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| Exclusion
from portfolio
limits
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397. (1) Subject to subsection (3), the value
of all loans, investments and interests
acquired by an association and any of its
prescribed subsidiaries under section 394 or as
a result of a realization of a security interest is
not to be included in calculating the value of
loans, investments and interests of the
association and its prescribed subsidiaries
under sections 398 to 402
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(a) for a period of twelve years following
the day on which the interest was acquired,
in the case of an interest in real property;
and
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(b) for a period of five years after the day on
which the loan, investment or interest was
acquired, in the case of a loan, investment
or interest, other than an interest in real
property.
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| Extension
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(2) The Superintendent may, in the case of
any particular association, extend any period
referred to in subsection (1) for any further
period or periods, and on any terms and
conditions, that the Superintendent considers
necessary.
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| Exception
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(3) Subsection (1) does not apply in respect
of an investment or interest described in that
subsection if the investment or interest is
defined by a regulation made under section
403 to be an interest in real property and
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(a) the association or the subsidiary
acquired the investment or interest as a
result of the realization of a security interest
securing a loan that was defined by a
regulation made under section 403 to be an
interest in real property; or
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(b) the association or the subsidiary
acquired the investment or interest under
section 394 as a result of a default referred
to in that section in respect of a loan that was
defined by a regulation made under section
403 to be an interest in real property.
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| Lending limit:
regulatory
capital of $25
million or less
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398. An association with twenty-five
million dollars or less of regulatory capital
shall not, and shall not permit its prescribed
subsidiaries to,
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(a) make or acquire a commercial loan, or
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(b) acquire control of a permitted entity that
holds commercial loans,
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if the aggregate value of all commercial loans
held by the association and its prescribed
subsidiaries exceeds, or the acquisition or
making of the commercial loan or the
acquisition of control of the entity would
cause the aggregate value of all commercial
loans held by the association and its
prescribed subsidiaries to exceed, 5 % of the
total assets of the association.
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| Lending limit:
regulatory
capital over
$25 million
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399. An association with more than
twenty-five million dollars of regulatory
capital may
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(a) make or acquire commercial loans, or
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(b) acquire control of a permitted entity that
holds commercial loans,
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if the aggregate value of all commercial loans
held by the association and its prescribed
subsidiaries would thereby exceed 5 % of the
total assets of the association only with the
prior approval in writing of the
Superintendent and in accordance with any
terms and conditions that the Superintendent
may specify.
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| Meaning of
``total assets''
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400. For the purposes of sections 398 and
399, ``total assets'', in respect of an
association, has the meaning given to that
expression by the regulations.
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| Limit on total
property
interest
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401. An association shall not, and shall not
permit its prescribed subsidiaries to, purchase
or otherwise acquire an interest in real
property or make an improvement to any real
property in which the association or any of its
prescribed subsidiaries has an interest if the
aggregate value of all interests of the
association in real property exceeds, or the
acquisition of the interest or the making of the
improvement would cause that aggregate
value to exceed, the prescribed percentage of
the regulatory capital of the association.
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| Limits on
equity
acquisitions
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402 . An association shall not, and shall not
permit its prescribed subsidiaries to,
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(a) purchase or otherwise acquire any
participating shares of any body corporate
or any ownership interests in any
unincorporated entity, other than those of a
permitted entity in which the association
has, or by virtue of the acquisition would
have, a substantial investment, or
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(b) acquire control of an entity that holds
shares or ownership interests referred to in
paragraph (a),
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if the aggregate value of
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(c) all participating shares, excluding
participating shares of permitted entities in
which the association has a substantial
investment, and
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(d) all ownership interests in
unincorporated entities, other than
ownership interests in permitted entities in
which the association has a substantial
investment,
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beneficially owned by the association and its
prescribed subsidiaries exceeds, or the
purchase or acquisition would cause that
aggregate value to exceed, the prescribed
percentage of the regulatory capital of the
association.
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| Regulations
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403. For the purposes of this Part, the
Governor in Council may make regulations
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(a) defining the interests of an association in
real property;
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(b) determining the method of valuing those
interests; or
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(c) exempting classes of associations from
the application of sections 397 to 402.
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| Divestment
order
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404. (1) The Superintendent may, by order,
direct an association to dispose of, within any
period that the Superintendent considers
reasonable, any loan, investment or interest
made or acquired in contravention of this Part.
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| Divestment
order
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(2) If , in the opinion of the Superintendent,
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(a) an investment by an association or any
entity it controls in shares of a body
corporate or in ownership interests in an
unincorporated entity enables the
association to control the body corporate or
the unincorporated entity, or
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(b) the association or any entity it controls
has entered into an arrangement whereby it
or its nominee may veto any proposal put
before
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(i) the board of directors of a body
corporate, or
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(ii) a similar group or committee of an
unincorporated entity,
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or whereby no proposal may be approved
except with the consent of the association,
the entity it controls or the nominee,
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the Superintendent may, by order, require the
association, within any period that the
Superintendent considers reasonable, to do all
things necessary to ensure that the association
no longer controls the body corporate or
unincorporated entity or has the ability to veto
or otherwise defeat any proposal referred to in
paragraph (b).
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| Divestment
order
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(3) If
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(i) fails to provide or obtain within a
reasonable time the undertakings
referred to in subsection 392(1), (2) or
(4), or
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(ii) is in default of an undertaking
referred to in subsection 392(1) or (2) and
the default is not remedied within ninety
days after the day of receipt by the
association of a notice from the
Superintendent of the default, or
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(b) a permitted entity referred to in
subsection 392(4) is in default of an
undertaking referred to in subsection 392(4)
and the default is not remedied within
ninety days after the day of receipt by the
association of a notice from the
Superintendent of the default,
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the Superintendent may, by order, require the
association, within any period that the
Superintendent considers reasonable, to do all
things necessary to ensure that the association
no longer has a substantial investment in the
entity to which the undertaking relates.
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| Exception
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(4) Subsection (2) does not apply in respect
of an entity in which an association has a
substantial investment permitted by this Part.
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| Deemed
temporary
investment
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405. If an association controls or has a
substantial investment in an entity as
permitted by this Part and the association
becomes aware of a change in the business or
affairs of the entity that, if the change had
taken place before the acquisition of control
or of the substantial investment, would have
caused the entity not to be a permitted entity
or would have been such that approval for the
acquisition would have been required under
subsection 390(5) or (6) , the association is
deemed to have acquired, on the day the
association becomes aware of the change, a
temporary investment in respect of which
section 393 applies.
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| Asset
transactions
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406. (1) An association shall not, and shall
not permit its subsidiaries to , without the
approval of the Superintendent, acquire assets
from a person or transfer assets to a person if
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A + B **** C
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where
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A is the value of the assets;
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B is the total value of all assets that the
association and its subsidiaries acquired from
or transferred to that person in the twelve
months ending immediately before the
acquisition or transfer ; and
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C is ten per cent of the total value of the assets
of the association, as shown in the last annual
statement of the association prepared before
the acquisition or transfer .
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| Restriction
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(2) The prohibition in subsection (1) does
not apply in respect of a transaction or series
of transactions between an association and a
member of the association.
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| Exception
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(3) The prohibition in subsection (1) does
not apply in respect of
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(a) an asset that is a debt obligation referred
to in subparagraphs (b)(i) to (vi) of the
definition ``commercial loan'' in
subsection 386(1); or
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(b) a transaction or series of transactions by
an association with another financial
institution as a result of the association's
participation in one or more syndicated
loans with that financial institution.
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| Exception
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(4) The approval of the Superintendent is
not required if
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(a) the association sells assets under a sale
agreement that is approved by the Minister
under section 233.5; or
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(b) the association or its subsidiary acquires
shares of, or ownership interests in, an
entity for which the approval of the Minister
under Part VIII or subsection 390(5) is
required or the approval of the
Superintendent under subsection 390(6) is
required.
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| Value of
assets
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(5) For the purposes of ``A'' in subsection
(1), the value of the assets is
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(a) in the case of assets that are acquired, the
purchase price of the assets or, if the assets
are shares of, or ownership interests in, an
entity the assets of which will be included
in the annual statement of the association
after the acquisition, the fair market value
of the assets; and
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(b) in the case of assets that are transferred,
the book value of the assets as stated in the
last annual statement of the association
prepared before the transfer, or, if the assets
are shares of, or ownership interests in, an
entity the assets of which were included in
the last annual statement of the association
before the transfer, the value of the assets as
stated in the annual statement.
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| Total value of
all assets
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(6) For the purposes of subsection (1), the
total value of all assets that the association or
any of its subsidiaries has acquired during the
period of twelve months referred to in
subsection (1) is the purchase price of the
assets or, if the assets are shares of, or
ownership interests in, an entity the assets of
which immediately after the acquisition were
included in the annual statement of the
association, the fair market value of the assets
of the entity at the date of the acquisition.
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| Total value of
all assets
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(7) For the purposes of subsection (1), the
total value of all assets that the association or
any of its subsidiaries has transferred during
the period of twelve months referred to in
subsection (1) is the book value of the assets
as stated in the last annual statement of the
association prepared before the transfer, or, if
the assets are shares of, or ownership interests
in, an entity the assets of which were included
in the last annual statement of the association
before the transfer, the value of the assets of
the entity as stated in the annual statement.
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| Transitional
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407. Nothing in this Part requires
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(a) the termination of a loan made before
June 25, 1999 ;
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(b) the termination of a loan made after that
date as a result of a commitment made
before that date;
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(c) the disposal of an investment made
before that date ; or
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(d) the disposal of an investment made after
that date as a result of a commitment made
before that date.
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But if the loan or investment would be
precluded or limited by this Part, the amount
of the loan or investment may not, except as
provided in subsections 393(2) , 394(3) and
395(3), be increased after that date .
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| Saving
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408. A loan or investment referred to in
section 407 is deemed not to be prohibited by
the provisions of this Part.
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| 1997, c. 15,
s. 151(1)
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315. (1) Paragraph 410(1)(b) of the Act is
replaced by the following:
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(b) is a director or senior officer of the
association or of a body corporate that
controls the association ;
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(2) Subsection 410(1) of the Act is
amended by striking out the word ``or'' at
the end of paragraph (d) and by adding the
following after paragraph (d):
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(d.1) is an entity in which a person who
controls the association has a substantial
investment; or
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(3) Section 410 of the Act is amended by
adding the following after subsection (1):
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| Related party
of retail
association
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(1.1) Subject to the regulations, for the
purposes of this Part, a person is a related party
of a retail association if the person is
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(a) a member of the association or of an
association that controls, or has a
significant interest in, the association;
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(b) a director or senior officer of the
association or of a body corporate that
controls the association;
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(c) the spouse or common-law partner, or a
child who is less than eighteen years of age,
of a person referred to in paragraph (a) or
(b);
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(d) an entity that is controlled, within the
meaning of section 3, determined without
regard to paragraph 3(1)(e), by a person
referred to in any of paragraphs (a) to (c); or
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(e) a person, or a member of a class of
persons, designated under subsection (2) or
(3) as, or deemed under subsection (4) to be,
a related party of the association.
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| Exception -
subsidiaries
and
substantial
investments of
associations
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(1.2) If an entity in which an association has
a substantial investment would, but for this
subsection, be a related party of the
association only because a person who
controls the association controls the entity or
has a substantial investment in the entity, and
the person does not control the entity or have
a substantial investment in the entity
otherwise than through the person's
controlling interest in the association, the
entity is not a related party of the association.
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316. (1) Paragraph 411(2)(a) of the Act is
amended by adding the following after
subparagraph (ii):
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(ii.1) in exchange for shares of a body
corporate that has been continued as an
association under Part III,
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(2) Paragraph 411(2)(a) of the Act is
amended by striking out the word ``or'' at
the end of subparagraph (iii) and by adding
the following after subparagraph (iii):
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(iii.1) by way of consideration in
accordance with the terms of a sale
agreement under Part VII, or
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(3) Section 411 of the Act is amended by
adding the following after subsection (3):
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