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The Estate Donation of a Company

The Estate Donation of a Company

On Giving Tuesday last month, The Winnipeg Foundation announced a $500 million estate donation from a local donor, Miriam Bergen.  The donation is of two companies.  Appleton Holdings Ltd., which owns Edison Properties, which in turn holds 27 rental apartment and commercial buildings in Winnipeg.

The donor’s wished that her 200 employees “retain their roles and positions” and for the companies to be kept intact.  The Foundation said they would do just that.  And, as result, this gift raises some interesting charitable issues.

The fit between gift and charity is remarkably coherent.  The Winnipeg Foundation, Canada’s oldest community foundation (1921), has a $1.75 billion endowment.  It invests long-term and pays out 4.5% per annum in grants.  A real estate company is probably a strong investment that will produce a steady income stream.

When the estate settles, The Winnipeg Foundation will be one of the city’s largest landlords. The donor, company management and the Foundation have all expressed interest in exploring the possibilities of increasing affordable housing.   Business and charitable mission hold hands.

Charities owning Businesses

Canadian law generally prohibits charities from owning and operating businesses.  For private foundations, the Income Tax Act prohibits this outright and there are “excess business holding rules” to reduce ownership.  Public foundations, like The Winnipeg Foundation, need to navigate Canada Revenue Agency’s policy on related businesses.  A related business is “run substantially by volunteers and/or … linked to a charity’s purpose and subordinate to that purpose.”

Every other kind of business is an unrelated business.  As CRA points out in its policy the “Income Tax Act says that charities can lose their registration if they carry on an unrelated business.”  The Winnipeg Foundation is likely grappling with this legal proscription.  But if Edison Properties is focused on affordable housing, does that make it an acceptable related business?


The Winnipeg Foundation grants to provide affordable housing and has been involved with housing policy.  There is strong alignment.  Edison Properties could be reimagined as a social enterprise.

To the best of my knowledge, this would be a first example in Canada, and it makes a ton of sense. There are management, capital, and reputational risks associated with a community foundation being a major landlord, but the benefits are tempting.  This is a unique impact investment.  It provides affordable housing and generates income.  I hope the business can be defined as related and that the foundation doesn’t have to sell its stake.  While the Foundation can hold Edison through a trust to avoid direct ownership, this kind of planning only adds complexity and may seem like a “work around”.

International Examples

Internationally, there are a few high-profile examples of companies being owned by foundations or public benefit structures.  The Swedish furniture giant IKEA is one.  The Indian conglomerate Tata is another.  In September, Patagonia, the outdoor clothing company became a high-profile third example.

Canadian Examples

Canadian stories, however, are rare.  There are a couple of high-profile donations of corporations to Canadian charities that could have been “related businesses”, but other factors intervened.

In 1948, at his death, Joseph Atkinson, the founder of The Toronto Star, donated the company to a private foundation, the Atkinson Foundation. He wanted the company’s profits to support the progressive causes to which he dedicated his life.  The Ontario Conservative government enacted the Charitable Gifts Act, which prohibited Ontario-based charities from owning more than 10% of a business. (Charity law or politics? A bit of both.)  The company was sold to five families who supported his principles, and the foundation was funded with the proceeds.  The Charitable Gifts Act was repealed in 2009.

In 2011, Avi Bennett, the owner of iconic Canadian publisher McClelland and Stewart donated 75% of the company to the University of Toronto.  It seemed aligned, but the University soon sold its stake to the US publisher Random House. Neither the gift amount nor the sales amount was disclosed. The alignment was very short lived.

The Winnipeg Experiment

I’m fascinated to see how The Winnipeg Foundation will manage this estate donation and company.  Canada’s oldest community foundation is by many measures also its most successful.  It’s connected and trusted locally.  It has enjoyed greater success than its national peers in terms of donations and endowment.  It is the perfect charity to explore the limits of the “related business” rules.  The Miriam Bergen gift is a rare and wonderful thing, and it could be precedent setting in more ways than just dollar value.