Investments in Associations and Cooperatively-owned Entities Regulations (SOR/2003-301)

Interpretation

Marginal note:Definitions

1 The definitions in this section apply in these Regulations.

Act

Act means the Cooperative Credit Associations Act. (Loi)

designated entity

designated entity means

• (a) an entity referred to in any of paragraphs 390(1)(a) to (h) of the Act;

• (b) an entity whose business includes one or more of the activities referred to in paragraph 390(2)(a) of the Act and that engages, as part of its business, in any financial intermediary activity that exposes the entity to material market or credit risk, including a factoring entity, a finance entity or a financial leasing entity; or

• (c) an entity whose business includes an activity referred to in paragraph 390(2)(b) of the Act, including a specialized financing entity, other than an entity in which an association is permitted to acquire or increase a substantial investment under subparagraph 390(4)(c)(iii) of the Act. (entité désignée)

value

value means

• (a) in respect of a share, ownership interest or loan held by an association at a particular time, the book value of the share, ownership interest or loan that would be reported on the balance sheet of the association prepared as at that time in accordance with the accounting principles and specifications of the Superintendent referred to in subsection 292(4) of the Act; and

• (b) in respect of a guarantee, the face value of the guarantee. (valeur)

General

Marginal note:Non-application

• 2 (1) Subsection 390(4) of the Act does not apply with respect to an association’s acquisition or increase of a substantial investment in a designated entity, other than an entity referred to in paragraph 390(1)(a) of the Act, that is controlled by another association.

• Marginal note:Loss of control — rights and obligations

  (2) If the designated entity ceases to be controlled by another association, the association that has acquired or increased a substantial investment in the designated entity

  • (a) may, if the total value of the following does not exceed 50% of the association’s regulatory capital, continue to hold the substantial investment, namely,

    • (i) all shares and ownership interests beneficially owned by the association, and all shares and ownership interests beneficially owned by entities controlled by the association, in designated entities in which the association has a substantial investment but over which it does not exercise control,

    • (ii) all loans held by the association, and all loans held by entities controlled by the association, that were made to designated entities in which the association has a substantial investment but over which it does not exercise control, other than loans to designated entities that are not foreign institutions and that are deemed to be controlled by a group of associations, and

    • (iii) all outstanding guarantees given by the association, and all outstanding guarantees given by entities controlled by the association, on behalf of designated entities in which the association has a substantial investment but over which it does not exercise control; and

  • (b) shall, if the total value referred to in paragraph (a) exceeds 50% of the association’s regulatory capital,

    • (i) without delay notify the Superintendent that the designated entity in which the association has a substantial investment has ceased to be controlled by another association, and that the total value referred to in paragraph (a) exceeds 50% of the association’s regulatory capital, and

    • (ii) within two years after the loss of control referred to in subparagraph (i), do all things necessary to ensure that the association no longer has a substantial investment in the designated entity.

Marginal note:Non-application

• 3 (1) Subsection 390(4) of the Act does not apply with respect to an association’s acquisition or increase of a substantial investment in an entity referred to in paragraph 390(1)(a) of the Act if the entity is, or would as a result of the investment be, controlled by a group of associations.

• Marginal note:Loss of group control — rights and obligations

  (2) If the entity referred to in paragraph 390(1)(a) of the Act ceases to be controlled by a group of associations, the association that has acquired or increased a substantial investment in the entity

  • (a) may, if the total value of the following does not exceed 50% of its regulatory capital, continue to hold the substantial investment, namely,

    • (i) all shares and ownership interests beneficially owned by the association, and all shares and ownership interests beneficially owned by entities controlled by the association, in designated entities in which the association has a substantial investment but over which it does not exercise control,

    • (ii) all loans held by the association, and all loans held by entities controlled by the association, that were made to designated entities in which the association has a substantial investment but over which it does not exercise control, other than loans to designated entities that are not foreign institutions and that are deemed to be controlled by a group of associations, and

    • (iii) all outstanding guarantees given by the association, and all outstanding guarantees given by entities controlled by the association, on behalf of designated entities in which the association has a substantial investment but over which it does not exercise control; and

  • (b) shall, if the total value referred to in paragraph (a) exceeds 50% of its regulatory capital,

    • (i) without delay notify the Superintendent that the entity has ceased to be controlled by a group of associations, and that the total value referred to in paragraph (a) exceeds 50% of the association’s regulatory capital, and

    • (ii) within two years after the loss of control referred to in subparagraph (i), do all things necessary to ensure that the association no longer has a substantial investment in the entity.

Marginal note:Meaning of “control”

• 4 (1) For the purposes of subparagraphs 2(2)(a)(ii) and 3(2)(a)(ii), a designated entity is deemed to be controlled by a group of associations if the association mentioned in either of those subparagraphs and other associations beneficially own securities of the designated entity in such a number that, if the association and the other associations were one association, that association would control the designated entity.

• (2) For the purpose of section 3, an entity referred to in paragraph 390(1)(a) of the Act is deemed to be controlled by a group of associations if

  • (a) it is controlled by another association; or

  • (b) if the association mentioned in that section and other associations beneficially own, or would own as a result of the investment, securities of the entity in such a number that, if the association and the other associations were one association, that association would control the entity.

Marginal note:Limitation

5 In subparagraphs 2(2)(a)(i) to (iii) and 3(2)(a)(i) to (iii), any reference to a substantial investment that an association has does not include a substantial investment

• (a) acquired by the association under regulations made under paragraph 396(a) of the Act, other than these Regulations;

• (b) acquired by the association in an entity referred to in paragraph 390(1)(a) of the Act if the association is a central cooperative credit society for which an order has been made under subsection 473(1) of the Act; and

• (c) acquired by the association by way of an investment of a specialized financing entity controlled by the association.

Coming into Force

Marginal note:Coming into force

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