Canadian Ownership and Control Determination Regulations, 1984 (SOR/84-431)

Segregated Funds

• 37 (1) The Canadian ownership rate of a segregated fund shall be calculated under these Regulations as if the segregated fund were a unit trust, the insurer were the trustee of the trust, the owners of the insurance policies in respect of which the segregated fund is maintained were the beneficiaries of the trust and the insurance policies in respect of which the segregated fund is maintained were the formal equity of the trust.

• (2) A segregated fund maintained by a life insurance company in respect of which at least fifty persons hold insurance policies shall be considered to have a Canadian ownership rate of 100% if the insurer has no knowledge or reason to believe that less than 90% of the aggregated value of all interests in the fund is held for the benefit of persons who would qualify for a Canadian ownership rate of 100%.

• (3) For the purposes of paragraph 52(g) of the Act, the control status of a segregated fund shall be the control status of the insurer.

Deemed Canadian Ownership Rate of Life Insurance Company As Applicant or Investor

38 A life insurance company incorporated in Canada shall be considered to have a Canadian ownership rate of 100% if, at the date of the most recent financial statements deposited in the Department of Insurance or with a similar authority of a province,

• (a) it is a mutual company not less than 95% of the outstanding life insurance policies of which constitute life policies in Canada, or

• (b) it is a stock company not less than 95% of the outstanding life insurance policies of which constitute life policies in Canada and the Canadian ownership rate of which, determined under Part III, is not less than 90%

and if not less than 95% of its gross actuarial reserves for life policies in Canada are maintained in respect of policyholders in Canada.

39 A life insurance company incorporated in Canada, other than one referred to in section 38, shall be considered to have a Canadian ownership rate of 100% if

• (a) at the date of the most recent financial statements deposited in the Department of Insurance or with a similar authority of a province not less than 95% of its gross actuarial reserves for life policies in Canada are maintained in respect of policyholders in Canada;

• (b) it has provided the Minister with an executed undertaking in a form acceptable to the Minister to allocate all of the benefits accruing to it from Canadian oil and gas investments to the owners of life policies in Canada that are participating policies, and to allocate the benefits arising from other investments to the owners of life policies in Canada in a manner consistent with the allocation of such benefits in previous years; and

• (c) where it is a stock company, it has a Canadian ownership rate, determined under Part III, of not less than 50%.

Canadian Ownership Rate of Life Insurance Company As Investor

40 Where a life insurance company incorporated outside Canada that is a mutual company is an investor, it shall be considered to have a Canadian ownership rate of 100% if

• (a) at the date of the most recent financial statements deposited in the Department of Insurance or with a similar authority of a province,

  • (i) not less than 95% of its gross actuarial reserves for life policies in Canada are maintained in respect of policyholders in Canada, and

  • (ii) not less than 90% of its gross actuarial reserves for life policies in Canada are maintained in respect of participating policyholders in Canada;

• (b) it has provided the Minister with an executed undertaking in a form acceptable to the Minister to allocate all of the benefits accruing to it from Canadian oil and gas investments to the owners of life policies in Canada that are participating policies, and to allocate the benefits arising from other investments to the owners of life policies in Canada in a manner consistent with the allocation of such benefits in previous years; and

• (c) the Minister is satisfied that the life insurance company maintains in Canada sufficient records to permit the Minister to monitor and audit compliance with the undertaking referred to in paragraph (b).

Determination of Canadian Ownership Rate of Life Insurance Company

41 The Canadian ownership rate of a life insurance company that is a mutual company other than a mutual company referred to in section 38, 39 or 40 shall be considered to be equal to the proportion, expressed as a percentage rounded to the nearest whole number, that, as at the date of the most recent financial statements deposited in the Department of Insurance or with a similar authority of a province, its gross actuarial reserves maintained in respect of life insurance policies for policyholders in Canada represent of its gross actuarial reserves maintained in respect of all life insurance policies.

• 42 (1) A life insurance company incorporated in Canada that is a stock company may elect to calculate its Canadian ownership rate in accordance with Part III or as the proportion

  1 - [(xp + n) / t]

  expressed as a percentage rounded to the nearest whole number, where

  • a) x is 100%, or if the maximum amount of profits earned in respect of life policies in Canada that are participating policies that may be allocated at the discretion of the directors of the company to shareholders is fixed by the company’s constating documents or governing statute, that maximum amount expressed as a percentage of the total profits earned by the insurance company in respect of its gross actuarial reserves for life policies in Canada that are participating policies;

  • b) p is the gross actuarial reserves for life policies in Canada that are participating policies;

  • c) n is the gross actuarial reserves for life policies in Canada that are non-participating policies; and

  • d) t is the gross actuarial reserves for life policies in Canada.

• (2) For the purposes of subsection (1), p, n and t shall be determined as at the date of the most recent financial statements deposited in the Department of Insurance or with a similar authority of a province.

• 43 (1) The Canadian ownership rate of a life insurance company that is a stock company incorporated outside Canada shall be considered to be the lesser of the Canadian ownership rate determined in accordance with Part III and the proportion

  1 - [(xp + n) / t]

  expressed as a percentage rounded to the nearest whole number, where

  • a) x is 100%, or if the maximum amount of profits earned in respect of life policies in Canada that are participating policies that may be allocated at the discretion of the directors of the company to shareholders is fixed by the company’s constating documents or governing statute, that maximum amount expressed as a percentage of the total profits earned by the insurance company in respect of its gross actuarial reserves for life policies in Canada that are participating policies;

  • b) p is the gross actuarial reserves for life policies in Canada that are participating policies;

  • c) n is the gross actuarial reserves for life policies in Canada that are non-participating policies; and

  • d) t is the gross actuarial reserves for life policies in Canada.

• (2) For the purposes of subsection (1), p, n and t shall be determined as at the date of the most recent financial statements deposited in the Department of Insurance or with a similar authority of a province.

44 Where a life insurance company can demonstrate to the satisfaction of the Minister that the determination of its Canadian ownership rate in accordance with this Part does not accurately reflect the beneficial interest in the company of its shareholders and policyholders in Canada, the Minister may adjust the Canadian ownership rate of the life insurance company to reflect the proportion of profits earned during the effective period of the relevant certificate that will be allocated to policyholders in Canada.

Canadian Ownership Rate of Property and Casualty Companies

45 The Canadian ownership rate of a property and casualty company that is a mutual company incorporated in Canada shall be considered to be the proportion, expressed as a percentage, that, as at the date of the most recent financial statements deposited in the Department of Insurance or with a similar authority of a province, its gross actuarial reserves maintained in respect of property and casualty insurance policies for policyholders in Canada represent of its gross actuarial reserves maintained in respect of all property and casualty insurance policies.

46 The Canadian ownership rate of a property and casualty insurance company that is a stock company incorporated in Canada shall be determined in accordance with Part III.

PART VICanadian Ownership Rates of Trusts

Interpretation

47 In this Part,

beneficiary

beneficiary includes a person in whose favour or for whose benefit a discretionary power may be exercised; (bénéficiaire)

designated rate of interest

designated rate of interest means 12.3% per annum; (taux d’intérêt désigné)

discretionary interest

discretionary interest means any estate or interest in or possibility of receiving income or capital of a trust that is dependent on, or the value of which may be increased or reduced by the exercise of or the failure to exercise, a discretionary power held by the trustee or trustees or by any other person or persons and, for greater certainty and without limiting the generality of the foregoing, a power to amend the terms of a trust or a power to determine the date at which all or any interests shall vest or at which all or any property shall be distributed is a discretionary power; (droit discrétionnaire)

interest in expectancy

interest in expectancy means an estate or interest in remainder or reversion and any other future interest, whether vested or contingent, but does not include a discretionary interest; (droit en expectative)

interest in possession

interest in possession means an estate or interest other than an interest in expectancy but does not include a discretionary interest. (droit en possession)

Determining Beneficial Ownership of Classes of a Trust

48 Subject to section 49, in determining the classes of formal equity and the beneficial Canadian ownership of a class of formal equity of a trust, other than a unit trust, the following rules apply:

• (a) each of the following shall be a class of formal equity of the trust, consisting of 100 units:

  • (i) all interests in possession of beneficiaries whose interests can be expressed in terms of a right to a certain amount or percentage of all or any part of the income of the trust,

  • (ii) all interests in expectancy of beneficiaries whose interests can be expressed in terms of a right to a certain amount or percentage of all or any part of the income of the trust,

  • (iii) all interests in possession of beneficiaries whose interests can be expressed in terms of a right to a certain amount or percentage of all or any part of the capital of the trust,

  • (iv) all interests in expectancy of beneficiaries whose interests can be expressed in terms of a right to a certain amount or percentage of all or any part of the capital of the trust,

  • (v) all discretionary interests of beneficiaries with respect to all or any part of the income of the trust, and

  • (vi) all discretionary interests of beneficiaries with respect to all or any part of the capital of the trust;

• (a.1) where a trust demonstrates to the Minister that the beneficial Canadian ownership of a class of formal equity of the trust does not accurately represent the beneficiaries’ interests in the capital or income of the trust, or any part thereof, the Minister may adjust the beneficial Canadian ownership accordingly;

• (b) subject to paragraph (c), each beneficiary of the trust shall be deemed to own a number of units of a particular class referred to in paragraph (a) determined in accordance with the formula

  (Av/Tv) × 100,

  calculated to two decimal places where

  • (i) Av is the value of the interest of the beneficiary represented in that class, and

  • (ii) Tv is the value of all beneficial interests constituting that class;

  • c) subject to paragraph (d), the beneficial Canadian ownership of a class of formal equity that comprises discretionary interests in a trust shall be equal to the lowest Canadian ownership rate of any of the beneficiaries whose discretionary interests constitute that class determined as if the words “rounded to the nearest whole number” in section 16 read “rounded to the nearest 10th of a percentage point” and, for greater certainty, subject to paragraph (f), if such beneficiaries include a person that has or may have a Canadian ownership rate of nil, whether or not the identity of that person can be ascertained, the beneficial Canadian ownership of the class shall be deemed to be nil;

  • d) the Canadian ownership rate of a trust shall be determined without regard to the existence of any discretionary power to consume, advance, appropriate, encroach upon or otherwise dispose of all or part of the capital or income of a trust to or for the benefit of any one or more individuals who have interests in that capital or income independently of the existence of the discretionary power, if the exercise of that power is limited by a determinable standard relating to the health, education, maintenance, support or comfort of such individual or individuals;

  • e) any possibility that one or more persons will subsequently acquire interests in property of the trust at birth, on adoption or on marriage shall be disregarded;

  • f) for the purposes of paragraph (b), the value of any income right, annuity, term of years, life interest or other similar estate and of any interest in expectancy shall be determined,

    • (i) where the income right, annuity, term of years, or other similar estate or the interest in expectancy does not depend on a life contingency, on the basis of compound interest at the designated rate of interest with annual rests, and

    • (ii) where the income right, annuity, term of years, life interest or other similar estate or the interest in expectancy depends on a life contingency, on the basis of compound interest at the designated rate of interest with annual rests and the standard of mortality set out in Table I of Schedule II;

  • g) Tables II, III and IV of Schedule II shall be used as far as they may be applicable for the purpose of determining the value of any income right, annuity, term of years, life interest or other similar estate or interest in expectancy;

  • h) for the purposes of paragraphs (f) and (g), the annual income from any property shall be deemed to be the product of the designated rate of interest and the value of the property;

  • i) for the purposes of paragraph (b), where the value of any interest in a trust depends on the happening of a contingency other than a life contingency, the value of the interest shall be determined on the basis that the contingency will not occur, except that, if the Minister is satisfied that the contingency is substantially within the control of a person who is not dealing at arm’s length with a beneficiary of the trust, the value of the interest shall, if the Minister so directs, be determined as if the contingency had already occurred;

  • j) for the purposes of paragraph (b), where the value of any interest in the trust depends on the happening of a contingency that the Minister is satisfied cannot reasonably be expected to occur, the value of the interest shall be determined on the basis that the contingency will not occur;

  • k) for the purposes of paragraph (b), where the value of a particular interest in a trust depends on the death of a beneficiary before attaining such age, not exceeding 40 years, as is specified in the trust instrument, and the particular interest of the beneficiary is an interest in possession, the value of that particular interest and the value of any other interest determined with reference to the value of that particular interest shall be determined as if that beneficiary will attain the age specified in the trust instrument; and

  • l) where each of the beneficiaries in whose favour a discretionary power may be exercised has a Canadian ownership rate of 100%, the Canadian ownership rate of the trust may, if the trust so elects, be determined without regard to the existence of that discretionary power.