Cooperative Credit Associations Act (S.C. 1991, c. 48)

Marginal note:Meaning of total assets

400 For the purposes of sections 398 and 399, total assets, in respect of an association, has the meaning given to that expression by the regulations.

Real Property

Marginal note:Limit on total property interest

401 An association shall not, and shall not permit its prescribed subsidiaries to, purchase or otherwise acquire an interest in real property or make an improvement to any real property in which the association or any of its prescribed subsidiaries has an interest if the aggregate value of all interests of the association in real property exceeds, or the acquisition of the interest or the making of the improvement would cause that aggregate value to exceed, the prescribed percentage of the regulatory capital of the association.

Equities

Marginal note:Limits on equity acquisitions

402 An association shall not, and shall not permit its prescribed subsidiaries to,

• (a) purchase or otherwise acquire any participating shares of any body corporate or any ownership interests in any unincorporated entity, other than those of a permitted entity in which the association has, or by virtue of the acquisition would have, a substantial investment, or

• (b) acquire control of an entity that holds shares or ownership interests referred to in paragraph (a),

if the aggregate value of

• (c) all participating shares, excluding participating shares of permitted entities in which the association has a substantial investment, and

• (d) all ownership interests in unincorporated entities, other than ownership interests in permitted entities in which the association has a substantial investment,

beneficially owned by the association and its prescribed subsidiaries exceeds, or the purchase or acquisition would cause that aggregate value to exceed, the prescribed percentage of the regulatory capital of the association.

Miscellaneous

Marginal note:Regulations

403 For the purposes of this Part, the Governor in Council may make regulations

• (a) defining the interests of an association in real property;

• (b) determining the method of valuing those interests; or

• (c) exempting classes of associations from the application of sections 397 to 402.

Marginal note:Divestment order

• 404 (1) The Superintendent may, by order, direct an association to dispose of, within any period that the Superintendent considers reasonable, any loan, investment or interest made or acquired in contravention of this Part.

• Marginal note:Divestment order

  (2) If, in the opinion of the Superintendent,

  • (a) an investment by an association or any entity it controls in shares of a body corporate or in ownership interests in an unincorporated entity enables the association to control the body corporate or the unincorporated entity, or

  • (b) the association or any entity it controls has entered into an arrangement whereby it or its nominee may veto any proposal put before

    • (i) the board of directors of a body corporate, or

    • (ii) a similar group or committee of an unincorporated entity,

    or whereby no proposal may be approved except with the consent of the association, the entity it controls or the nominee,

  the Superintendent may, by order, require the association, within any period that the Superintendent considers reasonable, to do all things necessary to ensure that the association no longer controls the body corporate or unincorporated entity or has the ability to veto or otherwise defeat any proposal referred to in paragraph (b).

• Marginal note:Divestment order

  (3) If

  • (a) an association

    • (i) fails to provide or obtain within a reasonable time the undertakings referred to in subsection 392(1), (2) or (4), or

    • (ii) is in default of an undertaking referred to in subsection 392(1) or (2) and the default is not remedied within ninety days after the day of receipt by the association of a notice from the Superintendent of the default, or

  • (b) a permitted entity referred to in subsection 392(4) is in default of an undertaking referred to in subsection 392(4) and the default is not remedied within ninety days after the day of receipt by the association of a notice from the Superintendent of the default,

  the Superintendent may, by order, require the association, within any period that the Superintendent considers reasonable, to do all things necessary to ensure that the association no longer has a substantial investment in the entity to which the undertaking relates.

• Marginal note:Exception

  (4) Subsection (2) does not apply in respect of an entity in which an association has a substantial investment permitted by this Part.

Marginal note:Deemed temporary investment

405 If an association controls or has a substantial investment in an entity as permitted by this Part and the association becomes aware of a change in the business or affairs of the entity that, if the change had taken place before the acquisition of control or of the substantial investment, would have caused the entity not to be a permitted entity or would have been such that approval for the acquisition would have been required under subsection 390(5) or (6), the association is deemed to have acquired, on the day the association becomes aware of the change, a temporary investment in respect of which section 393 applies.

Marginal note:Asset transactions

• 406 (1) An association shall not, and shall not permit its subsidiaries to, without the approval of the Superintendent, acquire assets from a person or transfer assets to a person if

  A + B > C

  where

  A

  is the value of the assets;

  B

  is the total value of all assets that the association and its subsidiaries acquired from or transferred to that person in the twelve months ending immediately before the acquisition or transfer; and

  C

  is ten per cent of the total value of the assets of the association, as shown in the last annual statement of the association prepared before the acquisition or transfer.

• Marginal note:Approval of series of transactions

  (1.1) The Superintendent may, for the purposes of subsection (1), approve a transaction or series of transactions relating to the acquisition or transfer of assets that may be entered into with a person, or with persons of any class of persons, regardless of whether those persons are known at the time of the granting of the approval or not.

• Marginal note:Exception

  (2) Subsection (1) does not apply in respect of a transaction or series of transactions between an association and a member of the association.

• Marginal note:Exception

  (3) Subsection (1) does not apply in respect of

  • (a) an asset that is a debt obligation referred to in subparagraphs (b)(i) to (vi) of the definition commercial loan in subsection 386(1);

  • (b) assets acquired or transferred under a transaction or series of transactions by an association with another financial institution as a result of the association’s participation in one or more syndicated loans with that financial institution;

  • (c) assets purchased or sold under a sale agreement that is approved by the Minister under section 233.5;

  • (d) shares of, or ownership interests in, an entity for which the approval of the Minister under Part VIII or subsection 390(5) is required or the approval of the Superintendent under subsection 390(6) is required;

  • (e) assets, other than real property, acquired or disposed of under an arrangement that has been approved by the Superintendent under subsection 418(3); or

  • (f) assets acquired or disposed of with the approval of the Superintendent under subsection 418(3.1).

• (4) [Repealed, 2007, c. 6, s. 176]

• Marginal note:Value of assets

  (5) For the purposes of “A” in subsection (1), the value of the assets is

  • (a) in the case of assets that are acquired, the purchase price of the assets or, if the assets are shares of, or ownership interests in, an entity the assets of which will be included in the annual statement of the association after the acquisition, the fair market value of the assets; and

  • (b) in the case of assets that are transferred, the value of the assets as reported in the last annual statement of the association prepared before the transfer or, if the value of the assets is not reported in that annual statement, the value of the assets as it would be reported in the annual statement of the association if the annual statement had been prepared, in accordance with the accounting principles referred to in subsection 292(4), immediately before the transfer.

• Marginal note:Total value of all assets

  (6) For the purposes of subsection (1), the total value of all assets that the association or any of its subsidiaries has acquired during the period of twelve months referred to in subsection (1) is the purchase price of the assets or, if the assets are shares of, or ownership interests in, an entity the assets of which immediately after the acquisition were included in the annual statement of the association, the fair market value of the assets of the entity at the date of the acquisition.

• Marginal note:Total value of all assets

  (7) For the purposes of subsection (1), the total value of all assets that the association or any of its subsidiaries has transferred during the 12-month period referred to in subsection (1) is the total of the value of each of those assets as reported in the last annual statement of the association prepared before the transfer of the asset or, if the value of any of those assets is not reported in that annual statement, as it would be reported in the annual statement of the association if the annual statement had been prepared, in accordance with the accounting principles referred to in subsection 292(4), immediately before the transfer of the asset.

Marginal note:Transitional

407 Nothing in this Part requires

• (a) the termination of a loan made before February 7, 2001;

• (b) the termination of a loan made after that date as a result of a commitment made before that date;

• (c) the disposal of an investment made before that date; or

• (d) the disposal of an investment made after that date as a result of a commitment made before that date.

But if the loan or investment would be precluded or limited by this Part, the amount of the loan or investment may not, except as provided in subsections 393(2), 394(3) and 395(3), be increased after that date.

Marginal note:Saving

408 A loan or investment referred to in section 407 is deemed not to be prohibited by the provisions of this Part.

PART XIAdequacy of Capital and Liquidity

Marginal note:Adequacy of capital and liquidity

• 409 (1) An association shall, in relation to its operations, maintain

  • (a) adequate capital, and

  • (b) adequate and appropriate forms of liquidity,

  and shall comply with any regulations in relation thereto.

• Marginal note:Regulations and guidelines

  (2) The Governor in Council may make regulations and the Superintendent may make guidelines respecting the maintenance by associations of adequate capital and adequate and appropriate forms of liquidity.

• Marginal note:Directives

  (3) Notwithstanding that an association is complying with regulations or guidelines made under subsection (2), the Superintendent may, by order, direct the association

  • (a) to increase its capital; or

  • (b) to provide additional liquidity in such forms and amounts as the Superintendent may require.

• Marginal note:Compliance

  (4) An association shall comply with an order made under subsection (3) within such time as the Superintendent specifies therein.

• Marginal note:Notice of value

  (5) Where an appraisal of any asset held by an association or any of its subsidiaries has been made by the Superintendent and the value determined by the Superintendent to be the appropriate value of the asset varies materially from the value placed by the association or subsidiary on the asset, the Superintendent shall send to the association, the auditor of the association and the audit committee of the association a written notice of the appropriate value of the asset as determined by the Superintendent.

PART XIISelf-dealing

Interpretation and Application

Definition of senior officer

409.1 For the purposes of this Part, a senior officer of a body corporate is a person who is

• (a) a director of the body corporate who is a full-time employee of the body corporate;

• (b) the chief executive officer, chief operating officer, president, secretary, treasurer, controller, chief financial officer, chief accountant, chief auditor or chief actuary of the body corporate;

• (c) a natural person who performs functions for the body corporate similar to those performed by a person referred to in paragraph (b);

• (d) the head of the strategic planning unit of the body corporate;

• (e) the head of the unit of the body corporate that provides legal services or human resources services to the body corporate; or

• (f) any other officer reporting directly to the body corporate’s board of directors, chief executive officer or chief operating officer.

Marginal note:Related party of association

• 410 (1) For the purposes of this Part, a person is a related party of an association where the person

  • (a) is a person, other than a member, who has a significant interest in a class of shares of the association;

  • (b) is a director or senior officer of the association or of a body corporate that controls the association;

  • (c) is the spouse or common-law partner, or a child who is less than eighteen years of age, of a person described in paragraph (a) or (b);

  • (d) is an entity that is controlled by a person referred to in any of paragraphs (a) to (c);

  • (d.1) is an entity in which a person who controls the association has a substantial investment; or

  • (e) is a person, or a member of a class of persons, designated under subsection (2) or (3) as, or deemed under subsection (4) to be, a related party of the association.

  • (f) and (g) [Repealed, 1997, c. 15, s. 151]

• Marginal note:Related party of retail association

  (1.1) Subject to the regulations, for the purposes of this Part, a person is a related party of a retail association if the person is

  • (a) a member of the association or of an association that controls, or has a significant interest in, the association;

  • (b) a director or senior officer of the association or of a body corporate that controls the association;

  • (c) the spouse or common-law partner, or a child who is less than eighteen years of age, of a person referred to in paragraph (a) or (b);

  • (d) an entity that is controlled, within the meaning of section 3, determined without regard to paragraph 3(1)(e), by a person referred to in any of paragraphs (a) to (c); or

  • (e) a person, or a member of a class of persons, designated under subsection (2) or (3) as, or deemed under subsection (4) to be, a related party of the association.

• Marginal note:Exception — subsidiaries and substantial investments of associations

  (1.2) If an entity in which an association has a substantial investment would, but for this subsection, be a related party of the association only because a person who controls the association controls the entity or has a substantial investment in the entity, and the person does not control the entity or have a substantial investment in the entity otherwise than through the person’s controlling interest in the association, the entity is not a related party of the association.

• Marginal note:Designated related party

  (2) For the purposes of this Part, the Superintendent may, with respect to a particular association, designate as a related party of the association any person or class of persons whose direct or indirect interest in or relationship with the association or a related party of the association might reasonably be expected to affect the exercise of the best judgment of the association in respect of a transaction.

• Marginal note:Idem

  (3) Where a person is designated as a related party of an association pursuant to subsection (2), the Superintendent may also designate any entity in which the person has a substantial investment and any entity controlled by such an entity to be a related party of the association.

• Marginal note:Deemed related party

  (4) Where, in contemplation of a person becoming a related party of an association, the association enters into a transaction with the person, the person is deemed for the purposes of this Part to be a related party of the association in respect of that transaction.

• Marginal note:Exemption

  (5) The Superintendent may, by order, designate a class of non-voting shares of an association for the purpose of this subsection. If a class of non-voting shares of an association is so designated, a person is deemed, notwithstanding paragraph (1)(a), not to be a related party of the association if the person would otherwise be a related party of the association only because the person has a significant interest in that class.

• Marginal note:Determination of control

  (6) For the purposes of paragraph (1)(d), “controlled” means “controlled, within the meaning of section 3, determined without regard to paragraph 3(1)(e)”.

• (7) [Repealed, 1997, c. 15, s. 151]