BILL C-38 - First Reading

	(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.
``mutual fund distribution entity'' « courtier de fonds mutuels »	``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.
``mutual fund entity'' « entité s'occupant de fonds mutuels »	``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.
``participating share'' « action partici- pante »	``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.
``permitted entity'' « entité admissible »	``permitted entity'' means an entity in which a company is permitted to acquire a substantial investment under section 453.
``prescribed subsidiary'' « filiale réglementai- re »	``prescribed subsidiary'' means a subsidiary that is one of a prescribed class of subsidiaries.
``specialized financing entity'' « entité s'occupant de financement spécial »	``specialized financing entity'' means a specialized financing entity as defined in the regulations.
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.
Non-applicati on 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
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.
Restriction on control and substantial investments	451. (1) Subject to subsections (2) to (4) , no company shall acquire control of, or hold , acquire or increase a substantial investment in, any entity other than a permitted entity.
Exception: indirect investments	(2) A company may 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.
Exception: temporary investments, realizations and loan workouts	(3) A company may 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.
Exception: specialized financing regulations	(4) A company may 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.
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.
Regulations	452. The Governor in Council may make regulations
	(a) respecting the determination of the amount or value of loans, investments and interests for the purposes of this Part;
	(b) respecting the loans and investments, and the maximum aggregate amount of all loans and investments, that may be made or acquired by a company and its prescribed subsidiaries to or in a person and any persons connected with that person;
	(c) specifying the classes of persons who are connected with any person for the purposes of paragraph (b); and
	(d) concerning specialized financing for the purposes of subsection 451(4).
	Subsidiaries and Equity Investments
Permitted investments	453. (1) Subject to subsections (6) to (8) and Part XI, a company may acquire control of, or acquire or increase a substantial investment in
	(a) a company;
	(b) a bank;
	(c) a bank holding company;
	(d) an association to which the Cooperative Credit Associations Act applies;
	(e) an insurance company or a fraternal benefit society incorporated or formed under the Insurance Companies Act;
	(f) an insurance holding company;
	(g) a trust, loan or insurance corporation incorporated or formed by or under an Act of the legislature of a province;
	(h) a cooperative credit society incorporated or formed, and regulated, by or under an Act of the legislature of a province;
	(i) an entity that is incorporated or formed by or under an Act of Parliament or of the legislature of a province and that is primarily engaged in dealing in securities; or
	(j) an entity that is incorporated or formed, and regulated, otherwise than by or under an Act of Parliament or of the legislature of a province and that is primarily engaged outside Canada in a business that, if carried on in Canada, would be the business of banking, the business of a cooperative credit society, the business of insurance, the business of providing fiduciary services or the business of dealing in securities.
Permitted investments	(2) Subject to subsections (3) to (6) and Part XI, a company may acquire control of, or acquire or increase a substantial investment in, an entity, other than an entity referred to in any of paragraphs (1)(a) to (j), whose business is limited to one or more of the following:
	(a) engaging in any financial service activity or in any other activity that a company is permitted to engage in under any of paragraphs 409(2)(b) to (d) or section 410 or 411;
	(b) acquiring or holding shares of, or ownership interests in, entities in which a company is permitted under this Part to hold or acquire;
	(c) engaging in the provision of any services exclusively to any or all of the following, so long as the entity is providing those services to the company or any member of the company's group:
	(i) the company,
	(ii) any member of the company's group,
	(iii) any entity that is primarily engaged in the business of providing financial services,
	(iv) any permitted entity in which an entity referred to in subparagraph (iii) has a substantial investment, or
	(v) any prescribed person, if it is doing so under prescribed terms and conditions, if any are prescribed;
	(d) engaging in any activity that a company is permitted to engage in, other than an activity referred to in paragraph (a) or (e), that relates to
	(i) the promotion, sale, delivery or distribution of a financial product or financial service that is provided by the company or any member of the company's group, or
	(ii) if a significant portion of the business of the entity involves an activity referred to in subparagraph (i), the promotion, sale, delivery or distribution of a financial product or financial service that is provided by any other entity that is primarily engaged in the business of providing financial services;
	(e) engaging in the activities referred to in the definition ``mutual fund entity'' or ``mutual fund distribution entity'' in subsection 449(1); and
	(f) engaging in prescribed activities, under prescribed terms and conditions, if any are prescribed.
Restriction	(3) A company may not acquire control of, or acquire or increase a substantial investment in, an entity whose business includes any activity referred to in any of paragraphs (2)(a) to (e) if the entity engages in the business of accepting deposit liabilities or if the activities of the entity include
	(a) activities that a company is not permitted to engage in under any of sections 415, 417 and 418;
	(b) acting as an executor, administrator or official guardian or as a guardian, tutor, curator, judicial adviser or committee of a mentally incompetent person;
	(c) being a trustee for a trust;
	(d) activities that a company is not permitted to engage in under any regulation made under section 416 if the entity engages in the activities of a finance entity or of any other entity as may be prescribed;
	(e) acquiring control of or acquiring or holding a substantial investment in an entity that a company is not permitted to control or in which a company is not permitted to have a substantial investment, except as may be permitted under paragraph 451(3)(b) or (c) or subsection 451(4); or
	(f) any prescribed activity.
Control	(4) Subject to subsection (8) and the regulations, a company may not acquire control of, or acquire or increase a substantial investment in,
	(a) an entity referred to in any of paragraphs (1)(a) to (j) or an entity that is primarily engaged in acquiring or holding shares or other ownership interests in entities in which a company is permitted under this Part to hold or acquire unless
	(i) the company controls, within the meaning of paragraph 3(1)(d), the entity, or would thereby acquire control, within the meaning of that paragraph, of the entity, or
	(ii) the company is permitted by regulations made under paragraph 459(a) to acquire or increase the substantial investment; or
	(b) an entity whose business includes one or more of the activities referred to in paragraph (2)(a) 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 finance entity, a factoring entity, a financial leasing entity and a specialized financing entity, unless
	(i) the company controls, within the meaning of paragraph 3(1)(d), the entity, or would thereby acquire control, within the meaning of that paragraph, of the entity, or
	(ii) the company is permitted by regulations made under paragraph 459(a) to acquire or increase the substantial investment.
Minister's approval	(5) Subject to the regulations, a company may not, without the prior written approval of the Minister,
	(a) acquire control of an entity referred to in paragraphs (1)(g) to (i) from a person who is not a member of the company's group;
	(b) acquire control of an entity referred to in paragraph (1)(j) or (4)(b), other than an entity whose activities are limited to the activities of one or more of the following entities, if the control is acquired from an entity referred to in any of paragraphs (1)(a) to (f) that is not a member of the company's group:
	(i) a factoring entity,
	(ii) a financial leasing entity, or
	(iii) a specialized financing entity;
	(c) acquire control of, or acquire or increase a substantial investment in, an entity whose business includes one or more of the activities referred to in paragraph (2)(d);
	(d) acquire control of, or acquire or increase a substantial investment in, an entity that engages in an activity described in paragraph 410(1)(c) or (c.1); or
	(e) acquire control of, or acquire or increase a substantial investment in, an entity engaging in an activity prescribed for the purposes of paragraph (2)(f).
Superinten- dent's approval	(6) Subject to subsection (7) and the regulations, a company may not acquire control of, or acquire or increase a substantial investment in, an entity referred to in any of paragraphs (1)(g) to (j) or (4)(b) unless the company obtains the approval of the Superintendent.
Exception	(7) Subsection (6) does not apply in respect of a particular transaction if the Minister has approved the transaction under subsection (5) or is deemed to have approved it under subsection 454(1).
Control not required	(8) A company need not control an entity referred to in paragraph (1)(j), or an entity that is incorporated or formed otherwise than by or under an Act of Parliament or of the legislature of a province, if the laws or customary business practices of the country under the laws of which the entity was incorporated or formed do not permit the company to control the entity.
Prohibition on giving up control in fact	(9) A company that, under subsection (4), controls an entity may not, without the prior written approval of the Minister, give up control, within the meaning of paragraph 3(1)(d), of the entity while it continues to control the entity.

General Constraints on Investments

Subsidiaries and Equity Investments