An Act to incorporate Continental Bank of Canada (S.C. 1976-77, c. 58)

Incorporation and Organization

Marginal note:Incorporation

1 There is hereby incorporated a corporation under the name Continental Bank of Canada, in English, and the name Banque Continentale du Canada, in French, hereinafter called the “Bank”, consisting of such persons as are from time to time shareholders of the Bank.

Marginal note:Provisional directors

• 2 (1) Subject to subsection (2), the persons who are the directors of IAC Limited on the coming into force of this Act are the provisional directors of the Bank, and this subsection constitutes a declaration of the names, addresses and occupations of those persons for purposes of subsection 8(1) of the Bank Act.

• Marginal note:Qualifications

  (2) A director of IAC Limited is not eligible to be a provisional director of the Bank unless he holds, as the absolute and sole owner thereof in his individual right and not as trustee or in the right of another, not less than one hundred common shares of the capital stock of IAC Limited, and the requirement in subsection 10(2) of the Bank Act that a provisional director of a bank be a subscriber for stock of that bank does not apply to a provisional director of the Bank.

Marginal note:Authorized capital

3 The authorized capital stock of the Bank shall be one hundred million dollars, divided into shares having a par value of ten dollars each.

Marginal note:Interpretation

• 4 (1) For purposes of this Act, a corporation is a subsidiary of another corporation (in this subsection called the “parent corporation”) only if it is controlled by

  • (a) the parent corporation,

  • (b) a group of two or more corporations each of which is either

    • (i) the parent corporation,

    • (ii) a corporation controlled by the parent corporation, or

    • (iii) a corporation controlled by one or more corporations that are controlled by the parent corporation, or

  • (c) a corporation described in subpararaph (b)(ii) or (b)(iii).

• Marginal note:Idem

  (2) For purposes of subsection (1), a corporation is controlled by another corporation or by two or more other corporations only if that other corporation owns, or those other corporations own, more than 50% of the issued shares having full voting rights in all circumstances of the capital stock of the first-mentioned corporation.

Marginal note:Head office

5 The head office of the Bank shall be in the Municipality of Metropolitan Toronto, in the Province of Ontario.

Marginal note:Application of Bank Act

6 This Act shall be construed to confer upon the Bank all the powers, privileges and immunities, and to subject it to all the liabilities and provisions set forth in the Bank Act, except as provided in the Bank Act or in this Act.

Marginal note:Exception to Bank Act

• 7 (1) Notwithstanding subsections 11(1) and 12(1) of the Bank Act, the provisional directors of the Bank are not required to give public notice of the opening of stock books of the Bank or of the meeting of subscribers referred to in subsection 12(1) of the Bank Act.

• Marginal note:Meetings of shareholders

  (2) Until the day on which an amalgamation under subsection 10(1) takes effect, the annual general meeting or any other meeting of the shareholders of the Bank is validly constituted notwithstanding that only the holder of a proxy of IAC Limited is present and qualified to vote thereat, and, notwithstanding section 19 of the Bank Act, no public notice of any such meeting is required.

• Marginal note:Temporary exceptions to Bank Act

  (3) During the period commencing on the day this Act comes into force and ending on the expiration of ten years next following that day or on the day on which an amalgamation under subsection 10(1) takes effect, whichever occurs first,

  • (a) IAC Limited may, notwithstanding sections 53 and 54 of the Bank Act,

    • (i) subscribe for shares of the capital stock of the Bank at not less than par value and cause to be registered in the name of IAC Limited the shares issued pursuant to such subscriptions, and

    • (ii) exercise, in person or by proxy, the voting rights pertaining to shares of the capital stock of the Bank registered in the name of IAC Limited;

  • (b) a person is not eligible to be a director of the Bank unless he holds, as the absolute and sole owner thereof in his individual right and not as trustee or in the right of another, not less that one hundred common shares of the capital stock of IAC Limited or such other number of common shares of that capital stock as the Minister of Finance may require, and, notwithstanding subsection 18(2) of the Bank Act, he is not required to hold stock of the Bank;

  • (c) notwithstanding subsection 18(7) of the Bank Act, a person is not ineligible to be elected or appointed a director of the Bank by reason of his being a director of IAC Limited or of a corporation that is a subsidiary of IAC Limited;

  • (d) paragraph 75(2)(g) of the Bank Act does not apply to the Bank; and

  • (e) the total principal amount outstanding, on the expiration of any financial year of the Bank, of all loans and advances that are made by the Bank on the security of real or immovable property of the kind described in subsection 75(4) of the Bank Act, other than loans or advances made or guaranteed under any Act of the Parliament of Canada other than the Bank Act shall not exceed the amount referred to in paragraph 75(4)(a) of that Act but may, notwithstanding that subsection, exceed the amount referred to in paragraph 75(4)(b) of that Act.

Relationship Between the Bank and IAC Limited

Marginal note:Bank as wholly-owned subsidiary

8 Until the day on which an amalgamation under subsection 10(1) takes effect,

• (a) all of the voting shares in the capital stock of the Bank from time to time outstanding shall be held in the name or right of and for the use or benefit of IAC Limited;

• (b) notwithstanding any provision of the Bank Act, IAC Limited shall cause a majority of the persons who are directors of the Bank at any time to be persons who are also directors of IAC Limited.

Marginal note:Restrictions on lending

9 The Bank shall not lend money to IAC Limited and no loan by the Bank to any corporation that is a subsidiary of IAC Limited but is not a subsidiary of the Bank shall be made, or permitted to remain outstanding, at a time when such corporation is carrying on any business, or owns any assets, that could not be carried on or owned by a chartered bank in compliance with the Bank Act, except as contemplated by Section 18.

Marginal note:Amalgamation

• 10 (1) IAC Limited and the Bank shall, within ten years after the coming into force of this Act, amalgamate in accordance with the Bank Act and, subject to subsections (4) to (6), the Bank after the amalgamation is subject in all respects to the Bank Act.

• Marginal note:Issue of shares

  (2) Notwithstanding section 110 of the Bank Act, the Bank resulting from the amalgamation under subsection (1) may issue its shares to the persons who were the registered owners of shares of IAC Limited immediately prior to the amalgamation.

• Marginal note:Application of certain provisions of the Bank Act

  (2.1) Subject to subsection (2.2), section 110.1 of the Bank Act applies to IAC Limited and in respect of the shares of IAC Limited.

• Marginal note:Exception

  (2.2) A person who immediately prior to the amalgamation under subsection (1) of this section was permitted by section 110.1 of the Bank Act to continue to hold or beneficially own shares of IAC Limited that but for subsection (2) of that section would be held or beneficially owned in contravention of paragraph (1)(a) of that section, may hold or beneficially own the shares issued to him under subsection (2) of this section after the amalgamation during the same period of time as he would have been permitted by subsection 110.1(2) of the Bank Act to continue to hold or beneficially own shares of IAC Limited had the amalgamation not occurred.

• Marginal note:Where Bank Act applies

  (3) Prior to an amalgamation under subsection (1), if there are no parties to the amalgamation other than IAC Limited, the Bank or any wholly owned subsidiary of either of them, the Governor in Council may, by order, prescribe that, notwithstanding any provision of the Bank Act, the proposed amalgamation agreement need not be submitted to the shareholders of IAC Limited.

• Marginal note:Outstanding indebtedness

  (4) Subject to subsection (6), if, when an amalgamation under subsection (1) takes effect, there is outstanding any indebtedness of IAC Limited, other that the debentures referred to in subsection (5), that is of a kind that the Bank is not permitted to incur under the Bank Act, then, notwithstanding the Bank Act, any such indebtedness incurred prior to October 28, 1975, remains outstanding after the amalgamation as indebtedness of the Bank and is binding upon and enforceable against the Bank in accordance with its terms, including any terms as to security.

• Marginal note:Exercise of rights of conversion

  (5) Subject to subsection (6), if

  • (a) an amalgamation under subsection (1) takes effect prior to July 15, 1984, and

  • (b) on the day when the amalgamation takes effect there are outstanding any debentures that carry rights of conversion into shares of IAC Limited to be issued on such conversion,

  then, notwithstanding the Bank Act, during the period from the day the amalgamation takes effect until July 15, 1984, the rights of conversion under any of those debentures that were issued prior to October 28, 1975 remain outstanding as rights of conversion into shares of the Bank and shares of the Bank may be validly issued during that period upon the exercise of the rights of conversion except that shares of the Bank may not be so issued to a person from whom a subscription for a share of the capital stock of the Bank could not, by reason of paragraphs 53(4)(a) or (b) or subsection 56(2) of the Bank Act, be accepted by the Bank.

• Marginal note:Application of subsections (4) and (5)

  (6) Subsections (4) and (5) apply to any indebtedness and any debentures referred to therein only if

  • (a) the terms thereof do not permit the debtor, at its option, to discharge the indebtedness or the debentures prior to the amalgamation, whether or not the discharge would require payment by the debtor of a premium or bonus; and

  • (b) the Minister of Finance consents to the application of those subsections to that indebtedness or those debentures upon submission to the Minister made by IAC Limited that it has attempted to arrive at alternative arrangements that would avoid the necessity of relying upon those subsections as to that indebtedness or those debentures.

• Marginal note:Undertaking to discharge indebtedness

  (7) The submission referred to in paragraph (6)(b) shall be accompanied by an undertaking to discharge the indebtedness at the first date upon which it may be discharged at the option of the debtor, whether or not upon payment of a premium or bonus.

• Marginal note:Discharge of indebtedness and debentures

  (8) Any indebtedness referred to in subsection (4) and any debentures referred to in subsection (5) that have not met the conditions set out in subsection (6) shall be discharged prior to an amalgamation under subsection (1).

• Marginal note:Effects of amalgamation

  (9) For greater certainty, all of the provisions of the Bank Act relating to the effects of an amalgamation apply to an amalgamation under subsection (1) except as provided in this section and section 11, but bonds, debentures and other evidences of indebtedness that the Bank is permitted to continue to have issued and outstanding pursuant to an order under paragraph 269(1)(d) of the Bank Act shall not be subject to this section.

• Marginal note:Confirming agreements

  (10) The Bank may enter into such agreements as may be reasonably necessary to confirm that any indebtedness to which subsection (4) applies remains outstanding after the amalgamation as indebtedness of the Bank, and that any debentures to which subsection (5) applies are convertible after the amalgamation into shares of the Bank to be issued on such conversion.

Marginal note:Continuing bank

11 The Bank shall be the continuing corporation resulting from the amalgamation of the Bank and IAC Limited referred to in subsection 10(1) so that, without limiting the generality of the foregoing,

• (a) for purposes of clause 75(4)(b)(i)(B) of the Bank Act, the Bank after the amalgamation shall be considered to have been permitted under section 13 of the Bank Act to commence business when the Bank was originally permitted under that section to commence business;

• (b) for purposes of subsections 76(3), (4) and (6) of the Bank Act, the Bank after the amalgamation shall be considered to have acquired any shares owned by IAC Limited or the Bank prior to the amalgamation, on the date when those shares were acquired by IAC Limited or the Bank, as the case may be;

• (c) for purposes of paragraph 77(6)(b) of the Bank Act, financial years of the Bank prior to the amalgamation shall be included after the amalgamation in determining the number of financial years of the Bank completed after the 31st day of October, 1965; and

• (d) except as provided in section 10, provisions of this Act applicable to IAC Limited or to the securities of IAC Limited are not applicable to the Bank or its securities after the amalgamation.

Application of the Bank Act to IAC Limited

Marginal note:Application of Bank Act

• 12 (1) Subject to section 15 of this Act, the provisions of sections 18 to 24 and 38 to 56 and subsections 158(1) and (2) of the Bank Act apply to IAC Limited and sections 38 to 56 of the Bank Act apply to the shares of IAC Limited, and for the purpose of the application of those provisions,

  • (a) references to “a bank” or “the bank” shall be construed as references to IAC Limited;

  • (b) the references in paragraph 18(2)(c) of the Bank Act to shares on which five thousand dollars, or such greater amount as the by-laws require, have been paid up, shall be construed as a reference to one hundred paid-up common shares of the capital stock of IAC Limited or such other number of those shares as the Minister of Finance may require pursuant to paragraph 7(3)(b); and

  • (c) the common shares without par value of the capital stock of IAC Limited shall be deemed to have a par value of twenty dollars or such other amount as the Minister of Finance may require.

• Marginal note:Application of other Acts

  (2) Sections 39 to 43 and 86 to 92 of the Canada Corporations Act and Part VI and sections 97, 100 to 104 and 116 of the Canada Business Corporations Act do not apply to IAC Limited, and sections 39 to 43 of the Canada Corporations Act and Part VI of the Canada Business Corporations Act to not apply to the shares of IAC Limited.

• Marginal note:By-laws of IAC Limited

  (3) By-laws of IAC Limited affecting the interpretation or application of the provisions of the Bank Act made applicable to IAC Limited and its shares by subsection (1) are properly made if made in accordance with sections 17 and 27 of the Bank Act.

• Marginal note:Investment Companies Act

  (4) To the extent that the requirements of sections 11 to 13 of the Investment Companies Act differ from those of sections 53 to 56 of the Bank Act, those sections of the Investment Companies Act do not apply to IAC Limited or to its shares but IAC Limited shall be considered for purposes of all other sections of the Investment Companies Act to be a sales finance company to or in respect of which sections 11 to 13 of the Act apply.

Marginal note:Issue of shares

13 IAC Limited shall not issue any additional shares of its capital stock unless

• (a) concurrently with the receipt by IAC Limited of the proceeds of the issue of shares, it applies an amount equal to the net cash proceeds to the purchase of shares in the capital stock of the Bank or as a contribution to the rest account of the Bank, or allocates that amount between the two applications; and

• (b) the shares are issued in accordance with the procedures, and subject to the requirements, set out in sections 33 to 35 of the Bank Act, and for that purpose references therein to “a bank” or “the bank” shall be construed as references to IAC Limited and subsection 33(1) shall be read without reference to the words “not less than par” therein;

and compliance with the procedures referred to in paragraph (b) constitutes compliance with the requirements of the Canada Corporations Act and the Canada Business Corporations Act as to the issue of shares by IAC Limited and the shares issued in compliance with those procedures constitute validly issued shares.

Marginal note:Certain investments

14 Subsections 76(6) and (7) of the Bank Act apply to the shares owned by IAC Limited in the capital stock of Sovereign Life Assurance Company of Canada and of Sovereign General Insurance Company as if IAC Limited were a bank that had acquired those shares on the day on which this Act comes into force, and a transfer of those shares to any corporation that is a subsidiary of IAC Limited does not constitute a sale or disposal for purposes of those subsections, but the ownership by IAC Limited of those shares in the capital stock of those corporations does not make section 16 applicable to those corporations.

Marginal note:Securities of IAC Limited

• 15 (1) Neither the preferred shares of IAC Limited outstanding on October 28, 1975, nor the debentures of IAC Limited outstanding on that date and carrying a right of conversion into common shares of IAC Limited, shall be considered to have been issued or to be outstanding in contravention of the Bank Act or of this Act, and shares of IAC Limited may be validly issued upon the exercise of such conversion rights notwithstanding anything contained in the Bank Act or this Act, except that shares of IAC Limited may not be so issued to a person from whom a subscription for a share could not, by reason of paragraph 53(4)(a) or (b) or subsection 56(2) of the Bank Act, be accepted by IAC Limited.

• Marginal note:Directors and officers

  (2) The persons who are the directors and officers of IAC Limited on the coming into force of this Act shall be considered to have been duly elected or appointed in accordance with sections 19 and 21 of the Bank Act.

Business of IAC Limited Pending Amalgamation

Marginal note:Prohibited activities

• 16 (1) After the effective day as defined in subsection (2), IAC Limited shall not permit any corporation, other than the Bank or a subsidiary of the Bank, while that corporation is a subsidiary of IAC Limited (any such corporation being hereinafter in this section and in sections 17 to 19 called a “restricted corporation”), to carry on any business or acquire any asset, nor shall IAC Limited carry on any business or acquire any asset, except as permitted by sections 17 and 18.

• Marginal note:Interpretation

  (2) In this section and in sections 17 and 18, effective day means

  • (a) as to a business that could be carried on or an asset that could be acquired by the Bank without contravention of the Bank Act or this Act, the day on which the Bank first carries on any of the activities referred to in subsection 75(1) of the Bank Act, or the day that is twelve months after the Bank obtains the approval of the Governor in Council to commence the business of banking, whichever occurs first; and

  • (b) as to any other business or asset, the day on which this Act comes into force.

Marginal note:Permitted activities

• 17 (1) Notwithstanding subsection 16(1), but subject to subsections (2) and (3), during the period commencing on the day this Act comes into force and ending on the expiration of ten years next following that day or on the day on which an amalgamation under subsection 10(1) takes effect, whichever occurs first,

  • (a) IAC Limited may acquire, and may permit any restricted corporation to acquire,

    • (i) assets from the Bank previously acquired by the Bank as permitted by the Bank Act (such assets and other assets which the Bank is permitted to acquire under the Bank Act being hereinafter in this section called “eligible assets”), and

    • (ii) eligible assets from IAC Limited or any restricted corporation,

  but the prior consent of the Inspector General of Banks shall be required for the acquisition of any eligible assets that consist of shares in the capital stock of a corporation, other than a corporation that is a subsidiary of IAC Limited when this Act comes into force;

  • (b) IAC Limited may acquire, and may permit any restricted corporation to acquire, assets for the purpose of leasing such assets to its customers, and IAC Limited may enter into leases of any such assets and may permit any restricted corporation to enter into leases of any such assets; and

  • (c) IAC Limited may lend money or make advances, and may permit any restricted corporation to lend money or make advances, upon the security of real or immovable property in Canada or of an equity of redemption therein or of an assignment of or mortgage on the interest of a lessee thereof where such loans or advances would not be permissible for the Bank by reason of the restrictions contained in subsections 75(3) or (4) of the Bank Act (the said loans and advances, and leases of assets referred to in paragraph (b), being hereinafter in this section referred to as “non-eligible assets”); and

  • (d) IAC Limited may acquire, and may permit any restricted corporation to acquire, non-eligible assets from any other of those corporations.

• Marginal note:Exception as to eligible assets

  (2) At no time after the effective day defined in paragraph 16(2)(a) shall the aggregate value, determined in a manner acceptable to the Inspector General of Banks, of the eligible assets held by IAC Limited and every restricted corporation be in excess of the aggregate value, so determined, of the eligible assets held by them on the effective day defined in paragraph 16(2)(a).

• Marginal note:Exceptions as to non-eligible assets

  (3) At no time after the effective day defined in paragraph 16(2)(b) shall the aggregate value, determined in a manner acceptable to the Inspector General of Banks, of the non-eligible assets held by IAC Limited and every restricted corporation, excluding those non-eligible assets that are leases, loans or advances entered into subsequent to that date pursuant to commitments with the lessees or borrowers in effect on that date, be in excess of the aggregate value, so determined, of the non-eligible assets held by them on the effective day defined in paragraph 16(2)(b).

Marginal note:Exceptions

18 For purposes of subsection 16(1), the following shall be considered not to constitute carrying on business or the acquisition of assets:

• (a) the continued ownership of assets held prior to the effective day;

• (b) the taking of all actions and the doing or executing of all deeds or documents that may be reasonably necessary in connection with the assets referred to in paragraph (a) and any other assets acquired without contravention of the Bank Act or this Act;

• (c) the deposit or temporary investment of money derived from the recovery upon or sale of assets acquired without contravention of the Bank Act or this Act, if the deposit or investment is for the purpose of preserving the money for future investments not in contravention of the Bank Act or this Act;

• (d) the making of investments, whether by way of purchase of shares or indebtedness, by IAC Limited or any restricted corporation in any other of those corporations or, subject to paragraph 8(a), in the Bank;

• (e) subject to section 9, the borrowing of money; and

• (f) matters reasonably necessary to facilitate the effective performance of the activities referred to in paragraphs (a) to (e) or otherwise permitted under this Act.

Marginal note:Protection of customers

19 A customer or other person dealing with IAC Limited or any restricted corporation is under no obligation to inquire into compliance by that corporation with sections 16 and 17, and a contravention of those sections does not affect any right or remedy otherwise available to that person.

Sanctions

Marginal note:Withdrawal of exemptions

20 If the Bank or IAC Limited or a director of the Bank or IAC Limited is, in the opinion of the Minister of Finance, in contravention of any requirement of sections 8, 9, 12, 13, 15 or 16, then the Minister may, unless that contravention is cured to his satisfaction not later than ninety days after written notice describing the contravention has been sent by prepaid registered mail by or on behalf of the Minister to the Bank, withdraw any or all of the exceptions to the Bank Act set out in subsection 7(3) of this Act or continue all or any of them on such terms and conditions as he may require.

Marginal note:Failure to amalgamate

21 If the Bank does not amalgamate with IAC Limited within ten years after this Act comes into force, the Bank shall not thereafter carry on the business of banking.

Marginal note:Offences

22 A violation of any of the provisions of the Bank Act made applicable to IAC Limited by sections 12 to 14 of this Act constitutes an offence against the Bank Act and the person committing the offence is liable to the penalties prescribed in the Bank Act for contravention of such provisions.

Other Matters

Marginal note:No approval to commence business

23 If no approval permitting the Bank to commence business is obtained by the Bank from the Governor in Council within one year after the coming into force of this Act, then, in addition to the consequences set out in subsection 15(1) of the Bank Act, the provisions of this Act that affect or restrict IAC Limited, the subsidiaries of IAC Limited or the shares of IAC Limited shall cease to have effect, except that subparagraph 7(3)(a)(ii) and paragraphs 7(3)(b) and (c) shall remain in effect for purposes of giving effect to subsections 15(2) to (9) of the Bank Act.

Marginal note:Amendment to Schedule A of Bank Act

24 Schedule A of the Bank Act is amended by adding thereto the following: