations.
    6. A risk management plan.
    7. The compliance with the Canada NFP Act, the Income Tax Act, and any other applicable law. 
  2. Documentation: All borrowing agreements must be documented in writing and signed by authorized representatives of the Corporation. 
  3. Member Approval (if required): If the borrowing exceeds the limits set in this policy or the Corporation's bylaws, a special resolution of the members may be required.

5. Reporting and Accountability

  1. Financial Reporting: All borrowing activities must be accurately recorded in the Corporation's financial statements and disclosed in accordance with applicable accounting standards.
  2. Board Oversight: The Board shall regularly review the Corporation's debt levels and repayment status to ensure compliance with this policy and the Corporation's financial health.
  3. CRA Compliance: The Corporation shall ensure that all borrowing activities comply with CRA guidelines for registered charities, including restrictions on undue benefits and the use of resources for charitable purposes.

6. Prohibited Activities

  1. The Corporation shall not borrow funds for non-charitable purposes or to provide financial benefits to directors, officers, or other related parties.
  2. The Corporation shall not engage in borrowing that would jeopardize its charitable status or result in a violation of the Income Tax Act.

7. Review and Amendments

This policy shall be reviewed by the Board of Directors at least every year to ensure its continued relevance and compliance with applicable laws and regulations. Amendments to this policy must be approved by a resolution of the Board.

Effective Date. This policy is effective as of April 21, 2025 and supersedes any prior policies regarding Borrowing Powers.

Revision. (YY/##). 2501