Bank Act (S.C. 1991, c. 46)

Marginal note:Unaffiliated directors

• 163 (1) At the election of directors at each annual meeting of a bank and at all times until the day of the next annual meeting, no more than two thirds of the directors may be persons affiliated with the bank.

• Marginal note:Exception

  (2) Subsection (1) does not apply where all the voting shares of a bank, other than directors’ qualifying shares, if any, are beneficially owned by a Canadian financial institution incorporated by or under an Act of Parliament.

• Marginal note:Determination of affiliation

  (3) For the purposes of subsection (1), whether or not a person is affiliated with a bank is to be determined as at the day the notice of the annual meeting is sent under section 138 and that determination becomes effective on the day of that meeting, and a person is deemed to continue to be affiliated or unaffiliated, as the case may be, until the next annual meeting of the shareholders or members, as the case may be.

• Marginal note:Transitional

  (4) Subsection (1) does not apply in respect of a bank that was in existence immediately prior to the day that subsection comes into force until the day that is three years after the day that subsection comes into force.

Marginal note:Limit on directors

164 No more than 15 per cent of the directors of a bank may, at each director’s election or appointment, be employees of the bank or a subsidiary of the bank, except that up to four persons who are employees of the bank or a subsidiary of the bank may be directors of the bank if those directors constitute not more than one half of the directors of the bank.

Election and Tenure — Directors

Marginal note:Number of directors

• 165 (1) Subject to subsection 159(1) and sections 168 and 217, the directors of a bank that is not a federal credit union must, by by-law, determine the number of directors or the minimum and maximum number of directors, but no by-law that decreases the number of directors shortens the term of an incumbent director.

• Marginal note:Number of directors — federal credit union

  (2) Subject to subsection 159(1), the members of a federal credit union must, by by-law, determine the number of directors or the minimum and maximum number of directors.

• Marginal note:Election at annual meeting

  (3) A by-law made under subsection (1) or (2) that provides for a minimum and maximum number of directors may provide that the number of directors to be elected at any annual meeting of the shareholders or members, as the case may be, be the number that is fixed by the directors before the annual meeting.

Marginal note:Election or appointment as director

165.1 The election or appointment of a person as a director is subject to the following:

• (a) the person was present at the meeting when the election or appointment took place and did not refuse to hold office as a director; or

• (b) the person was not present at the meeting when the election or appointment took place but

  • (i) consented in writing to hold office as a director before the election or appointment or within 10 days after it, or

  • (ii) acted as a director after the election or appointment.

Marginal note:Term of directors

• 166 (1) Except where this Act or the by-laws of a bank provide for cumulative voting, a bank may, by by-law, provide that the directors be elected for terms of one, two or three years.

• Marginal note:Term of one, two or three years

  (2) A director elected for a term of one, two or three years holds office until the close, as the case may be, of the first, second or third annual meeting of shareholders or members, as the case may be, following the election of the director.

• Marginal note:No stated term

  (3) A director who is not elected for an expressly stated term of office ceases to hold office at the close of the next annual meeting of shareholders or members, as the case may be, following the election of the director.

• Marginal note:Tenure of office

  (4) It is not necessary that all directors elected at a meeting of shareholders or members hold office for the same term.

• Marginal note:Idem

  (5) If a by-law of a bank provides that the directors be elected for a term of two or three years, it may also provide that the term of office of each director be for the whole of that term, or that, as nearly as may be, one half of the directors retire each year if the term is two years, and that one third of the directors retire each year if the term is three years.

• Marginal note:Composition requirements

  (6) Subject to subsection 163(4), if a director of a bank is elected or appointed for a term of more than one year, the bank must comply with subsections 159(2) and 163(1) and section 164 at each annual meeting of shareholders or members, as the case may be, during the director’s term of office as if that director were elected or appointed on that date.

Marginal note:Determining election of directors

• 167 (1) Except where this Act or the by-laws of a bank provide for cumulative voting, the persons, to the number authorized to be elected, who receive the greatest number of votes at an election of directors of a bank shall be the directors thereof.

• Marginal note:Idem

  (2) If, at any election of directors referred to in subsection (1), two or more persons receive an equal number of votes and there are not sufficient vacancies remaining to enable all the persons receiving an equal number of votes to be elected, the directors who receive a greater number of votes or the majority of them shall, in order to complete the full number of directors, determine which of the persons so receiving an equal number of votes are to be elected.

Marginal note:Cumulative voting

• 168 (1) Where this Act or the by-laws provide for cumulative voting,

  • (a) there shall be a stated number of directors fixed by by-law and not a minimum and maximum number of directors;

  • (b) each shareholder entitled to vote at an election of directors has the right to cast a number of votes equal to the number of votes attached to the shares held by the shareholder multiplied by the number of directors to be elected, and the shareholder may cast all such votes in favour of one candidate or distribute them among the candidates in any manner;

  • (c) a separate vote of shareholders shall be taken with respect to each candidate nominated for director unless a resolution is passed unanimously permitting two or more persons to be elected by a single vote;

  • (d) if a shareholder has voted for more than one candidate without specifying the distribution of the votes among the candidates, the shareholder is deemed to have distributed the votes equally among the candidates for whom the shareholder voted;

  • (e) if the number of candidates nominated for director exceeds the number of positions to be filled, the candidates who receive the least number of votes shall be eliminated until the number of candidates remaining equals the number of positions to be filled;

  • (f) each director ceases to hold office at the close of the next annual meeting of shareholders following the director’s election;

  • (g) a director may be removed from office only if the number of votes cast in favour of a motion to remove the director is greater than the product of the number of directors required by the by-laws and the number of votes cast against the motion; and

  • (h) the number of directors required by the by-laws may be decreased only if the number of votes cast in favour of a motion to decrease the number of directors is greater than the product of the number of directors required by the by-laws and the number of votes cast against the motion.

• Marginal note:Mandatory cumulative voting

  (2) Where the aggregate of the voting shares beneficially owned by a person and any entities controlled by the person carries more than 10 per cent of the voting rights attached to all the outstanding voting shares of a bank, the directors shall be elected by cumulative voting.

• Marginal note:Exception

  (3) Subsection (2) does not apply

  • (a) where all the voting shares of the bank that are outstanding are beneficially owned by

    • (i) one person,

    • (ii) one person and one or more entities controlled by that person, or

    • (iii) one or more entities controlled by the same person;

  • (b) in respect of a bank that was in existence immediately prior to the day that subsection comes into force whose shareholders are confined to entities incorporated or formed by or under an Act of Parliament or of the legislature of a province that are, in the opinion of the directors, operating as credit unions or cooperative associations.

• Marginal note:Exception

  (3.1) Subsection (2) does not apply to a widely held bank with equity of twelve billion dollars or more or to a bank in respect of which subsection 378(1) applies.

• Marginal note:Transitional election

  (4) Where this Act or the by-laws of a bank provide for cumulative voting, the shareholders of the bank shall,

  • (a) at the first annual meeting of shareholders held not earlier than ninety days following the date that cumulative voting is required under subsection (2) or provided for in the by-laws, and

  • (b) at each succeeding annual meeting,

  elect the stated number of directors to hold office until the close of the next annual meeting of shareholders following their election.

• Marginal note:Exception

  (5) Nothing in this Act precludes the holders of any class or series of shares of a bank from having an exclusive right to elect one or more directors.

Marginal note:No cumulative voting

168.1 Despite section 168 or any provision of its by-laws, cumulative voting is not permitted in a federal credit union.

Marginal note:Re-election of directors

169 A director who has completed a term of office is, if otherwise qualified, eligible for re-election.

Incomplete Elections and Director Vacancies

Marginal note:Void election or appointment

• 170 (1) If, immediately after the time of any purported election or appointment of directors, the board of directors would fail to comply with subsection 159(2) or 163(1) or section 164, the purported election or appointment of all persons purported to be elected or appointed at that time is void unless the directors, within forty-five days after the discovery of the non-compliance, develop a plan, approved by the Superintendent, to rectify the non-compliance.

• Marginal note:Failure to elect minimum

  (2) If, at the close of a meeting of shareholders or members of a bank, the shareholders or members have failed to elect the number or minimum number of directors required by this Act or the by-laws of a bank, the purported election of directors at the meeting

  • (a) is valid if the directors purported to be elected and those incumbent directors, if any, whose terms did not expire at the close of the meeting, together constitute a quorum; or

  • (b) is void if the directors purported to be elected and those incumbent directors, if any, whose terms did not expire at the close of the meeting, together do not constitute a quorum.

• (3) and (4) [Repealed, 1997, c. 15, s. 15]

Marginal note:Directors where elections or appointments incomplete or void

• 171 (1) Despite subsections 166(2) and (3) and paragraphs 168(1)(f) and 172(1)(a), if subsection 170(1) or (2) applies at the close of any meeting of shareholders or members of a bank, the board of directors, until their successors are elected or appointed, consists solely of

  • (a) where paragraph 170(2)(a) applies, the directors referred to in that paragraph; or

  • (b) where subsection 170(1) or paragraph 170(2)(b) applies, the persons who were the incumbent directors immediately before the meeting.

• Marginal note:Where there is no approved rectification plan

  (2) Notwithstanding subsections 166(2) and (3) and paragraphs 168(1)(f) and 172(1)(a), where a plan to rectify the non-compliance referred to in subsection 170(1) has not been approved by the Superintendent by the end of the forty-five day period referred to in that subsection, the board of directors shall, until their successors are elected or appointed, consist solely of the persons who were the incumbent directors immediately before the meeting at which the purported election or appointment referred to in that subsection occurred.

• Marginal note:Directors to call meeting

  (3) If subsection (1) or (2) applies, the board of directors referred to in that subsection must, without delay, call a special meeting of shareholders or members, as the case may be, to fill the vacancies if paragraph 170(2)(a) applies, or elect a new board of directors if subsection 170(1) or paragraph 170(2)(b) applies.

• Marginal note:Others may call meeting

  (4) If the directors fail to call a special meeting required by subsection (3), the meeting may be called by any person who would be entitled to vote at the meeting.

Marginal note:Ceasing to hold office

• 172 (1) A director ceases to hold office

  • (a) at the close of the annual meeting at which the director’s term of office expires;

  • (b) when the director dies or resigns;

  • (c) when the director becomes disqualified under section 160 or ineligible to hold office pursuant to subsection 203(2);

  • (d) when the director is removed under section 173; or

  • (e) when the director is removed from office under section 647 or 647.1.

• Marginal note:Date of resignation

  (2) The resignation of a director of a bank becomes effective at the time a written resignation is sent to the bank by the director or at the time specified in the resignation, whichever is later.

Marginal note:Removal of director

• 173 (1) Subject to paragraph 168(1)(g), the shareholders of a bank that is not a federal credit union may by resolution at a special meeting of shareholders remove any director or all the directors from office.

• Marginal note:Removal of director — federal credit union

  (1.1) A director of a federal credit union may be removed from office by resolution at a special meeting of the persons who are entitled to vote in the election of that director.

• Marginal note:Exception

  (2) Where the holders of any class or series of shares of a bank have the exclusive right to elect one or more directors, a director so elected may be removed only by a resolution at a meeting of the shareholders of that class or series.

• Marginal note:Exception — members

  (2.1) If members of a federal credit union have the exclusive right to elect one or more directors, a director so elected may be removed only by a resolution of the members having that right.

• Marginal note:Vacancy by removal

  (3) Subject to paragraphs 168(1)(b) to (e), a vacancy created by the removal of a director may be filled at the meeting of the shareholders or members, as the case may be, at which the director is removed or, if not so filled, may be filled under section 177 or 178.