Handing over the keys to the State? The challenges of church as legal entity Part 3 of 3



May 28, 2018

Version 2 

An ARPA Three-Part series on Church and State in Canada

By André Schutten and John Sikkema

The church, says the Belgic Confession, is “a holy congregation and assembly of true Christian believers” that “has existed from the beginning of the world and will be to the end” and “is not confined or limited to one particular place or to certain persons, but is spread and dispersed throughout the entire world.”

Yet in common parlance we use “church” to mean several other things. We may use it to refer to a certain denomination, or a local congregation, or perhaps even a physical building.

While the church universal spans across history and across the planet, the local church is where the Word is preached, the sacraments administered, and discipline carried out. Individual believers fellowship with and encourage each other, study God’s Word together, and minister to each other’s needs within the local church. Members of the local church participate in evangelism in order to bring locals into the local church. Such activities are probably what come to mind when we think about what the local church should be and do, and rightly so.

Of practical concern today is that “church” can also refer to a legal entity that owns property, buys insurance, enters contracts, hires employees, and so on, within a system of civil law. Such functions might be considered incidental rather than essential to the church – indeed there are many local churches that have no legal status or recognition (think of unregistered house churches in China). However, it seems that some overlap between church and state is unavoidable in Canada and this article is concerned with the local church (and the church denomination, if applicable) as it exists as a legal entity. And the legal form a church ought to take, if any, cannot be divorced from its theology.

This is the third part in an ARPA series on church and state. The impetus for these articles was the Supreme Court of Canada hearing on the question of whether civil courts can review church discipline decisions. In the first part, we explained how God grants authority to the family, the church, and the state, and argued that church discipline is exclusively the task of the church. In the second part, we discussed whether civil courts can supervise the procedure of church discipline, provided they don’t interfere directly with the substance of a church decision. We argued that both procedure and substance are governed by the Word, applied by the church.

In this third part, we argue that incorporating the local church (with church members as corporate members and elders as corporate directors) raises problems in light of Reformed ecclesiology and church discipline. The basic corporate form does not suit Reformed church polity because it makes the decisions of the elders subject to review (and possible rejection) by its members. The corporate form also subjects the church’s authority to discipline its members to review by the state. While there may be practical advantages to incorporation, such as limited liability and perpetual legal personality, we suggest that other legal options may be better. Many of the Christian Reformed Churches adopted the corporate model and some United Reformed Churches continued the practice. Most Canadian Reformed Churches have not adopted the corporate model, but a few new Canadian Reformed churches have.

Incorporation may subject the Church’s discipline decisions to review by the state

Incorporating the local church blurs the lines of ultimate responsibility between the authority of the church and the authority of the state. Through incorporation, the elders of the church cede authority over church discipline to the state. The local, incorporated church is made subject to the incorporation statute and to case law that has been developed around corporations.

Recall the recent case at the Supreme Court of Canada, discussed in part I. Had Mr. Wall’s Jehovah’s Witnesses “church” been incorporated, the civil judiciary would have at least had the legal authority to decide whether that church had followed its corporate bylaws.

M.H. Ogilvie, a leading Canadian scholar on the subject of religious institutions and the law, says that courts are generally reluctant to intervene in church matters and that “courts have stated that they will not consider matters that are strictly spiritual or narrowly doctrinal in nature, but will intervene where civil rights or property rights have been violated.” However, “where a religious institution is incorporated,” Ogilvie says, “[its] internal tribunals are as subject to civil court supervision as any other inferior courts.” That is, when a church has incorporated, “civil courts may intervene regardless of other factors…” (emphasis added).

According to Law Professor William Bassett, “Organizing and administering communities of faith are as much exercises of religion as are worship and public prayer.” Consequently, in his view, “State monitoring of the internal governance of the church and its agencies threatens entanglement with religion, ceding unwarranted competency to the civil magistrate.”

Scripture teaches (as discussed in Parts 1 and 2 of this series) that the final appeal on church matters is to the elders (including the elders who make up a classis or synod, where discipline decisions are appealed). Absent incorporation, discipline of a church member is not reviewable by the courts, unless a contractual right or a property right depends on it. This fact alone calls into doubt the wisdom of incorporating a church (with all church members as corporation members).

Incorporation may subject the authority of the shepherds to the will of the flock

Incorporating the church also undermines Reformed church governance because it puts power in the hands of the membership to overturn “board” (i.e. elders’) decisions. Incorporation puts final decision making power in the membership rather than consistory. The annual congregational meeting is no longer a meeting of the consistory with the congregation to update them on church matters and consult with them, but a members’ meeting, where members decide whether to pass the budget and give direction to their elected board.

Consider this example: if the elders made the decision to prioritize local mission over making improvements to the church building, that decision would be subject to approval by the membership of an incorporated charity. And if the members disagreed with that decision, they could vote down the budget at the required annual meeting and instruct the elders, by way of motion and majority vote, to do the exact opposite of what the elders as the spiritual overseers of the church had determined was best. Incorporation changes the consistory from Christ’s representatives as overseers of the flock into a “duly elected board”. The membership can overturn decisions made by that board, and the membership can even turf that board when they don’t like its decisions.

Legal alternatives to incorporation that may better accord with Reformed ecclesiology

The laws of Ontario allow churches to take on the form of a charitable trust, which may be a preferable alternative to incorporation. A church set up this way would have both a trust (which lays out the charitable purpose) and a constitution (which sets out governance issues). The appointed trustees would hold the property in trust for the church members. Some Reformed churches have the consistory members act as the trustees and replace the trustees every three years or so, or on a rotating basis, with the election of new office bearers. While courts would assume jurisdiction over a dispute about who has control over the trust or whether the trust is being properly administered (property issues), this would not grant courts jurisdiction over a dispute about church membership or matters of internal religious governance.

Of course, there are also limitations to what a trust can do for a church. For example, a trust applies only to real property, it does not give the church perpetual legal existence, and it does not confer limited liability on the members of the church.

One idea that might work for Reformed churches is using the general incorporation statute to incorporate only the governing body of each church, i.e., the consistory. The members of the consistory would be the corporation’s sole members and sole “directors”. (In fact, this is how the membership and board of directors of ARPA Canada is set up in our incorporation, called a “closely held corporation”.) In Reformed church polity, it is the consistory that makes the decisions, not the members. The documents that create the corporation could still make clear that the church exists to proclaim the gospel to the congregants and the public and that it is required to call an annual general meeting and may call other meetings. In such an arrangement, the directors would not be legally bound to heed the votes of the congregation on who should become a member of the consistory. Church membership, unlike consistory membership, would have no legal status.

The point here is that simply because the corporate model is generally used for charities and is easier to create, does not mean it is the best one for Reformed churches in Canada when we consider Reformed ecclesiology and the proper jurisdiction of church and state. If the corporate form is used, churches should be careful about how they incorporate. To embed the church’s teachings, membership requirements, and so on into the articles of incorporation and corporate bylaws invites courts to assume jurisdiction to interpret and enforce them.

Our hope is that when we understand why incorporation could undermine the authority of the church, more Reformed churches will consider carefully whether incorporation is the route to go and explore legal alternatives with a view to preserving the church’s independence from the state, and the freedom to preach the gospel continually without interference.

Disclaimer: This article is not legal advice. If you are considering how to set up a new church, or reviewing legal matters within an existing church, please speak to a lawyer. The authors of this article do not practice in the field of corporate law or trusts. This article is intended to help consistory and church members identify issues at the intersection of corporate law, trusts, and ecclesiology that should be discussed with experts in those fields (which we are not). In that spirit, we welcome constructive feedback and critique from those who are.

Further reading:

M.H. Ogilvie, Religious Institutions and the Law in Canada

Norman Doe, “Modern church law”, in Christianity and Law: An Introduction, John Witte Jr. and Frank Alexander (eds).

William Basset, “Religious organizations and the state: the laws of ecclesiastical polity and civil courts” in Christianity and Law: An Introduction, John Witte Jr. and Frank Alexander (eds).

Some churches are constituted by private statutes (passed by a legislature but governing a private entity only), which the church has a hand in drafting. Such idea seems unworkable in that each local Reformed church would have to convince the provincial or federal government to draft and pass a statute particular to that local church. These kinds of private statutes work well for large denominations that are episcopal in formation, like the United Church of Canada for example, where one statute would rule the entire denomination. But Reformed church polity rejects the hierarchy of the episcopal model, due to the biblical emphasis of the local government of the local church. Moreover, courts have jurisdiction to interpret and enforce such a statute.

To discuss the subject matter of this article with us and help us understand these issues better, write to us at [email protected].

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