Trust and Loan Companies Act (S.C. 1991, c. 45)

PART IXInvestments

Definitions and Application

Marginal note:Definitions

• 449 (1) The following definitions apply in this Part.

  business growth fund

  business growth fund means Canadian Business Growth Fund (GP) Inc., a corporation incorporated under the Canada Business Corporations Act. (fonds de croissance des entreprises)

  closed-end fund

  closed-end fund means an entity whose activities are limited to investing the funds of the entity so as to provide investment diversification and professional investment management to the holders of its securities, and whose securities are

  • (a) fixed in number and distributed to the public in an offering under a preliminary prospectus, prospectus, short-form prospectus or similar document in accordance with the laws of a province or a foreign jurisdiction;

  • (b) traded on an exchange or an over-the-counter market; and

  • (c) liquidated on a fixed future termination date, the proceeds of which are allocated to the holders of the securities on a proportional basis. (fonds d’investissement à capital fixe)

  commercial loan

  commercial loan means

  • (a) any loan made or acquired by a company, other than

    • (i) a loan to a natural person in an amount of two hundred and fifty thousand dollars or less,

    • (ii) a loan to the Government of Canada, the government of a province, a municipality, or to any agency thereof, or to the government of a foreign country or any political subdivision thereof, or any agency thereof, or to a prescribed international agency,

    • (iii) a loan that is guaranteed by, or fully secured by securities issued by, a government, a municipality or an agency referred to in subparagraph (ii),

    • (iv) a loan that is secured by a mortgage on real property, if

      • (A) the mortgage is on residential property and the amount of the loan, together with the amount then outstanding of any mortgage having an equal or prior claim against the property, does not exceed 80% of the value of the property at the time the loan is made or acquired, or

      • (B) the mortgage is on real property other than residential property and

        • (I) the amount of the loan, together with the amount then outstanding of any mortgage having an equal or prior claim against the property, does not exceed 80% of the value of the property at the time the loan is made or acquired, and

        • (II) at the time the loan is made or acquired, the property provides an annual income sufficient to pay all annual expenses related to the property, including the payments owing under the mortgage and the mortgages having an equal or prior claim against the property,

    • (v) a loan that is secured by a mortgage on real property, if

      • (A) the mortgage is on residential property and

        • (I) the amount of the loan, together with the amount then outstanding of any mortgage having an equal or prior claim against the property, exceeds 80% of the value of the property at the time the loan is made or acquired, and

        • (II) repayment of the amount of the loan that exceeds 80% of the value of the property is guaranteed or insured by a government agency or private insurer approved by the Superintendent,

      • (B) the mortgage is on real property other than residential property and

        • (I) the amount of the loan, together with the amount then outstanding of any mortgage having an equal or prior claim against the property, exceeds 80% of the value of the property at the time the loan is made or acquired,

        • (II) repayment of the amount of the loan that exceeds 80% of the value of the property is guaranteed or insured by a government agency or private insurer approved by the Superintendent, and

        • (III) at the time the loan is made or acquired, the property provides an annual income sufficient to pay all annual expenses related to the property, including the payments owing under the mortgage and the mortgages having an equal or prior claim against the property, or

      • (C) the loan is one referred to in paragraph 418(2)(d),

    • (vi) a loan that

      • (A) consists of a deposit made by the company with another financial institution,

      • (B) is fully secured by a deposit with any financial institution, including the company,

      • (C) is fully secured by debt obligations guaranteed by any financial institution other than the company, or

      • (D) is fully secured by a guarantee of a financial institution other than the company, or

    • (vii) a loan to an entity controlled by the company;

  • (b) an investment in debt obligations, other than

    • (i) debt obligations that are

      • (A) guaranteed by any financial institution other than the company,

      • (B) fully secured by deposits with any financial institution, including the company, or

      • (C) fully secured by debt obligations that are guaranteed by any financial institution other than the company,

    • (ii) debt obligations issued by the Government of Canada, the government of a province, a municipality, or by any agency thereof, or by the government of a foreign country or any political subdivision thereof, or by any agency thereof, or by a prescribed international agency,

    • (iii) debt obligations that are guaranteed by, or fully secured by securities issued by, a government, a municipality or an agency referred to in subparagraph (ii),

    • (iv) debt obligations that are widely distributed, as that expression is defined by the regulations, or

    • (v) debt obligations of an entity controlled by the company; and

  • (c) an investment in shares of a body corporate or ownership interests in an unincorporated entity, other than

    • (i) shares or ownership interests that are widely distributed, as that expression is defined by the regulations,

    • (ii) shares or ownership interests of an entity controlled by the company, or

    • (iii) participating shares. (prêt commercial)

  factoring entity

  factoring entity means a factoring entity as defined in the regulations. (entité s’occupant d’affacturage)

  finance entity

  finance entity means a finance entity as defined in the regulations. (entité s’occupant de financement)

  financial leasing entity

  financial leasing entity means an entity

  • (a) the activities of which are limited to the financial leasing of personal property and such related activities as are prescribed and whose activities conform to such restrictions and limitations thereon as are prescribed; and

  • (b) that, in conducting the activities referred to in paragraph (a) in Canada, does not

    • (i) direct its customers or potential customers to particular dealers in the leased property or the property to be leased,

    • (ii) enter into lease agreements with persons in respect of any motor vehicle having a gross vehicle weight, as that expression is defined by the regulations, of less than twenty-one tonnes, or

    • (iii) enter into lease agreements with natural persons in respect of personal household property, as that expression is defined by the regulations. (entité s’occupant de crédit-bail)

  loan

  loan includes an acceptance, endorsement or other guarantee, a deposit, a financial lease, a conditional sales contract, a repurchase agreement and any other similar arrangement for obtaining funds or credit but does not include investments in securities. (prêt ou emprunt)

  motor vehicle

  motor vehicle means a motorized vehicle designed to be used primarily on a public highway for the transportation of persons or things, but does not include

  • (a) a fire-engine, bus, ambulance or utility truck; or

  • (b) any other special purpose motorized vehicle that contains significant special features that make it suitable for a specific purpose. (véhicule à moteur)

  mutual fund distribution entity

  mutual fund distribution entity means an entity whose principal activity is acting as a selling agent of units, shares or other interests in a mutual fund and acting as a collecting agent in the collection of payments for any such interests if

  • (a) the proceeds of the sales of any such interests, less any sales commissions and service fees, are paid to the mutual fund; and

  • (b) the existence of a sales commission and service fee in respect of the sale of any such interest is disclosed to the purchaser of the interest before the purchase of the interest. (courtier de fonds mutuels)

  mutual fund entity

  mutual fund entity means an entity

  • (a) whose activities are limited to the investing of the funds of the entity so as to provide investment diversification and professional investment management to the holders of its securities; and

  • (b) whose securities entitle their holders to receive, on demand, or within a specified period after demand, an amount computed by reference to the value of a proportionate interest in the whole or in a part of its net assets, including a separate fund or trust account of the entity. (entité s’occupant de fonds mutuels)

  participating share

  participating share means a share of a body corporate that carries the right to participate in the earnings of the body corporate to an unlimited degree and to participate in a distribution of the remaining property of the body corporate on dissolution. (action participante)

  permitted entity

  permitted entity means an entity in which a company is permitted to acquire a substantial investment under section 453. (entité admissible)

  prescribed subsidiary

  prescribed subsidiary means a subsidiary that is one of a prescribed class of subsidiaries. (filiale réglementaire)

  specialized financing entity

  specialized financing entity means a specialized financing entity as defined in the regulations. (entité s’occupant de financement spécial)

• Marginal note:Members of a company’s group

  (2) For the purpose of this Part, a member of a company’s group is any of the following:

  • (a) an entity referred to in any of paragraphs 453(1)(a) to (f) that controls the company;

  • (b) a subsidiary of the company or of an entity referred to in any of paragraphs 453(1)(a) to (f) that controls the company;

  • (c) an entity in which the company, or an entity referred to in any of paragraphs 453(1)(a) to (f) that controls the company, has a substantial investment; or

  • (d) a prescribed entity in relation to the company.

• Marginal note:Non-application of Part

  (3) This Part does not apply in respect of

  • (a) money or other assets held in trust by a company, other than guaranteed trust money and assets held in respect thereof;

  • (b) the holding of a security interest in real property, unless the security interest is prescribed pursuant to paragraph 467(a) to be an interest in real property; or

  • (c) the holding of a security interest in securities of an entity.

General Constraints on Investments

Marginal note:Investment standards

450 The directors of a company shall establish and the company shall adhere to investment and lending policies, standards and procedures that a reasonable and prudent person would apply in respect of a portfolio of investments and loans to avoid undue risk of loss and obtain a reasonable return.

Marginal note:Limit — business growth fund

• 450.1 (1) The aggregate value of all ownership interests in the business growth fund and the entities that the business growth fund controls that a company and its subsidiaries hold must not exceed $200,000,000.

• Marginal note:Application

  (2) For the purposes of subsection (1), the value of an ownership interest is determined by the amount paid for it at the time of its issuance.

Marginal note:Restriction on control and substantial investments

• 451 (1) Subject to subsections (2) to (4.4), no company shall acquire control of, or hold, acquire or increase a substantial investment in, any entity other than a permitted entity.

• Marginal note:Exception: indirect investments

  (2) A company may, subject to Part XI, acquire control of, or acquire or increase a substantial investment in, an entity other than a permitted entity by way of

  • (a) an acquisition of control of an entity referred to in any of paragraphs 453(1)(a) to (j), or of a prescribed entity, that controls or has a substantial investment in the entity; or

  • (b) an acquisition of shares or ownership interests in the entity by

    • (i) an entity referred to in any of paragraphs 453(1)(a) to (j), or a prescribed entity, that is controlled by the company, or

    • (ii) an entity controlled by an entity referred to in any of paragraphs 453(1)(a) to (j), or a prescribed entity, that is controlled by the company.

• Marginal note:Exception: temporary investments, realizations and loan workouts

  (3) A company may, subject to Part XI, acquire control of, or acquire or increase a substantial investment in, an entity by way of

  • (a) a temporary investment permitted by section 456;

  • (b) an acquisition of shares of a body corporate or of ownership interests in an unincorporated entity permitted by section 457; or

  • (c) a realization of security permitted by section 458.

• Marginal note:Exception: specialized financing regulations

  (4) A company may, subject to Part XI, acquire control of, or hold, acquire or increase a substantial investment in, an entity other than a permitted entity if it does so in accordance with regulations made under paragraph 452(d) concerning specialized financing.

• Marginal note:Business growth fund

  (4.1) Subject to section 450.1, subsections (4.2) to (4.4) and Part XI, a company may hold, acquire or increase a substantial investment in the business growth fund or any entity that the business growth fund controls.

• Marginal note:For greater certainty

  (4.2) For greater certainty, a company is prohibited from acquiring control of the business growth fund or any entity that the business growth fund controls.

• Marginal note:Prohibition — entity

  (4.3) A company is prohibited from holding or acquiring a substantial investment in the business growth fund or any entity that the business growth fund controls if the business growth fund or any entity that the business growth fund controls holds or acquires shares of, or other ownership interests in, any of the following entities, or in any entity that controls any of the following entities:

  • (a) an entity referred to in any of paragraphs 453(1)(a) to (j);

  • (b) an entity that is primarily engaged in the leasing of motor vehicles in Canada for the purpose of extending credit to a customer or financing a customer’s acquisition of a motor vehicle;

  • (c) an entity that is primarily engaged in providing temporary possession of personal property, including motor vehicles, to customers in Canada for a purpose other than to finance the customer’s acquisition of the property;

  • (d) an entity that acts as an insurance broker or agent in Canada; or

  • (e) an entity that is engaged in any prescribed activity.

• Marginal note:Prohibition — capital and loans

  (4.4) A company is prohibited from holding or acquiring a substantial investment in the business growth fund or any entity that the business growth fund controls if the business growth fund or any entity that the business growth fund controls holds shares of, or other ownership interests in, an entity or holds a loan made to an entity and, in respect of that entity and its affiliates, the aggregate value of the following exceeds $100,000,000:

  • (a) all ownership interests that are held by the company, the company’s subsidiaries, the business growth fund or the entities that the business growth fund controls, the value of those ownership interests as determined by the amount paid for them at the time each was first acquired by any of those entities; and

  • (b) the outstanding principal of all loans held by the business growth fund or the entities that the business growth fund controls.

• Marginal note:Exception: uncontrolled event

  (5) A company is deemed not to contravene subsection (1) if the company acquires control of, or acquires or increases a substantial investment in, an entity solely as the result of an event not within the control of the company.

• Marginal note:Non-application of subsection (2)

  (5.1) No company shall, under subsection (2), acquire control of, or acquire or increase a substantial investment in, an entity referred to in paragraph 453(1)(j).

• Marginal note:Holding

  (5.2) If a company holds a substantial investment in an entity referred to in paragraph 453(1)(j) that it acquired or increased under subsection (2) before the coming into force of subsection (5.1), the company may continue to hold that substantial investment.

• Marginal note:Application of other provision

  (6) Despite having acquired control of, or a substantial investment in, an entity under a particular provision of this Part, a company may continue to control the entity or hold the substantial investment in the entity as though it had made the acquisition under another provision of this Part so long as the conditions of that other provision are met.

• Marginal note:Timing of deemed acquisition

  (7) If a company decides to exercise its right under subsection (6), the company is deemed to be acquiring the control or the substantial investment under the other provision.