Investment Limits (Cooperative Credit Associations) Regulations (SOR/2001-395)

Indirect Interests — Secured Loans and Debt Obligations

Marginal note:Certain indirect interests

• 11 (1) If an association or a designated entity controlled by an association makes a loan to, or beneficially owns or guarantees the debt obligation of, a third party, the loan or debt obligation is an interest of the association in real property if it is secured by

  • (a) real property beneficially owned by a third party in conjunction with

    • (i) the association,

    • (ii) the designated entity,

    • (iii) a related real property entity of the association,

    • (iv) a securities dealer or insurance company controlled by the association,

    • (v) an entity controlled by a securities dealer or insurance company referred to in subparagraph (iv), or

    • (vi) a real property entity described in subparagraph 10(1)(c)(i) or (ii); or

  • (b) shares or ownership interests beneficially owned by a third party in

    • (i) an entity that beneficially owns real property in conjunction with the association, a related real property entity of the association or a designated entity controlled by the association, or

    • (ii) a related real property entity of the association.

• Marginal note:Value of those interests

  (2) The value of the interests of an association in real property is

  • (a) in respect of a loan or debt obligation that is secured by real property referred to in paragraph (1)(a), the lesser of

    • (i) the net realizable value of the third party’s interest in the real property at the time that the security interest was given, and

    • (ii) the amount determined by the formula

      A - B

      where

      A

      is

      • (A) if the loan was made by the association or a designated entity controlled by the association or the debt obligation is beneficially owned by the association or a designated entity controlled by the association, the book value of the loan or debt obligation, or

      • (B) if the debt obligation is guaranteed by the association or a designated entity controlled by the association, the face value of the guarantee, and

      B

      is the total net realizable value of any other security interests that were given for the loan or debt obligation;

  • (b) in respect of a loan or debt obligation that is secured by shares or ownership interests beneficially owned by a third party in an entity referred to in subparagraph (1)(b)(i), the lesser of

    • (i) the net realizable value of the third party’s interest in those shares or ownership interests at the time that the security interest was given, and

    • (ii) the amount determined by the formula

      A - (B - (C × D/E))

      where

      A

      is

      • (A) if the loan was made by the association or a designated entity controlled by the association or the debt obligation is beneficially owned by the association or a designated entity controlled by the association, the book value of the loan or debt obligation, or

      • (B) if the debt obligation is guaranteed by the association or a designated entity controlled by the association, the face value of the guarantee,

      B

      is the total net realizable value of all security interests that were given for the loan or debt obligation,

      C

      is the net realizable value of the entity’s interest in the real property referred to in subparagraph (1)(b)(i),

      D

      is the value of the shares or ownership interests that are given as the security interest, and

      E

      is the total value of the outstanding shares or ownership interests in the entity; and

  • (c) in respect of a loan or debt obligation that is secured by shares or ownership interests beneficially owned by a third party in a related real property entity referred to in subparagraph (1)(b)(ii), the lesser of

    • (i) the net realizable value of the third party’s interest in those shares or ownership interests at the time that the security interest was given, and

    • (ii) the amount determined by the formula

      A - B

      where

      A

      is

      • (A) if the loan was made by the association or a designated entity controlled by the association or the debt obligation is beneficially owned by the association or a designated entity controlled by the association, the book value of the loan or debt obligation, or

      • (B) if the debt obligation is guaranteed by the association or a designated entity controlled by the association, the face value of the guarantee, and

      B

      is the total net realizable value of any other security interests that were given for the loan or debt obligation.

Other Interests

Marginal note:Other interests

• 12 (1) The following are interests of an association in real property:

  • (a) a guarantee given by the association, or by a designated entity controlled by the association, to an entity other than the association or designated entity for the purpose of completing the development of real property that is beneficially owned by

    • (i) the association,

    • (ii) a designated entity controlled by the association, or

    • (iii) a related real property entity of the association; and

  • (b) an agreement made by the association, or by a designated entity controlled by the association, to support a third party’s cost of operating or financing real property that is beneficially owned by

    • (i) the association,

    • (ii) a designated entity controlled by the association, or

    • (iii) a related real property entity of the association.

• Marginal note:Value of those interests

  (2) The value of the interests of an association in real property is

  • (a) in respect of a guarantee referred to in paragraph (1)(a), the estimated cost of completing the development of the real property; and

  • (b) in respect of an agreement referred to in paragraph (1)(b), the amount of any funds advanced by the association, or by a designated entity controlled by the association, under the agreement.

Repeals

Marginal note:Repeal

13 [Repeal]

Marginal note:Repeal

14 [Repeal]

Coming into Force

Marginal note:Coming into force

Footnote ^*15 These Regulations come into force on the day on which sections 389 and 403 of the Cooperative Credit Associations Act, as enacted by section 314 of the Financial Consumer Agency of Canada Act, chapter 9 of the Statutes of Canada, 2001, come into force.

• Return to footnote ^*[Note: Regulations in force October 24, 2001, see SI/2001-102.]