Guidelines Respecting Control in Fact for the Purpose of Subsection 377(1) of the Bank Act (SOR/2002-163)

Interpretation

Marginal note:Definitions

1 The following definitions apply in these Guidelines.

Act

Act means the Bank Act. (Loi)

senior officer

senior officer has the same meaning as in section 485.1 of the Act. (cadre dirigeant)

Application

Marginal note:Guidelines

2 These Guidelines apply for the purposes of subsection 377(1) of the Act in respect of an application referred to in subsection 396(2) of the Act.

Control in Fact

Marginal note:Determination

3 In determining whether a transaction referred to in subsection 396(2) of the Act would, if approved, result in a contravention of subsection 377(1) of the Act, the policy objectives set out in section 4 must be considered.

Marginal note:Policy objectives

4 The following policy objectives must be considered for the purpose of a determination referred to in section 3, taking into account the factors set out in section 5:

• (a) the preservation of the benefits of the ownership rules applicable to banks in respect of which subsection 377(1) of the Act applies, which may be the subject of an application referred to in subsection 396(2) of the Act, including

  • (i) maintaining a high degree of transparency and market oversight over banks,

  • (ii) lessening the risk of distortions by banks in their credit allocation that may result from links with investors, and

  • (iii) enhancing the safety and soundness of the banks;

• (b) allowing banks to manage their day-to-day operations and to develop their strategic visions by taking into account their best interests, as opposed to the best interests of any single shareholder or any group of shareholders; and

• (c) allowing investors in banks to exercise the degree of influence necessary to gain the benefits of their investments, including allowing them to account for their investments using the equity accounting method in accordance with generally accepted accounting principles.

Marginal note:Factors

• 5 (1) The factors referred to in section 4 are the following:

  • (a) the number, type and distribution of securities of the bank or any subsidiary of the bank, and the rights, privileges or features attached to the securities;

  • (b) the value of the equity and the number and type of securities of the bank or any subsidiary of the bank, that the applicant has or proposes to acquire, and the rights, privileges or features attached to those securities;

  • (c) the involvement of the applicant, any significant shareholder of the bank or any significant shareholder of any subsidiary of the bank, in the business of the bank or subsidiary, and their knowledge or expertise in financial services or in areas relevant to the operations of the bank;

  • (d) the relationships, agreements, understandings or arrangements

    • (i) amongst the significant shareholders of the bank or amongst the significant shareholders of any subsidiary of the bank,

    • (ii) between the applicant and shareholders of the bank or between the applicant and shareholders of any subsidiary of the bank, and

    • (iii) between the applicant and any person in relation to securities of the bank;

  • (e) the composition and structure of the board of directors, any committees of the board of directors or any senior management committees of the bank or any subsidiary of the bank, and the voting arrangements of the board and those committees;

  • (f) whether shareholders, directors or senior officers of the bank or any subsidiary of the bank, are also shareholders, directors or senior officers of the applicant;

  • (g) the existence of family relationships between the applicant’s directors and senior officers and the directors and senior officers of the bank or any subsidiary of the bank;

  • (h) the ability of persons, including the applicant, to nominate, appoint or veto the appointment of directors, members of committees of the board of directors or senior officers of the bank or any subsidiary of the bank;

  • (i) the ability of persons, including the applicant, in respect of the board of directors, any committee of the board of directors or any senior management committee of the bank or any subsidiary of the bank, to

    • (i) require that prior to the placement of a proposal before that board or committee, as the case may be, the applicant consent to the placement of the proposal, or

    • (ii) veto a proposal put before that board or committee;

  • (j) the ability of persons, including the applicant, to determine or veto day-to-day operations, business plans, significant capital expenditures, dividend policy or the issuance of securities of the bank or any subsidiary of the bank;

  • (k) the material terms and conditions of any agreement or arrangement between the applicant and the bank or between the applicant and any subsidiary of the bank;

  • (l) the existence of any dependency of the bank or any subsidiary of the bank, on the applicant created by an agreement or other arrangement between them;

  • (m) any linkages between the applicant and an entity on which the bank has a dependency by reason of an agreement or other arrangement between the bank and the entity;

  • (n) representations about control of the bank by the applicant made by the applicant to any agency or body that regulates or supervises financial institutions; and

  • (o) any other relevant factor that is related to any of the policy objectives set out in section 4.

• Marginal note:Significant shareholder

  (2) For the purpose of subsection (1), a person is a significant shareholder of an entity if the aggregate of shares of a class beneficially owned by the person and any shares of that class beneficially owned by entities controlled by the person exceeds 10% of all of the outstanding shares of that class of shares of the entity.

Coming into Force

Marginal note:Coming into force

6 These Guidelines come into force on the day on which they are registered.